Sprint faces SEC probe over tax collection practices

Sprint Nextel (NYSE:S) received a subpoena from the Securities and Exchange Commission related to an investigation of Sprint's tax collection, which comes a few months after New York State sued Sprint for $300 million for deliberately underpaying state sales taxes for seven years in order to keep its prices down.

Sprint said in a regulatory filing that the SEC on July 23 issued a formal order of investigation relating to its sales tax collection. Sprint said it is cooperating with the SEC and cannot predict the outcome of, or the timeframe for, the conclusion of the investigation. "We do not expect the resolution of these matters to have a material adverse effect on our financial position or results of operations," Sprint said.

The issue turns on how much a flat-rate calling plan can be taxed. New York Attorney General Eric Schneiderman said in that state's lawsuit that state law requires carriers to collect and pay sales taxes on all of their monthly charges. Sprint claims New York can only tax calls that start and end within the state and not inter-state calls.

In a statement issued yesterday, Sprint noted that it still believes the New York lawsuit and complaint is without merit. "The Attorney General's office claims New York consumers, who already pay some of the highest wireless taxes in the country, should pay even more," Sprint said. "We intend to stand up for New York consumers' rights and fight this lawsuit."

The CTIA has long fought for bills from Congress that would place five-year moratoriums on new state and local taxes targeting wireless services but not other goods or services. However, the legislation has perennially failed to make it out of Congress.

For more:
- see this WSJ article (sub. req.)
- see this Reuters article
- see this CNET article
- see this Sprint release

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