New York Attorney General Letitia James and Acting Commissioner of the State Department of Taxation and Finance (DTF) Amanda Hiller announced a $6.25 million settlement with Sotheby’s, Inc. for helping clients evade sales taxes on millions of dollars worth of art purchases. The settlement resolves a lawsuit alleging that between 2010 and 2020, Sotheby’s aided wealthy clients in fraudulently claiming to be resellers of art, allowing them to avoid paying sales tax.
“No one should be allowed to cheat the system and escape paying the taxes they owe,” said Attorney General James. “Sotheby’s intentionally broke the law to help its clients dodge millions of dollars in taxes, and now they are going to pay for it. Every person and company in New York knows they are required to pay taxes, and when people break the rules, we all lose out. I thank Acting Tax Commissioner Hiller for her partnership in ensuring everyone pays their fair share.”
The lawsuit revealed that Sotheby’s knowingly accepted resale certificates from clients who were purchasing art for personal use, not resale. One major client, referred to as the “Collector,” used this scheme to purchase $27 million in art between 2010 and 2015, while Sotheby’s personnel even helped display the art in the Collector’s home. Additional evidence showed that from 2012 to 2020, the auction house facilitated similar fraudulent transactions for at least seven other clients.
“This case shows that no one is above the law when it comes to paying taxes,” said Attorney General James. “Sotheby’s intentionally broke the law to help its clients dodge millions of dollars in taxes, and now they are being held accountable.”
Under the terms of the settlement, Sotheby’s will pay $6.25 million to the state and implement reforms to ensure compliance with New York’s tax laws. This includes employee training on tax rules and better monitoring of clients’ intentions to resell purchased art.
Attorney General James shares, “Sotheby’s intentionally broke the law to help its clients dodge millions of dollars in taxes, and now they are going to pay for it. Every person and company in New York knows they are required to pay taxes, and when people break the rules, we all lose out. I thank Acting Tax Commissioner Hiller for her partnership in ensuring everyone pays their fair share.”
This agreement comes on the heels of a previous settlement that addressed the Attorney General’s investigation into Porsal Equities, the Collector’s company. Porsal Equities consented to pay more than $10 million in taxes, penalties, and damages, while also acknowledging its misuse of resale certificates to acquire art for personal enjoyment, which contravened tax regulations and the New York False Claims Act.
“Wealthy art collectors are not above the law,” said Attorney General Underwood. “Just like any other consumers buying items for personal use, art collectors must pay sales and use tax when making a purchase. They cannot skirt the rules and make law-abiding New York taxpayers foot the bill.”
The investigation revealed that Porsal Equities had been repeatedly warned that its purchases did not meet the criteria for the resale exemption. Representatives from at least two art institutions raised questions about the nature and purpose of these transactions. Despite these warnings, Porsal Equities neglected to conduct essential inquiries about its tax responsibilities and continued to inappropriately assert the resale exemption for its acquisitions.
The case follows a broader crackdown by James on tax fraud, with recent settlements and arrests in various sectors, including car dealerships and restaurants, highlighting her office’s efforts to ensure fair tax compliance across the state.
