NY AG Continues Crackdown On Sales Tax Abuse In Art World With Gagosian Gallery $4.3 Million Settlement

Following up on my previous posts (links below):  Press Release, A.G. Schneiderman Announces $4.28 Million Settlement With International Art Dealer Gagosian Gallery For Failure To Collect And Remit New York Sales Tax:

Attorney General Eric T. Schneiderman announced today a $4.28 million settlement with international art dealer Gagosian Gallery following an investigation into sales tax collection practices. Gagosian Gallery is a leading dealer of contemporary art, with galleries in New York City, Beverly Hills, San Francisco, London, Paris, Geneva, Rome, Athens and Hong Kong. Its owner, Laurence Gagosian, is a prominent figure in the contemporary art scene, and it is estimated to sell over one billion dollars of art annually. ...

The Attorney General alleges that from at least 2005 to 2015, Pre-War Art, Inc., a California affiliate of Gagosian Gallery, sold and shipped nearly $40 million of art to customers in New York without collecting or remitting New York state and local sales tax.  During this time, employees of Pre-War, and the Gagosian Gallery location in New York, engaged in substantial economic activity to promote and facilitate the sale of Pre-War’s art in New York. 

Additionally, the Attorney General alleges that from at least 2012 to 2015, Gagosian Gallery Inc. sold a significant volume of art in New York that was shipped out of state, for which it should have, but did not, collect New York state and local sales tax.  Under New York law, New York sales tax is due if possession is transferred by the vendor to the purchaser or purchaser’s agent within New York.  When it turned over art to shipping companies within New York that were not common carriers like UPS, FedEx or the U.S. Postal Service, but rather, were contract carriers acting as the purchasers’ agents, Gagosian should have collected and remitted sales tax. 

• New York Times, Gagosian Gallery to Pay New York State $4.3 Million
• Wall Street Journal, Art Dealer Larry Gagosian Settles Over Sales Taxes for $4.3 Million; New York Attorney General’s Office Has Been Cracking Down on Alleged Tax Abuses in the Art World

Prior TaxProf Blog coverage:

• NY Times: Buyers Evade State Taxes by Loaning Purchased Art to Museums in Non-Tax States (Apr. 14, 2014)
• NY Times: Art Collectors Find Safe Harbor In Delaware’s Tax Laws (Oct. 27, 2015)
• NY Times: AG Dings Developer Aby Rosen For $7 Million In Unpaid Taxes On Art (May 4, 2016)