Sprint Nextel Must Face NY Suit Over Tax Fraud

On July 1, New York Supreme Court Justice O. Peter Sherwood denied a motion to dismiss a lawsuit against Sprint Nextel Corp. for deliberately not collecting or paying millions of dollars of taxes for its cell phone service. The suit was brought by New York Attorney General Eric Schneiderman who alleged, based on whistleblower information, that Sprint failed to bill customers for more than $100 million in taxes for its wireless services over the course of seven years. Schneiderman attributed Sprint’s decision not to collect or pay taxes to a nationwide effort by the Kansas-based company, Overland Park, to attract rivals’ customers and make its service $4.6 million less expensive per month. In addition to seeking three times the amount of underpaid taxes, the lawsuit also demands penalties. While Justice Sherwood allowed the tax collection lawsuit to continue against Sprint, he dismissed a conspiracy claim against the company, ruling that certain claims applying to periods before March 31, 2008 are barred by a three-year statute of limitations. “[This ruling] sends a message that tax dodgers will be exposed and prosecuted to the fullest extent of the law,” said Schneiderman.

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