Sotheby’s will pay more than $6 million to settle claims it helped clients avoid paying taxes on high-priced art from masters like Basquiat by pretending the big-money collectors were resellers.
One high-roller allegedly dodged taxes on $27 million worth of art from Sotheby’s between 2010 and 2015, including on a $1.4 million Anish Kapoor sculpture and a $5.4M Jean-Michel Basquiat painting, according to court papers.
“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,” Attorney General Letitia James wrote in a statement announcing the settlement.
“Every person and company in New York knows they are required to pay taxes, and when people break the rules, we all lose out,” James continued.
Sotheby’s will pay $6.25 million to settle the lawsuit.
The Wall Street Journal reported in 2020 that the alleged tax dodger, referred to simply as “the Collector” in court documents, is Isaac Sultan, president of Miami-based shipping company Atlantic Feeder Services USA LLC.
Between 2010 and 2015 the Collector acquired 35 pieces of art and furniture from Sotheby’s.
In their complaint first filed in 2020, prosecutors painted an excruciatingly detailed picture of how Sotheby’s staff were fully aware that Sultan was not a reseller, but gave him resale certificates so he could get qualify for a sales tax exemption.
“These were not the acts of a rogue employee, or mere negligence,” the 2020 complaint reads.
It goes on to lay out how employees provided the Collector with resale certificates even though they knew full well that he was buying art for his personal use.
At least 29 Sotheby’s employees knew he wasn’t a reseller, and at least 22 knew the pieces were specifically going to his Manhattan apartments.
On one occasion the Collector even provided specific instructions to ship a piece from London for display in his Manhattan apartment.
According to the complaint, the sales taxes on the $1.4 million Anish Kapoor sculpture alone would’ve been $126,000.
Sotheby’s as well as “the collector’s shell company, Porsal Equities, were charged under New York’s False Claims Act. Porsal Equities settled with New York in 2018 where they admitted to falsely using the resale certificates.
“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,” Amanda Hiller, acting commissioner of the Department of Taxation and Finance, said in a statement.
Additional reporting by Peter Senzamici.
