Sotheby’s settles lawsuit alleging it helped art collectors avoid taxes on works by Basquiat and others

Sotheby’s will pay more than $6 million to settle claims it helped clients avoid paying taxes on expensive art by masters such as Basquiat by passing off big-money collectors as dealers.

One of the biggest players allegedly evaded taxes on $27 million worth of art at Sotheby’s between 2010 and 2015, including a $1.4 million Anish Kapoor sculpture and a Jean-Michel painting, according to court documents Basquiat worth $5.4 million.

“Sotheby’s willfully broke the law to help its customers evade millions of dollars in taxes, and now they are going to pay for it,” Attorney General Letitia James wrote in a statement announcing the settlement.

“Every person and company in New York knows they have to pay taxes, and when people break the rules, we all lose,” James continued.

Sotheby’s will pay $6.25 million to settle the lawsuit.

The This is reported by the Wall Street Journal In 2020, the alleged tax evader, referred to simply as “The Collector” in court documents, is Isaac Sultan, president of shipping company Atlantic Feeder Services USA LLC in Miami.

Between 2010 and 2015, the collector purchased 35 pieces of art and furniture at Sotheby’s.

In their complaint, first filed in 2020, prosecutors painted an excruciatingly detailed picture of how Sotheby’s employees knew full well that Sultan was not a sales agent but issued him resale certificates so he could qualify for sales tax exemptions.

“These were not acts of wrongdoing by the employee or simple negligence,” the 2020 complaint said.

It goes on to describe how employees provided the Collector with resale certificates, even though they knew full well that he was buying art for personal use.

At least 29 Sotheby’s employees knew that he was not a sales agent, and at least 22 knew that the pieces were going directly to his Manhattan apartments.

On one occasion, a collector even gave specific instructions to ship a piece from London for display in his Manhattan apartment.

According to the complaint, the sales tax on the $1.4 million Anish Kapoor sculpture would have been $126,000.

Sotheby’s, as well as the collector’s front company, Porsal Equities, were charged under New York’s False Claims Act. Porsal Equities settled with New York in 2018, where they admitted to misusing resale certificates.

“In this case, a well-known auction house went out of its way to help wealthy clients avoid paying millions of dollars in sales tax on their art purchases,” said Amanda Hiller, acting commissioner of the Department of Taxation and Finance.

Additional reporting by Peter Senzamici.