NY Times: Art Collectors Find Safe Harbor In Delaware’s Tax Laws

New York Times, Art Collectors Find Safe Harbor in Delaware’s Tax Laws:

This state is special because storage spots in most other states cannot offer the same tax advantages as Delaware. It is one of only five states without any sales or use tax, meaning that a Manhattan collector who might owe, say, $887,500 in sales tax on the purchase of a $10 million painting at Sotheby’s in New York, would owe nothing by shipping the art to Delaware directly after purchasing it.

Once there, art can be bought and sold within a storage space without any tax on the transactions for as long as it remains there.

“Delaware has a lot of trust and tax advantages,” said Derek Jones, executive director of Atelier.

As interest in art as an investment — not a wall hanging — grows, the appeal of storing it tax free while it possibly appreciates in value has grown, too, spurring the expansion of free ports in Geneva and elsewhere in Europe and Asia. Owners do not have to pay import or export taxes when they ship to and from those locations. But, as Mr. Dietl points out, they are far away for American collectors, and there is no export tax on shipping an artwork into or around the United States, either.

As a result, Mr. Dietl thinks his new warehouse can replicate the benefits of overseas free ports “100 percent,” and maybe surpass them, because New York owners have to move their art less than 200 miles to Delaware.

He has even called his new facility, which opened last month, the Delaware Freeport. Each week, his truck shuttles along Interstate 95 from Manhattan carrying art for private buyers, museums and other institutions.

(Hat Tip: Mike Talbert.)