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State attorney general levels tax fraud charges against Sprint

Every taxing authority, from the Internal Revenue Service to the California Franchise Tax Board, wants to ensure compliance with all applicable laws. These authorities are willing to pursue everyone from the smallest taxpayer to the largest corporation for not meeting their tax obligations, whether the amount in question is a few hundred dollars to a few hundred million dollars.

Last week, one state's attorney general alleged that Sprint Nextel had failed to pay the state approximately $100 million in sales taxes collected since 2005. The attorney general filed a tax fraud lawsuit against the company, arguing that Sprint withheld tax payments in order to improve its pricing margin vis-à-vis competing companies in the communications market.

According to the state's attorney general, the lawsuit against the company originated when a whistleblower filed a separate suit last year. Sprint is being prosecuted under the state's False Claims Act, which imposes heavy penalties on violators. A person or business found in contravention of the act must remit three times its tax liability to the state. In Sprint's case, that means it could owe in excess of $300 million in taxes and penalties.

Sprint representatives have responded to the tax fraud lawsuit, remarking that the allegations are false and that it has paid all sales taxes required by law. There is a lot at stake for the company, which posted a nearly $3 billion loss in 2011. Although different tax laws apply to corporations and individual persons, on one level Sprint's tax issues are similar to those of ordinary taxpayers except that there are a few extra zeros involved. Tax fraud is a serious charge, and people can face significant consequences if found guilty.

Source: CNNMoney.com, "Sprint hit with $300 million tax fraud lawsuit," Julianne Pepitone, April 19, 2012.

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