Randy Kennedy reports for the New York Times that Larry Gagosian will pay $4.28 million USD in back taxes to the state of New York. It sounds like Gagosian has some sort of dummy secondary market company based in California through which he attempted to evade taxes. One of his directors was also nabbed for not paying taxes on private sales. Read Kennedy in partial below, or in full via New York Times.
The Gagosian Gallery, one of the most successful art dealerships in the world, failed to pay New York State sales tax on hundreds of art transactions over a decade, according to Eric T. Schneiderman, the New York State attorney general, who on Tuesday announced an agreement to collect $4.28 million in back taxes, interest and penalties from the business.
“Those who evade art taxes potentially deprive the state of millions of dollars,” Mr. Schneiderman said, “and ordinary New Yorkers are stuck footing the bill.”
Investigators found that the gallery’s affiliate in California, Pre-War Art Inc., sold and shipped nearly $40 million worth of art to customers in New York from 2005 to 2015 and should have paid sales tax on those sales, according to the attorney general’s office. The investigators said that a “substantial nexus” exists between the gallery and the California company. Larry Gagosian, the gallery’s founder, is president of Pre-War as well as president of companies that control the rest of the gallery’s operations, and Pre-War maintained an active bank account in New York.
The investigation, which found no evidence of criminal activity, also concluded that the gallery failed to pay tax on the sale of other works in New York that were shipped out of state from 2012 to 2015. Mr. Schneiderman said that state law requires sales tax to be paid when possession of a good is transferred to a buyer within New York State and that the gallery, in handing over art to shipping companies that were not common carriers like FedEx or the United States Postal Service, was legally transferring possession to the buyer at that point.
As part of the settlement with the attorney general’s office, the gallery has agreed to set up a new shipping company of its own, so that it can comply with the letter of the law, and has also agreed that Pre-War will provide information to authorities for the next six years about its sales to New York.
The investigation, conducted with help from the New York State Department of Taxation and Finance, is the result of a more aggressive stance being taken recently by the state toward the flourishing art market, which generates billions of dollars in annual sales and for which New York City and London are the primary hubs.
*Image of Larry Gagosian via Phaidon