Sotheby’s to Pay $6.25M Settlement to NY State for Alleged Tax Fraud
The auction house was accused of helping clients avoid paying taxes on millions of dollars’ worth of art purchased from 2010 to 2020.
The auction house allegedly helped clients avoid paying taxes on tens of millions of dollars’ worth of art purchased between 2010 and 2020, New York Attorney General Letitia James said when announcing the settlement last week.
The lawsuit, brought by James’ office in November 2020, claimed Sotheby’s encouraged clients to use tax exemption forms known as resale certificates, which certify that a buyer is exempt from paying sales tax because the purchase is for resale only.
It then accepted these certificates, even though the auction house allegedly knew these clients were buying the art for themselves, not to resell it.
Sotheby’s did not respond to National Jeweler’s request for comment but a Reuters report said the company did not admit or deny wrongdoing, and said it “settled to avoid the time, expense, and distraction of litigation.”
James said one of Sotheby’s clients, referred to as the “Collector,” purchased $27 million worth of art from the auction house between 2010 and 2015 using these forms.
She said Sotheby’s accepted resale certificates from the Collector even though it knew they were not buying art for resale but for a personal art collection, some of which Sotheby’s employees helped to set up for display in the Collector’s home.
James previously had secured a settlement with the Collector’s company, Porsal Equities, requiring it to pay more than $10 million in taxes, penalties, and damages for being in violation of tax laws and the New York False Claims Act.
“No one should be allowed to cheat the system and escape paying the taxes they owe,” she said.
“Sotheby’s intentionally broke the law to help its clients dodge millions of dollars in taxes, and now they are going to pay for it. Every person and company in New York knows they are required to pay taxes, and when people break the rules, we all lose out.”
The attorney general’s office also claimed that from 2012 to 2020, Sotheby’s improperly accepted resale certificates from at least seven other clients on millions of dollars of purchases despite knowing they were buying art for their personal collections.
In several instances, Sotheby’s did not just accept the false resale certificates, but suggested its clients use them, said James, providing the forms and filling out portions of it for them.
“In this case, 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 Amanda Hiller, acting commissioner and general counsel of New York State Department of Taxation and Finance.
“Thanks to the diligent efforts of Attorney General James and her staff, this fraudulent activity has been stopped and Sotheby’s is being held accountable.”
In addition to paying $6.25 million, Sotheby’s has to undergo reforms as part of the settlement, including creating new measures to ensure employees are educated properly on New York tax law and reviewing information about whether a client intends to resell the art being purchased.
The Latest
A total of 126 million consumers shopped in stores over the five-day period, about 5 million more than last year.
The FTC’s Jewelry Guides require “clear and conspicuous” disclosure when advertising lab-grown diamonds.
The fine jewelry designer, who came out of retirement in 2017, is putting down his sketchpad for good.
While no reputable jeweler would knowingly sell lab-grown stones as natural, it's a growing possibility.
The Type IIa, very light pink colored diamond was the highlight of the recent Hong Kong jewelry auction.
In his latest column, Smith provides a list of questions every business needs to be asking their next potential leader.
An innovative artist inspired by the natural world, Lehrer is remembered for being a visionary and a shining light.
From protecting customer data to safeguarding inventory records, it's crucial to learn how to tackle cybersecurity challenges.
Jérôme Lambert returns as CEO of Jaeger-LeCoultre, while Laurent Perves takes the lead role at Vacheron Constantin.
The extravagant gifts in this year’s “A Neiman’s Fantasy” Holiday Book range from a Messika diamond necklace to pavé diamond cowboy boots.
Owners Greg and Lynn Bires are heading into retirement.
The industry veteran is remembered for his faith, his dedication to his family, his wealth of knowledge and his generosity in sharing it.
PricewaterhouseCoopers’ 2024 holiday trends survey took a 10-year look back to see what mattered to consumers then versus now.
Monique Lhuillier and Kay Jewelers collaborated to create the pieces, which were offered at the recent Baby2Baby gala.
Botswana joins Antwerp as a certification center for rough under the G7 ban on Russian diamonds.
The miner said its November sale, which earned $16.1 million, felt the effect of competitive pricing by a rival Zambian producer.
Mignon Faget honors its hometown of New Orleans with a piece inspired by “The Crescent City.”
The London-based business-to-business diamond and gemstone marketplace just closed on a $51 million round of Series C funding.
“Forever Present” highlights gifting opportunities for natural diamonds, celebrating familial, friendship, and romantic relationships.
It’s one of the most impressive assemblages of the French designer’s pieces ever to come to auction, Christie’s said.
Successful email marketing campaigns are all about timing, personalization, and compelling CTAs, Emmanuel Raheb writes.
Retail leader Lisa Bridge and geology professor Dr. Wendy Bohrson joined the organization’s board.
Look out for a black bear wearing a purple Santa hat and its zippered tummy pouch made for holding a holiday gift from Ben Bridge Jeweler.
“The William Goldberg Way” was released in honor of the company’s 75th anniversary and 25 years of its proprietary Ashoka diamond.
Fenix and Dholakia Lab-Grown Diamonds have jointly acquired the Israel-based company, which grows diamonds using solar power.
The Danish brand has opened an appointment-only location on Madison Avenue in New York City.
The actor and watch enthusiast will be part of the show’s education lineup.