Sprint loses ruling in $300M lawsuit for underpaid taxes in New York

An appellate court in New York has ruled that a lawsuit filed by the New York attorney general--which claims Sprint (NYSE:S) deliberately under-collected and underpaid millions of dollars in state and local taxes on its flat-rate wireless data plans--should move forward. If Sprint is found liable in the suit, the company could have to pay the underpaid sales taxes plus penalties totaling more than $300 million.

In the lawsuit, New York Attorney General Eric Schneiderman claims Sprint deliberately evaded sales taxes, which cost the state and local governments approximately $130 million. If Sprint is found liable, the New York False Claims Act requires the company to pay three times its underpayment plus penalties, which totals $300 million.

According to Schneiderman, Sprint "knowingly" underpaid state sales taxes at a rate of about $210,000 per week for the past seven years. However, Sprint has maintained that the attorney general is applying an 'out-of-context' provision of law that says the taxes should be paid on the full amount of the flat-rate plan rather than just the applicable portion.

In a statement, Sprint said it is disappointed in the decision and is exploring its options.

Sprint has continued to offer customers flat-rate data plans despite the fact that many competitors have moved to a tiered data pricing model.

Sprint's latest rate plan innovation, the Framily plan, lets new Sprint customers pay $55 per month per line for unlimited talk, text and 1 GB of data. For each new Sprint customer joining a Framily group, the cost per person will drop $5 a month up to a maximum monthly discount of $30 per line.

For more:
- see this Bizjournal article
- see this Kansas City Star article
- see this Bloomberg article

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