Sotheby’s Settles for $6.25 Million Over Alleged Tax Evasion Facilitation as NY Attorney General Cracks Down on Art Market

In a significant crackdown on tax evasion tactics employed by affluent art buyers, Sotheby’s has agreed to a $6.25 million settlement after the New York Attorney General’s office exposed the auction house’s involvement in facilitating clients to evade sales taxes on art purchases. According to an announcement by New York Attorney General Letitia James and Acting DTF Commissioner Amanda Hiller, the renowned auction house allowed buyers to falsely claim artwork purchases as being for resale, thereby avoiding the payment of sales tax on multimillion-dollar transactions over the course of a decade, as reported by the

Office of the New York State Attorney General

.

This financial repercussion follows a thorough inquiry into Sotheby’s practices between 2010 and 2020, during which the auction house allowed a major client, referred to as the “Collector,” to use resale certificates to avoid sales tax on $27 million worth of art. This occurred despite the auction house’s knowledge that the art was for personal use, with some pieces even being installed by Sotheby’s personnel in the Collector’s home. “No one should be allowed to cheat the system and escape paying the taxes they owe,” stated Attorney General James, according to the

New York State Attorney General’s office

, in a case that has exposed the underbelly of the high-end art market.

Along with the Collector, at least seven other clients were identified as having used the same fraudulent method—submitting false resale certificates for personal art purchases—to evade tax obligations. The Attorney General’s investigation revealed that Sotheby’s not only knowingly accepted these false claims but, in some cases, even aided clients in the process, effectively acting as co-conspirators in the unlawful avoidance of sales tax. “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,” said Acting Commissioner Hiller in a statement obtained by the

New York State Attorney General’s office

.

The hefty settlement comprises a monetary penalty to the State of New York and necessitates that Sotheby’s institute, substantial internal reforms. These reforms aim to further educate its employees on the nuances of New York tax laws and to evaluate clientele’s true intentions for art purchases. This case is part of a broader initiative by Attorney General James to ensure tax compliance, with previous actions bringing in millions in settlements and penalties — including from a car dealership owner, a diner owner, and a Nassau County auto body shop, for various tax-related offenses.

Assistant Attorney General Sujata Tanikella from the Taxpayer Protection Bureau handled this case, with support from other legal staff members under the oversight of the Division of Economic Justice.

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