Sotheby’s New York State Case Dismissal Denied
Justice Andrew Borrok of the New York State Court in Manhattan denied Sotheby’s request to dismiss a case in which the New York attorney general alleges Sotheby’s helped a client obtain false resale exemption certificates. The exemption certificates date from 2010 to 2015 and portray the client as an art dealer rather than a collector, entitling him to certain tax exemptions.
“This lawsuit should send a clear message that no matter how well-connected or wealthy you are, no one is above the law.”
Punishment or Accountability?
Art auction house Sotheby’s is facing a lawsuit by New York attorney general Letitia James after allegedly helping an art collector evade millions of dollars of sales tax. The client purchased over $27 million in art and sculptures, but resale certificates represent him as an art dealer rather than a collector, entitling him to millions in tax exemptions. The complaint states that Sotheby’s accepted four resale certificates despite overwhelming evidence the purchases were for personal use in order to boost their own sales.
Sotheby’s requested a case dismissal on the grounds that a poorly trained, junior staff member executed the alleged offense as a mistake and not as a conspiracy to evade the tax. In their original complaint, Sotheby’s contends that none of their accountants who reviewed the certificates were aware of the wrongdoing. However, Attorney General James claimed that at least 12 employees knew the client was buying art for himself while using a resale certificate.
They also claimed that seeking triple damages from the company under New York’s False Claims Act was punitive, saying the attorney general was seeking to punish them instead of simply collecting the sales tax due. Of note, the state had already settled with the client himself two years prior regarding the unpaid sales tax.
Justice Andrew Borrok denied the dismissal and stated that it did not matter that Sotheby’s accountants might not have known of the issue. Sotheby’s has continued to reiterate that the resale certificate was filed in error by an inadequately trained employee and that no tax evasion occurred. The attorney general’s opposition brief is due January 29, 2022 and Sotheby’s must reply by February 19, 2022.