NEW YORK (Reuters) - Sprint Nextel Corp (S.N) asked a judge on Thursday to dismiss a lawsuit filed against the company by the state of New York for more than $300 million in uncollected taxes and penalties.
Eric Schneiderman, the state’s attorney general, has accused the mobile service provider of deliberately failing to collect and turn over to New York more than $100 million in taxes for its wireless phone services over seven years. The lawsuit, filed in April, seeks three times the alleged amount of underpayment, along with penalties.
But in a motion to dismiss filed in New York State Supreme Court on Thursday, Sprint said the state was attempting to levy taxes on services that are legally excluded from sales tax.
“The New York Attorney General’s complaint seeks to impose liability for practices that do not violate New York law,” the lawsuit said.
At issue is Sprint’s practice of “unbundling” its monthly plans so that its customers paid taxes on calls made to people within New York state, but not on those made to other states.
Schneiderman claims New York law requires sales tax on the full amount of the monthly charges, regardless of the type of calls made. But Sprint said New York law expressly exempted “interstate” calls from sales tax and that federal law permits mobile providers to unbundle taxable and nontaxable services.
The complaint is based on whistleblower information from Empire State Ventures, which conducts investigations and has been involved in many false claims cases. Schneiderman has said that internal Sprint documents demonstrate the unbundling is part of a broad strategy to draw customers away from its major competitors.
The lawsuit was brought under the False Claims Act, which allows whistleblowers to receive up to 25 percent of any money recovered by the government as a result of information they have provided.
The attorney general’s office could not immediately be reached for comment.
Reporting by Joseph Ax in New York; Editing by Lisa Von Ahn