The New York attorney general has sued Sprint for $300 million for failure to pay sales tax for seven years. The company allegedly failed to collect sales tax on charges associated with its wireless accounts. The state of New York alleges that Sprint’s under-payment cost the government around $100 million.
You may be wondering why the government is suing for $300 million if Sprint supposedly failed to pay $100 million. It turns out the suit is being brought under New York’s False Claims Act. Intended to severely disincentivize fraud, the act makes those who commit tax fraud liable for three times the amount of their fraud.
In a statement released by his office today, New York Attorney General Eric T. Schneiderman accused Sprint of “deliberately evading sales taxes,” an act that “cost the state and local governments over $100 million that could have been used for critical services and much needed resources.” New York state law requires that mobile carriers collect and pay sales taxes on their monthly access charges. Sprint, the suit alleges, failed to collect and pay the full amount of taxes owed. The suit claims that Sprint deliberately concealed the practice by submitting falsified records and hiding the practice from their customers and competitors. This, the state says, was designed to give Sprint a competitive advantage over other carriers.
The suit was originally filed by a whistleblower in March 2011. Following an investigation by the New York Taxpayer Protection Bureau and Department of Taxation and Finance, the attorney general’s office filed this complaint. Under whistleblower laws, the state’s suit effectively takes over the one filed by the whistleblower last year.