Source: https://www.whistleblowerlawyerblog.com/court_allows_ny_tax_whistleblo_1/
Timestamp: 2019-06-18 06:51:53
Document Index: 294844893

Matched Legal Cases: ['ART 49', '§ 189', '§ 1105', '§ 1105', '§ 1105', '§ 1105', '§ 1105', '§ 1105']

Court Allows N.Y. Tax Whistleblower Case To Proceed Against Sprint-Nextel Corporation — Whistleblower Lawyer Blog — July 10, 2013
The Court also dismissed the Complaint’s unnecessary conspiracy count, by holding that a corporation cannot conspire with its own subsidiaries.
Most state False Claims Acts mirror the federal law, which excludes tax cases from the types of cases that whistleblowers (known as “relators”) may bring as “qui tam” cases. Attorney General Eric T. Schneiderman as a legislator had a lead role in enacting New York’s current False Claims Act.
AG Scheiderman and his Senior Advisor and Counselor Gregory Krakower have warmly welcomed tax whistleblowers and their attorneys to file tax qui tam cases in New York. The Attorney General has established a Taxpayer Protection Bureau within his office led by Randall Fox, whom I have found very approachable and receptive to these cases.
For whistleblower lawyers who already have pending IRS Whistleblower claims that also have New York state tax elements, the New York Taxpayer Protection Bureau holds great promise. The IRS and New York need to amend their information sharing agreement so that the IRS may share information and resources with the new Taxpayer Protection Bureau, which receives the whistleblower filings. Ideally, the IRS and the N.Y. Taxpayer Protection Bureau should be able to assist each other in joint audits when appropriate–especially in cases of complexity.
Excerpts of the Court’s Order allowing the case against Sprint to proceed follow:
BY ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL FOR THE STATE OF NEW YORK, AND STATE OF NEW YORK, EX REL.
NEXTEL OF NEW YORK, INC. AND NEXTEL PARTNERS OF UPSTATE NEW YORK, INC.,
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 49
DECISION AND ORDER Index No. 103917/2011
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.
The superceding Complaint alleges that Sprint intentionally avoided more than $100 million in New York sales tax obligations by arbitrarily unbundling its wireless offerings. The Complaint also alleges that for the years at issue, the percentage of fixed-rate wireless calling plans on which Sprint did not collect sales taxes ranged from 13.7% to 28.5% of the overall fixed rate. Plaintiff maintains that the allocation between taxable and non-taxable categories not only ignored the applicable sections of the Tax Law, but also was arbitrary because it was not related to any customer’s actual usage.
The New York False Claims Act, State Finance Law § 189(1)(g), prohibits any person from knowingly making or using a false record or statement to avoid an obligation to pay or transmit money or property to the state or a local government. Effective August 10, 2010, the False Claims Act was amended to expressly apply to knowing violations of the New York Tax Law (2010 McKinney’s Session Laws of NY, ch 379, at A 11568).
New York’s Tax Law § 1105(b)(2) imposes a four percent tax on:
“[t]he receipts from every sale of mobile telecommunications service provided by a home service provider, other than sales for resale, that are voice services, or any other services that are taxable under subparagraph (B) of paragraph one of this subdivision, sold for a fixed periodic charge (not separately stated), whether or not sold with other services.”
“The receipts from every sale, other than sales for resale, of the following: . . .
(B) telephony and telegraphy and telephone and telegraph service of whatever nature except interstate and international telephony and telegraphy and telephone and telegraph service and except any telecommunications service the receipts from the sale of which are subject to tax under paragraph two of this subdivision. . . .”
Section 1105(b)(2) imposes the four percent tax on receipts from every sale of mobile telecommunications services, other than sales for resales, that are voice services sold for a fixed periodic charge. The superceding Complaint specifically seeks to redress Sprint’s alleged tax avoidance for mobile telecommunications services sold for a fixed periodic charge. Thus, § 1105(b)(2) must be applied to address plaintiff’s claims.
Section § 1105(b)(3) states that “[t]he tax imposed pursuant to this subdivision is imposed on receipts from charges for intrastate mobile telecommunications service of whatever nature in any state if the mobile telecommunications customer’s place of primary use is in this state.” Thus, § 1105(b)(3) taxes receipts from intrastate mobile telecommunications charges incurred by New York customers while they are in any state. A review of the superceding Complaint reveals no factual allegations that require the application of § 1105(b)(3).
Simply stated, nothing in the plain language of Tax Law §§ 1105(b)(1) or (b)(3) addresses plaintiff’s allegations that Sprint knowingly avoided New York sales taxes on the sale of mobile telecommunications services for a fixed monthly recurring access charge.
“(1) Receipts from the sale of mobile telecommunications service provided by a home service provider shall include ‘charges for mobile telecommunications services.’ Such term shall mean any charge by a home service provider to its mobile telecommunications customer for
(2) With respect to services or property described in subparagraph (B) of paragraph one of this subdivision, internet access service, any mobile telecommunications service which the mobile telecommunications customer originates in a foreign country to the extent included in the fixed periodic charge, any interstate or international telephony or telegraphy or telephone or telegraph service of whatever nature which is not a voice service, and any property or service which is not telephony or telegraphy or telephone or telegraph service of whatever nature, a home service provider shall collect and pay over tax, and a mobile telecommunications customer shall pay such tax, on receipts from any charge that is aggregated with and not separately stated from other charges for mobile telecommunications service. Provided, however, if such home service provider uses an objective, reasonable and verifiable standard for identifying each of the components of the charge for mobile telecommunications service, then such home service provider may separately account for and quantify the amount of each such component charge. If a home service provider chooses to so separately account for and quantify and separately sells any such property or service, then the charge for such property or service shall be based upon the price for such property or service as separately sold.”