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New York sues Sprint for $300m over alleged tax fraud

Sprint-Nextel Corp. was sued for more than $300 million by the New York attorney general, who said the third-largest US wireless carrier deliberately failed to pay sales taxes for seven years.

Sprint didn’t collect and pay some sales taxes on flat-rate access charges for wireless calling plans, costing state and local governments more than $100 million, Attorney General Eric Schneiderman said in a statement today.

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“This case represents a new era in tax fraud prosecutions,” Schneiderman said at press conference today. “The deliberate failure to collect or pay your fair share of taxes will not be tolerated in New York state.”

The attorney general said he is taking over a whistle- blower lawsuit filed in New York in March 2011 and is seeking three times Sprint’s alleged underpayment of more than $100 million plus penalties under the state’s false claims act.

John Taylor, a spokesman for Overland Park, Kansas-based Sprint, said in an e-mailed statement that it would fight the lawsuit.

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‘Every Penny’

“We have collected and paid over to New York every penny of sales taxes on mobile wireless services that we believe our customers owe under New York state law,” Taylor said. “The attorney general’s office is claiming New York consumers, who already pay some of the highest wireless taxes in the country, should pay even more.”

Wireless carriers selling a set number of minutes of calling time for a fixed monthly charge must collect and pay sales taxes on the entire charge, Schneiderman said. Sprint treated a portion as nontaxable and withheld about 25 percent of the taxes it was supposed to collect and remit to state and local governments, according to the attorney general.

The move arose from a nationwide effort by Sprint to gain an advantage over competitors including AT&T Inc. and Verizon Wireless, which correctly collect and pay the taxes, Schneiderman said.

The whistle-blower complaint couldn’t immediately be found in court records.

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