Gagosian Gallery to Pay $4.28 Million in Tax Settlement

Updated on
  • New York attorney general and Gagosian reached agreement
  • Accord on unpaid taxes on art shipped to and from the state

The Gagosian Gallery agreed to a $4.28 million settlement for failing to pay taxes on art sales, New York Attorney General Eric Schneiderman said in a statement Tuesday.

The attorney general said that for at least a decade Pre-War Art Inc., a California affiliate of the gallery, sold and shipped almost $40 million of art to customers in New York without collecting or remitting state and local sales taxes. The office also said that from at least 2012 to 2015, the gallery sold a significant volume of art in New York that was shipped out of state without paying the required taxes.

“There is one set of tax rules for all, and that includes art dealers and collectors,” Schneiderman said in the statement. “Those who fail to pay their share can deprive the state of millions of dollars.”

The Gagosian settlement comes amid a wave of investigations into financial dealings in the art market. Aby Rosen, a New York real estate developer with a storied half-billion dollar art collection, agreed in May to pay $7 million related to claims that he avoided paying sales and use taxes on $80 million of fine art he had commissioned or bought since 2002. At the same time, Victoria Gelfand, a Gagosian Gallery director, agreed to pay $210,000 in unpaid taxes on more than 30 pieces of art she had purchased through her privately owned companies.

“Sales and use taxes have become cottage industry for art lawyers and accountants in Manhattan,” said Thomas C. Danziger, a partner at Danziger, Danziger & Muro LLP. “I’ve been spending hours a day on this very issue over the past year.”

State Law

The settlements don’t include admissions of wrongdoing. The New York Times broke the news about the Gagosian settlement earlier Tuesday.

The attorney general’s office said it began investigating Gagosian Gallery’s practice of collecting sales taxes in 2013.

“Under New York law, New York sales tax is due if possession is transferred by the vendor to the purchaser or purchaser’s agent within New York,” according to the press release. “When it turned over art to shipping companies within New York that were not common carriers like UPS, FedEx or the U.S. Postal Service, but rather, were contract carriers acting as the purchasers’ agents, Gagosian should have collected and remitted sales tax.”

Gagosian, the world’s biggest gallery by exhibition space, said in a statement, “Although we cannot comment on these findings, we accept and will fully comply with the terms of the settlement to bring closure to this matter.”

Shipping Division

As part of the settlement, the gallery will establish a wholly owned division called GG Shipping, which will handle the shipment of art from Gagosian’s New York location to out-of-state customers, according to the attorney general’s statement.

Gagosian will charge New York state and local sales taxes on taxable sales of art to be shipped out of state, unless the purchaser agrees to use GG Shipping, according to the accord.

The settlement “clarifies that buyers of artwork in New York should not directly facilitate shipping of their purchases outside the state,” Danziger said. “Clearly, dealers and art collectors are squarely in the cross-hairs of the AG’s investigative staff.”

    Before it's here, it's on the Bloomberg Terminal.