The state attorney general said in a lawsuit filed Friday that a prominent auction house helped an art collector avoid millions of dollars in sales taxes in New York, and accused the famous auction house of accepting fake documents to spare a major customer a tax bill.
The case involves the purchase of $ 27 million worth of pieces by artists such as painter Jean-Michel Basquiat and sculptor Anish Kapoor, and it portrays Sotheby’s as so passionate about keeping a major client working, which employees have enabled him to consider himself an art dealer for tax purposes.
“Sotheby’s violated the law and robbed New York’s taxpayers of millions just to boost its sales,” Attorney General Letitia James, a Democrat, said in a statement.
The lawsuit comes after the collectors’ technical holding company, a British Virgin Islands-based company called Bursal Equities Limited, was settled with the attorney general’s office in 2018. Bursal agreed to pay $ 10.75 million in taxes, damages and penalties over allegations it avoided sales. Tax on art purchases in excess of $ 50 million from various entities in New York.
Sotheby’s said it “strongly refutes” the allegations, describing them as unfounded and “unsupported by reality and law.”
“This is a case between the taxpayer and the state,” the auction house said in a statement, noting that the conductor and the attorney general settled in 2018.
The attorney general’s office did not publicly recognize the Tahseel collector. The lawsuit describes him as someone who runs a successful shipping company, loves Latin American art, lives outside the United States, and owns homes around the world, including an apartment in New York City.
According to the lawsuit, he paid a 2010 visit to Sotheby’s New York City headquarters and met a junior employee eager to raise him as a client. After the collector asked why some art purchases were not subject to sales tax, I provided him with a so-called “Resale Certificate” form and partially filled it out.
The document is intended to provide tax relief 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.
According to the lawsuit, the employee learned – and over time, more than 20 colleagues – that the customer was purchasing the artwork for their enjoyment. She arranged to have some of the pieces installed in his Manhattan apartment, and she and some of her colleagues went there to see the $ 5.7 million Basquiat painting he bought through Sotheby’s in 2012.
The lawsuit said the collector, sometimes through Porsal Equities, purchased $ 27 million worth of artworks through Sotheby’s tax-free from 2010 to 2015, thanks to resale certificates.
Among the purchases is a $ 1.4 million piece by Kapoor, which includes her stainless steel sculpture known as The Bean in Chicago’s Millennium Park. According to the lawsuit, the sales tax on the 2010 Kapoor purchase alone would amount to more than $ 126,000.
He seeks unspecified damages and penalties.
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