Sotheby’s has come up against New York attorney general Letitia James after her office alleged the auction house challenged the public with massive tax revenues in a lawsuit filed in early November. The AG claimed a collector avoided taxes on $ 27 million in art purchases – and Sotheby’s helped them do that.
On Friday, Sotheby’s filed a 27-page memo with the New York State Supreme Court asking a judge to dismiss the case. Sotheby’s attorneys cited several reasons, including that the attorney general had not adequately argued that the auction house was required to collect taxes.
In the more than 40-page complaint filed by Attorney General James on November 6, Sotheby’s was accused of “helping wealthy customers evade taxes to increase their own sales”. The lawsuit elaborated on the House’s role in assisting a specific customer it did not name and evaded tax by filing documents granting it benefits legally reserved for dealers rather than private collectors.
In their response, Sotheby’s attorneys alleged that the Attorney General had failed to show that the House knew that the documents they submitted were false. They also stressed that the state, which had come to terms with the buyer in question two years ago, had already reimbursed the unpaid sales tax.
The attorney general “is trying to punish sales tax rather than simply reclaiming it,” argued Sotheby’s lawyers.
Sotheby’s declined to comment further. A representative previously told Artnet News that the House “vigorously denies the attorney general’s unfounded allegations, which are unsupported by both fact and law.”
While the Attorney General’s complaint only identified the central customer Portal Equities as a holding company based in the British Virgin Islands, the Wall Street Journal named the collector behind Isaac Sultan, President of Atlantic Feeder Services USA LLC in Miami. Sultan is known for collecting Latin American and contemporary art, according to the Journal. Artnet News was unable to independently confirm the collector’s identity. Sultan did not respond to a request for comment.
The original complaint sets out how an unidentified Sotheby’s Junior employee known as the Key Client Manager or “KCM” wooed the collector. It was alleged that the employee helped the customer fill out a resale certificate, which provides tax protection for dealers who want to buy works and put them back on the market, even though the collector was not eligible for the credit.
In response, Sotheby’s attorneys wrote that the attorney general “is trying to circumvent the tax law by trying to put aside decades of guidelines and jurisdiction governing the circumstances under which sellers can properly accept resale certificates from their customers. this is the [Office of the Attorney General] can not.”
Sotheby’s repeatedly emphasized that it had no knowledge that the resale certificates provided by the collector were false. Rather than launch a conspiracy to avoid taxes, the auction house argued, the manager was simply “inadequately trained”.
The Attorney General’s objection letter is due by January 29th. Sotheby’s answer will follow on February 19th.
When asked for comment, an attorney general reiterated Letitia James’ earlier statement at the time the lawsuit was filed: “Millionaires and billionaires are banned from avoiding taxes while Americans pay their fair share every day. Sotheby’s broke the law and got New York taxpayers out of the millions just to grow its own sales. This lawsuit should send a clear message that no one is above the law, no matter how well connected or rich you are. “
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