NEW YORK – Sotheby’s helped an art collector avoid millions of dollars in sales taxes in New York, the state attorney general said in a lawsuit filed Friday. In the lawsuit, he accuses the prominent auction house of accepting false documentation to save an important client a tax bill.
The case involves purchases of $ 27 million worth of pieces by artists such as painter Jean-Michel Basquiat and sculptor Anish Kapoor, and portrays Sotheby’s as a company so eager to keep an important client in business that he staff allowed him to pose as an art dealer for tax purposes.
“Sotheby’s broke the law and defrauded New York taxpayers out of millions just to boost their own sales,” Attorney General Letitia James said in a statement.
The lawsuit comes after the British Virgin Islands-based company Porsal Equities Ltd. settled with the attorney general’s office in 2018. Porsal agreed to pay $ 10.75 million in taxes, damages and penalties for Allegations that he circumvented sales tax on more than $ 50 million in art purchases from various entities in New York.
Sotheby’s said it “vigorously refutes” the allegations, calling them unfounded and “not supported by both facts and law.”
“This is a problem between the taxpayer and the state,” the auction house said in a statement, noting that the collector and the attorney general reached an agreement in 2018.
The attorney general’s office has not publicly identified the collector. The lawsuit describes him as someone who runs a successful shipping business, likes Latin American art, lives outside of the US, and has homes around the world, including an apartment in New York City.
According to the lawsuit, he paid a 2010 visit to Sotheby’s headquarters in New York City and met a junior staff member eager to nurture him as a client. After the collector asked why some art purchases are not subject to sales tax, she provided him with what is known as a “resale certificate” form and filled it out partially.
The document is intended to provide a tax exemption only to art dealers who purchase items for their business inventory and for resale. Other buyers generally owe New York City and state sales tax on art purchased and delivered in the city.
The staff member and, over time, more than 20 colleagues, knew that the customer was purchasing art for their own enjoyment, according to the lawsuit. She arranged for a few pieces to be installed in her Manhattan apartment, and she and some co-workers went there to see a $ 5.7 million painting of Basquiat that she bought through Sotheby’s in 2012.
The collector, sometimes through Porsal Equities, purchased $ 27 million worth of art through Sotheby’s duty-free from 2010 to 2015, thanks to resale certificates, according to the lawsuit.
Among the purchases was a $ 1.4 million piece by Kapoor, whose work includes the stainless steel sculpture known as The Bean in Chicago’s Millennium Park. The servicer’s 2010 sales tax on the Kapoor purchase would total more than $ 126,000, according to the lawsuit.
Look for unspecified damages and penalties.