Sotheby's settles with New York for $6.25M over tax fraud

ALBANY, N.Y. (NEXSTAR) — New York Attorney General Letitia James announced a $6.25 million settlement with Sotheby’s, the iconic New York City auction house, for helping clients avoid millions in sales taxes. From 2010 to 2020, Sotheby’s let clients claim phony tax exemptions on millions of dollars in art purchases.

"A prominent auction house went out of its way to help wealthy clients avoid paying millions of dollars in sales taxes on their art purchases,” said Acting New York State Tax Commissioner Amanda Hiller. “This fraudulent activity has been stopped and Sotheby’s is being held accountable.”

According to the Attorney General's Office, Sotheby’s told clients to pretend to buy art for resale when they were actually curating their own personal galleries, which let them skip sales tax. In one example, a major client used tax exemption forms to buy $27 million in art this way between 2010 and 2015. Sotheby’s knew this collector wasn't reselling, but still accepted their forms.

That collector’s company already agreed to repay over $10 million in taxes and penalties in an earlier settlement brokered by James's office.

But the attorney general's investigation showed that Sotheby’s also helped other clients dodge taxes from 2012 to 2020. Although employees knew that those buyers were not art dealers, the auction house provided or completed resale certificates for clients who were buying art as gifts or for their private collections.

Under the settlement agreement, Sotheby’s has to commit to major procedural changes beyond the millions in penalties. The company has to train employees on New York tax law and make it harder to break the law in this way in the future.

“No one should be allowed to cheat the system and escape paying the taxes they owe," James said when announcing the settlement on November 14. "When people break the rules, we all lose.”