Sprint pays record $330M to settle New York claim that it ‘flagrantly broke the law’

Federal securities officials previously investigated the same issue at Sprint but did not pursue and “enforcement action.”
Federal securities officials previously investigated the same issue at Sprint but did not pursue and “enforcement action.” The Kansas City Star

Sprint has agreed to pay $330 million to settle a long-running tax dispute with New York state, which had claimed the company “flagrantly broke the law.”

The state had sued in 2012 claiming Overland Park-based Sprint knowingly failed to collect state and local taxes on flat-rate wireless calling plans sold in the Empire State.

“Sprint knew exactly how New York sales tax law applied to its plans — yet for years the company flagrantly broke the law, cheating the state and its localities out of tax dollars that should have been invested in our communities,” New York Attorney General Barbara D. Underwood said in an announcement. “Now, Sprint will pay the price with this record-setting settlement.”

It’s the largest recovery the state has collected under the New York False Claims Act, the announcement said.

“We are pleased with the settlement, and while we disagree with the state’s characterizations, we believe resolving this matter is in the best interest of the company,” a Sprint spokeswoman said.

The Securities and Exchange Commission had investigated the same issue but notified Sprint in 2013 that it “did not intend to recommend and enforcement action against the company,” Sprint had said in a public filing.

Sprint had argued that it did not need to collect the taxes on calls within New York state but only on calls New York residents made to numbers outside the state.

Underwood said “a substantial portion of the $330 million” already has been paid out to localities “directly harmed by Sprint’s conduct.”

Sprint, the nation’s fourth largest wireless provider, is seeking approval from federal and state officials for its proposed $26 billion merger with T-Mobile, the third largest national wireless carrier.

Related stories from Kansas City Star

Mark Davis writes about business for The Kansas City Star with attention to Sprint, investing, the economy and scams. He has been a winner and finalist in national competitions held by the Society for Advancing Business Editing and Writing.