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A.G. Schneiderman Announces $4.28 Million Settlement With International Art Dealer Gagosian Gallery For Failure To Collect And Remit New York Sales Tax

News from Attorney General Eric T. Schneiderman

FOR IMMEDIATE RELEASE 
July 19, 2016

New York City Press Office / 212-416-8060
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A.G. SCHNEIDERMAN ANNOUNCES $4.28 MILLION SETTLEMENT WITH INTERNATIONAL ART DEALER GAGOSIAN GALLERY FOR FAILURE TO COLLECT AND REMIT NEW YORK SALES TAX

Gagosian Gallery Has Locations In U.S., Europe And Asia; Sells Over $1 Billion Annually

NEW YORK—Attorney General Eric T. Schneiderman announced today a $4.28 million settlement with international art dealer Gagosian Gallery following an investigation into sales tax collection practices. Gagosian Gallery is a leading dealer of contemporary art, with galleries in New York City, Beverly Hills, San Francisco, London, Paris, Geneva, Rome, Athens and Hong Kong. Its owner, Laurence Gagosian, is a prominent figure in the contemporary art scene, and it is estimated to sell over one billion dollars of art annually.

“There is one set of tax rules for all, and that includes art dealers and collectors,” said Attorney General Schneiderman. “Those who fail to pay their fair share can deprive the state of millions of dollars, leaving ordinary New Yorkers to foot the bill. We will continue to remain vigilant in order to ensure that art dealers and collectors fully abide by the state’s tax laws.”

The Attorney General alleges that from at least 2005 to 2015, Pre-War Art, Inc., a California affiliate of Gagosian Gallery, sold and shipped nearly $40 million of art to customers in New York without collecting or remitting New York state and local sales tax.  During this time, employees of Pre-War, and the Gagosian Gallery location in New York, engaged in substantial economic activity to promote and facilitate the sale of Pre-War’s art in New York. 

Additionally, the Attorney General alleges that from at least 2012 to 2015, Gagosian Gallery Inc. sold a significant volume of art in New York that was shipped out of state, for which it should have, but did not, collect New York state and local sales tax.  Under New York law, New York sales tax is due if possession is transferred by the vendor to the purchaser or purchaser’s agent within New York.  When it turned over art to shipping companies within New York that were not common carriers like UPS, FedEx or the U.S. Postal Service, but rather, were contract carriers acting as the purchasers’ agents, Gagosian should have collected and remitted sales tax. 

In addition to the cash payment of $4.28 million, it was agreed that Pre-War will provide information regarding its sales to New York to the New York State Department of Taxation and Finance for the next six years.  Furthermore, Gagosian Gallery has agreed to a code of conduct to include the following:

  • Gagosian Gallery will establish a wholly-owned division called GG Shipping, which will handle the shipment of art from Gagosian Gallery’s New York location to out-of-state customers; 
  • Gagosian will charge New York state and local sales taxes on taxable sales of art to be shipped out of state, unless the purchaser agrees to use GG Shipping; and
  • If the customer chooses to use GG Shipping, GG Shipping will arrange for shipping by selecting a carrier, and entering into a principal-agent contract with that carrier for shipment of the art outside of New York.

Attorney General Schneiderman expresses his thanks to the New York State Department of Taxation and Finance for its important assistance in bringing this investigation to resolution.

The Attorney General’s investigation of Gagosian Gallery was led by Assistant Attorney General Sujata Tanikella, with assistance from Legal Support Analyst Bianca LaVeglia, former Assistant Attorney General Lisa White, and former Legal Support Analyst Rupinder Garcha.

The Taxpayer Protection Bureau, overseen by Bureau Chief Thomas Teige Carroll and Deputy Chief Scott Spiegelman, enforces the New York False Claims Act, including tax claims made thereunder.  It is a unit of the Criminal Division, which is headed by Executive Deputy Attorney General Kelly Donovan.

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