In 2020, New York State investigators revealed that a group of collectors had used Sotheby’s Private Sales Division to buy high-value art without paying sales tax. One purchase—a $25 million Jean-Michel Basquiat—became the centerpiece of a $6.25 million settlement with the state. The case offered a rare look into how ultra-wealthy buyers move art around the tax code and where those moves cross the line.
The mechanism was simple but powerful: the resale certificate. Dealers can use these certificates to purchase art tax-free when the piece is meant for resale. But some collectors claimed dealer status they didn’t have and used the art for personal display. Sotheby’s was accused of ignoring obvious red flags and accepting the documents at face value—a practice regulators later called “willful blindness.”
Delivery location was another lever. Many collectors routed their purchases through Delaware, a state with no sales tax and several secure art-storage facilities. By having artwork “delivered” to Delaware first, they avoided triggering New York sales tax—even if the pieces ended up elsewhere. The structure is legal only when the art truly stays in storage for resale or safekeeping, not for personal use. It illustrates how thin the line can be between sales tax planning and sales tax fraud, a topic we explore further in Luxury Tax Loopholes.
For legitimate investors, the lesson is not that art is risky—it’s that intent and documentation define how the IRS and state authorities see your transactions. A collector with proper entity structure, records, and business purpose can treat art as a strategic asset, not a liability. That approach also applies to broader Wealth Preservation Strategies that rely on clear paper trails and compliance-first design.
At Anvil Tax Strategies, we help clients preserve wealth while staying compliant. Whether you’re collecting art or investing in real assets, the goal is the same: build structures that stand up to scrutiny and work in your favor. For those considering Art as an Investment, the Sotheby’s case is a reminder that strategy without substance is just speculation.
If you’d like to explore how your collection or portfolio fits within the tax code, schedule a private consultation.
⚖️ Disclaimer
This article is for educational purposes only and does not constitute legal, tax, or financial advice. Consult your licensed advisor before implementing any strategy described herein.