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People v. Sprint Nextel Corp.

Supreme Court of New York, New York County

June 27, 2013, Decided



 [*513]  [**168]  O. Peter Sherwood, J.

Defendants Sprint Nextel Corp. and its wholly-owned subsidiaries, Sprint Spectrum L.P., Nextel of New York, Inc., and Nextel Partners of Upstate New York, Inc. (collectively, Sprint), move, pursuant to CPLR 3211 (a) (5) and (7), to dismiss the complaint in this tax enforcement action.


This case arises out of a qui tam action pursuant to the New York False Claims Act, State Finance Law § 189. Empire State  [*514]  Ventures, LLC initially commenced the action, pursuant to State Finance Law § 189, essentially alleging that Sprint, mobile telecommunications service providers, failed to collect or pay New York sales taxes on receipts from the sale of certain wireless telephone services. After an investigation, plaintiff, the People of the State of New York, by Eric T. Schneiderman,  [***2] Attorney General for the State of New York, [**169]  intervened and filed a superseding [****2]  complaint, also alleging claims under the State Finance Law, as well as claims under the Tax Law and Executive Law. The Attorney General claims, in essence, that Sprint knowingly filed false tax returns and underpaid New York sales taxes on its mobile telecommunications offerings in order to gain an advantage over its competitors.

The superseding complaint includes the following factual allegations, which, on this motion to dismiss, are accepted as true. From 2002 to the present, Sprint sold wireless telephone calling plans to New York customers for a set number of minutes per month at fixed monthly recurring access rates. Customers incur the fixed monthly recurring access charges regardless of whether they actually use all of the available minutes in a given month, or whether they make interstate or intrastate charges. Customers also incur overage charges, on a per-minute basis, for any minutes used in excess of the monthly allotment. Sprint issues monthly invoices, which do not distinguish between interstate and intrastate usage, but rather, include the fixed monthly recurring access charges, any overage  [***3] charges, and charges for sales taxes.

Beginning in July 2005, Sprint implemented a nationwide program of unbundling its wireless offerings. As such, Sprint began treating part of its fixed monthly access charges for wireless voice services as if they were charges for interstate calls charged on a per-minute basis. The monthly invoices from defendants continued to identify the charges as fixed monthly recurring access charges. However, Sprint did not collect or pay New York sales taxes on the interstate calls. Sprint also submitted monthly and quarterly state sales tax filings reflecting only the amount of sales taxes it collected for intrastate calls. The submissions offer very little insight into the standards Sprint used to identify each component of the unbundled charges.

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41 Misc. 3d 511 *; 970 N.Y.S.2d 164 **; 2013 N.Y. Misc. LEXIS 2860 ***; 2013 NY Slip Op 23230 ****; 2013 WL 3496478

 [****1]  The People of the State of New York, by Eric T. Schneiderman, Attorney General for the State of New York, et al., Plaintiffs, v Sprint Nextel Corp. et al., Defendants.

Subsequent History: Affirmed by People v. Sprint Nextel Corp., 114 A.D.3d 622, 980 N.Y.S.2d 769, 2014 N.Y. App. Div. LEXIS 1363 (N.Y. App. Div. 1st Dep't, 2014)

Decision reached on appeal by People v. Sprint Communications Inc., 2017 N.Y. App. Div. LEXIS 1877 (N.Y. App. Div. 1st Dep't, Mar. 15, 2017)


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Civil Procedure, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Responses, Motions to Dismiss, Governments, Local Governments, Claims By & Against, Tax Law, State & Local Taxes, Administration & Procedure, General Overview, State & Territorial Governments, Sales Taxes, Imposition of Tax, Legislation, Interpretation, Exempt Sales, Communications Law, Regulated Entities, Telephone Services, Mobile Communications Services, Federal & State Interrelationships, Federal Common Law, Preemption, Constitutional Law, Supremacy Clause, Federal Preemption, Bills of Attainder & Ex Post Facto Clause, Ex Post Facto Clause, Application & Interpretation, Remedies, Damages, Punitive Damages, Federal Government, Criminal Law & Procedure, Acts & Mental States, Mens Rea, Specific Intent, Fraud Against the Government, Tax Fraud, Elements, Injunctions, Torts, Business Torts, Fraud & Misrepresentation, Statute of Limitations, Time Limitations