Sotheby’s helped more rich clients dodge sales tax, claims NY attorney general

The state’s 2020 lawsuit against Sotheby’s has expanded to include seven additional collectors and numerous Sotheby’s employees from across the organisation

New York's attorney general Letitia James said that documents recently handed over to state investigators revealed the alleged tax dodge by the shipping executive was 'only the tip of the iceberg'. Picture: Richard Drew/PA

An alleged effort by Sotheby’s to help wealthy art collectors avoid paying sales tax on purchases for their homes was “far more extensive and serious than previously known”, New York’s attorney general has said.

The state’s 2020 lawsuit against Sotheby’s for allegedly helping a wealthy shipping executive use a false resale certificate to dodge taxes has expanded to include seven additional collectors and numerous Sotheby’s employees from across the organisation, including its tax department, New York attorney general Letitia James said in a filing in Manhattan.

Documents that were recently handed over to state investigators during the litigation revealed that the alleged tax dodge by the shipping executive was “only the tip of the iceberg,” Ms James said in the filing.

Ms James is seeking court permission to conduct almost two dozen more depositions of people involved in the alleged practice, including a Missouri art gallery owner who allegedly used resale certificates improperly to buy untaxed jewellery from Sotheby’s for his wife, and a New York-based interior designer who deployed the practice to avoid taxes on jewelry, and a handbag he bought from Sotheby’s for Mother’s Day gifts. 

Ms James is also seeking to depose Sotheby’s employees who signed off on the paperwork.

None of the clients are identified in the court filing and none are named as defendants in the suit. According to the filing, Ms James’s team is still trying to identify the Sotheby’s employee who filled in the business description line on a resale certificate to falsely state: “I am in the business of art dealer and principally sell art work.” 

Neither Sotheby’s media office nor the company’s lawyer immediately responded to messages seeking comment on the weekend. Sotheby’s has previously denied wrongdoing in the matter. 

Sotheby’s initially balked at handing over records beyond those involving the shipping executive, arguing that Ms James was a on a “fishing expedition” and that additional documents would not “yield evidence of wrongdoing”.

“Once the court ordered Sotheby’s to produce them, they in fact showed that Sotheby’s misconduct was far more extensive and serious than previously known,” the attorney general said in a footnote of her filing.

• Bloomberg