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Sotheby’s New York salesroom in June. Photo: Sotheby’s.

Sotheby’s Sued by New York State AG for Tax Fraud

Storied New York auction house Sotheby’s has been hit with a lawsuit by the state attorney general alleging that it “helped wealthy clients evade taxes to boost its own sales.” The suit, filed Friday by lawyers for state AG Letitia James, specifically claims that Sotheby’s assisted an unnamed collector in posing as an art dealer so that the collector could unlawfully avoid paying sales tax by claiming an exemption meant only for the art trade.

The forty-one-page November 6 filing contends that a junior staffer formed a strong seller-buyer connection with a wealthy shipping magnate who collects Latin American art and helped that person avoid $27 million in sales taxes between 2010 and 2015 by assisting them in filling out a resale certificate, even though the staffer knew the collector had no plans to resell the work. According to the complaint, nearly thirty staff members were aware of these efforts, which additionally involved Porsal Equities, a British Virgin Islands–based entity that in 2018 paid $10.75 million to the state AG after admitting to sales tax avoidance related to $50 million worth of art and objects. Sotheby’s provided evidence in the case.

“Millionaires and billionaires cannot be allowed to evade taxes while everyday Americans pay their fair share,” said James in a press release. “Sotheby’s violated the law and fleeced New York taxpayers out of millions just to boost its own sales. This lawsuit should send a clear message that no matter how well-connected or wealthy you are, no one is above the law.” 

Sotheby’s in a statement issued Friday said that it “vigorously refutes the unfounded allegations made by the attorney general, which are unsupported by both fact and law. This is an issue between the taxpayer and the state dating from between five and ten years ago which, as the attorney general noted in her complaint, was settled two years ago.”

The suit comes just months after another high-profile New York auction house, Christie’s, agreed to pay $16.7 million to the Manhattan DA for failing to properly collect New York sales tax between 2013 and 2017.

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