Gagosian Gallery Takes $4.3m Hit on Tax Settlement

Randy Kennedy has the news that Gagosian Gallery has settled with the State of New York over its failure to pay sales tax on works sold by its California affiliate. Here’s his report in The New York Times along with some interesting color on what constitutes taking possession in New York State:

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.

Gagosian Gallery to Pay New York State $4.3 Million (The New York Times)