The U.S. Supreme Court declined to hear an appeal from Sprint (NYSE:S) to avoid a $300 million lawsuit filed by New York state claiming the carrier deliberately under-collected and underpaid hundreds of millions of dollars in state and local taxes over seven years.
The New York Attorney General's office sued Sprint in 2012 based on whistleblower information, claiming the operator ignored state law imposing sales taxes on interstate mobile phone services. Sprint failed to collect more than $100 million in taxes from New York customers owed to the state and to local governments, according to the suit, which seeks three times that amount in damages and penalties.
A New York appellate court ruled in 2014 that the lawsuit should move forward, rejecting the carrier's claim that Attorney General Eric Schneiderman applied an "out-of-context" provision of law saying the taxes should be paid on the full amount of the flat-rate plan rather than just the applicable portion. The Supreme Court opted not to hear Sprint's argument that New York state law on sales taxes for interstate mobile services is overruled by federal telecom law.
Schneiderman's office has said Sprint's decision not to collect and pay taxes was part of a larger effort to attract customers from larger competitors, including Verizon and AT&T. The strategy saved Sprint customers in New York a total of $4.6 million per month, Schneiderman claims.
"This is a procedural step in the process," a Sprint representative said in a prepared statement in response to the news. "The Supreme Court declined to hear an interim appeal on the interplay between a federal statute and the state statute. The case now goes back to the trial court for the parties to engage in discovery and other pretrial proceedings. It's important to note that the merits of the case have not yet been heard."
- see this Reuters report
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