Barron’s Stacy Perman has some more details on the seemingly growing interest among New York State’s tax enforcers in the art market. Their efforts seem to have been aided and accelerated by the existence of electronic customs records and tax returns that can be searched for large sums, repeat transactions and New York addresses:

A lawyer tells us he “was shocked” when he recently received a “seven-figure” tax bill, after he arranged several years ago to have a multimillion-dollar painting sent to New York from Europe, solely for a client’s viewing. While the work was ultimately shipped out-of-state upon its sale, and thereby not subject to New York taxes, “the shipper used my name as the contact person on the invoice.” The lawyer was able to resolve the matter only after presenting Albany with sufficient documentation proving he was just an intermediary.

Not everyone was so lucky. The authorities are casting a wide net. “I’m getting panicked phone calls from people who are not even my clients,” says David Lifson, a partner with art-world expertise at New York accounting firm Crowe Horwath. “I’m seeing letters about people who have moved to New York,” he says, and “letters where the inventory is in transit among dealers and owners. There are many people on this list who bought art in Europe and had it shipped in or through New York.”

New York City imposes an 8.875% tax on the sale or “first use” of personal property. That means that if a $10 million work is bought at a Paris gallery and then shipped to the collector’s Manhattan residence, it is eligible for a VAT refund in Paris but subject to an $887,500 tax in New York. There are some loopholes that can be taken advantage of, but the authorities now have electronic access to customs records and tax returns that are turning up leads on behind-the-scenes transactions.

New York Comes Down on Art Collectors (Barrons.com)