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New York Attorney General Eric T. Schneiderman has filed a lawsuit against Sprint Nextel Corp., Sprint Spectrum L.P., Nextel of New York, Inc., and Nextel Partners of Upstate New York, Inc. (collectively "Sprint") alleging that Sprint knowingly underpaid state and local sales taxes on flat-rate access charges for wireless calling plans in an amount exceeding $100 million. The complaint, filed April 19, 2012 in the New York state supreme court, alleges that as of July 2005, Sprint has avoided its sales tax obligations on approximately 25% of its receipts for flat-rate calling plans.

 

New York has imposed sales taxes on fixed monthly charges for wireless voice services since August 2002. Such charges are taxable regardless of whether the calls are intrastate, interstate, or international in nature. The complaint asserts that Sprint categorized part of its fixed monthly charges as charges for interstate calls charged on a per-minute basis. Such charges, unlike fixed monthly charges, are not taxable in New York.

 

The lawsuit was filed pursuant to the New York False Claims Act, which is the only such Act in the nation that expressly includes tax fraud within its scope. The Act permits triple damages in addition to penalties and attorneys' fees. If found liable, Sprint could receive a judgment in excess of $300 million.

 

This lawsuit is the result of a whistleblower, or "qui tam" action filed March 2011. After an investigation was conducted by the Taxpayer Protection Bureau and the Department of Taxation and Finance, the Attorney General opted to file suit, effectively superseding the whistleblower action.

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