Supreme Court Turns Down Sprint Hearing in $300 Million Lawsuit

May 31, 2016, 1:54 PM UTC
Inside A Sprint Corp. Store Ahead Of Earnings Figures
A customer talks on a cell phone while exiting a Sprint Corp. store in Woodhaven, Michigan, U.S., on Thursday, Oct. 29, 2015. Sprint Corp. is scheduled to release earnings figures on November 3. Photographer: Laura McDermott/Bloomberg via Getty Images
Photograph by Bloomberg via Getty Images

The U.S. Supreme Court on Tuesday declined to hear Sprint’s bid to avoid a lawsuit filed by New York state that seeks $300 million and claims the company deliberately did not bill customers for taxes on its wireless services over seven years.

By refusing to hear the appeal, the justices left in place an October 2015 ruling by the New York Court of Appeals in favor of the state. Sprint (S), the No. 4 U.S. wireless carrier, argued that a New York state law imposing sales taxes on interstate mobile phone services is trumped by federal telecommunications law.

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The office of New York Attorney General Eric Schneiderman, in a 2012 lawsuit based on whistleblower information, said Sprint ignored that law and failed to collect more than $100 million in taxes from New York customers owed to the state and to local governments since 2005.

The state 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 (T) and Verizon Wireless (VZ), and saved Sprint customers in New York $4.6 million per month.

Sprint has said the 2002 state law in question is preempted by a federal law called the Mobile Telecommunications Sourcing Act, enacted in 2000, that regulates state taxation of mobile telecommunications services.