Sotheby’s helped an art collector avoid millions of dollars in sales taxes in New York, the state attorney general said in a complaint filed Friday, accusing the prominent auction house of agreeing to false documents to save a high profile customer a tax bill.
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The case involves $ 27 million in coin purchases by artists such as painter Jean-Michel Basquiat and sculptor Anish Kapoor, and it portrays Sotheby’s as keen to keep the business of a prominent client that staff members allowed him to pose as an art dealer for tax purposes.
“Sotheby’s broke the law and robbed millions of New York taxpayers just to increase its own sales,” Democrat Attorney General Letitia James said in a statement.
The lawsuit comes after the collector’s art holding company, a British Virgin Islands-based company called Porsal Equities Ltd., settled with the Attorney General’s office in 2018. Porsal agreed to pay $ 10.75million dollars in taxes, damages and penalties for allegations that she circumvented sales tax on more than $ 50 million in art purchases from various New York entities.
Sotheby’s said it “vigorously refutes” the claims, calling them unfounded and “unsubstantiated by the facts and the law.”
“It’s a problem between the taxpayer and the state,” the auction house said in a statement, noting that the collector and the attorney general had moved in 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, enjoys Latin American art, lives outside the United States, and has homes around the world, including an apartment in New York City.
According to the lawsuit, he paid a visit in 2010 to Sotheby’s headquarters in New York City and met a junior staff member eager to cultivate it 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 “Certificate of Resale” form and partially completed it.
The document aims to offer a tax exemption only to art dealers who purchase items for their inventory and resale. Other buyers generally owe New York State and city sales tax on artwork purchased and delivered in the city.
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The staff – and, over time, more than 20 colleagues – knew the customer was buying artwork for their own enjoyment, according to the lawsuit. She arranged to have pieces installed in his Manhattan apartment, and she and a few colleagues went there to see a $ 5.7 million Basquiat painting he bought through Sotheby’s in 2012.
The collector, sometimes through Porsal Equities, purchased $ 27 million worth of artwork through Sotheby’s tax-free from 2010 to 2015, using certificates of resale, according to the lawsuit.
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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 sales tax on the collector’s purchase of Kapoor in 2010 alone would amount to more than $ 126,000, according to the lawsuit.
He seeks unspecified damages and penalties.