Sprint loses bid to dismiss $300 million N.Y. tax fraud lawsuit

Reuters News
Posted: Oct 20, 2015 11:14 AM

By Daniel Wiessner

(Reuters) - Sprint Corp <S.N> must face a $300 million fraud lawsuit by New York state claiming the company deliberately failed to bill customers for taxes on its wireless services over seven years, the state's top court ruled on Tuesday.

The Court of Appeals in a 4-1 decision rejected Sprint's claims that a 2002 state law imposing sales taxes on interstate mobile phone services violated the U.S. Constitution.

The office of Attorney General Eric Schneiderman in a 2012 lawsuit based on whistleblower information said Sprint ignored the law and failed to collect more than $100 million in taxes from New York customers. The prosecutor is seeking three times that amount in damages and penalties.

Schneiderman said Sprint's decision not to collect and pay taxes was part of a nationwide effort by the Kansas-based company to lure customers from rivals such as AT&T Inc <T.N> and Verizon Wireless <VZ.N>, and saved Sprint customers in New York $4.6 million a month.

The case was stayed pending the outcome of Sprint's appeal.

A Sprint representative could not immediately be reached to comment on the court's decision.

The case is the People v. Sprint Nextel Corp, New York State Court of Appeals No. 127.

(Reporting by Daniel Wiessner in Albany, New York; Editing by Alexia Garamfalvi and Grant McCool)