New York goes after telecommunications company

by Chuck April 26, 2012




New York, with one of the highest telecommunications taxes in the nation, this month sued Sprint-Nextel over what it claims is more than $100 million in “uncollected taxes.”

New York State Attorney General Eric Schneiderman, with the help from investigative group Empire State Ventures LLC, filed a lawsuit this month against Sprint-Nextel Corp., claiming it deliberately under-collected and underpaid $100 million in sales taxes.

According to the Associated Press, the lawsuit is based on a 2010 state law allowing the government to sue over tax losses due to fraud. If found guilty, the company could face a fine up to 3 times the amount NY claims was underpaid. The amount of the lawsuit could keep growing unless Sprint-Nextel complies with state law requiring taxes to be collected on the full amount of the of their monthly access fees for calling plans.

According to the complaint, Sprint failed to collect taxes on the interstate portion of the phone service, something AT&T and the other networks did collect taxes on. New York estimates  that since 2005 Sprint underpaid by about 25 percent and submitted false records.

Telecommunications taxes average out to 9.87% nationwide, but run the gambit from states  such as Oregon (1.81%), Nevada (2.08%) and Idaho (2.20%) , to those considerably higher than the rest, such as New York (17.78%), Washington (17.95%) and Nebraska (18.64%), according to The Tax Foundation.

With telecommunications taxed at such a substantial percentage, New York obviously has a vested interest in making sure the money is collected and remitted properly. “We’re hoping to have more folks scrutinizing any rip-off of state and local governments,” said Schneiderman, who as a former state senator helped redraft the law making this lawsuit possible.

Want to see what states tax cell phones the highest/lowest? Check out The Tax Foundation.


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