Sprint loses bid to dismiss $300 million N.Y. tax fraud lawsuit

The logo of U.S. mobile network operator Sprint Corp is seen at a Sprint store in San Marcos, California August 3, 2015. REUTERS/Mike Blake

(Reuters) - Sprint Corp S.N must face a $300 million fraud lawsuit by New York state claiming the company deliberately failed to bill customers for taxes on its wireless services over seven years, the state's top court ruled on Tuesday.

The Court of Appeals in a 4-1 decision rejected Sprint’s claims that a 2002 state law imposing sales taxes on interstate mobile phone services violated the U.S. Constitution.

The office of Attorney General Eric Schneiderman in a 2012 lawsuit based on whistleblower information said Sprint ignored the law and failed to collect more than $100 million in taxes from New York customers. The prosecutor 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 Inc T.N and Verizon Wireless VZ.N, and saved Sprint customers in New York $4.6 million a month.

The case was suspended pending the outcome of Sprint’s appeal.

A Sprint representative said the company was disappointed with the decision.

Schneiderman in a statement said that when companies dodge taxes, they place honest competitors at a disadvantage.

“There has to be one set of rules for everyone, no matter how rich or how powerful, and that includes the biggest corporations paying their fair share of taxes,” he said.

The case is the People v. Sprint Nextel Corp, New York State Court of Appeals No. 127.

Reporting by Daniel Wiessner in Albany, New York; Editing by Alexia Garamfalvi and Grant McCool