Christie's Settles Tax Claims for $16 Million
April 09 2020 - 7:16PM
Dow Jones News
By Laura Kusisto and Kelly Crow
Christie's Inc. will pay up to $16.7 million to settle Manhattan
prosecutors' allegations that the world's largest auction house
failed to collect New York state sales tax on private sales for a
five-year period ending in 2017.
Manhattan prosecutors' allegations targeted a growing arm of
Christie's retooled business model. In recent years, the global
firm has gone to great lengths to convince collectors to buy and
sell art discreetly through its private sales division --
particularly in battered market years when sellers might be spooked
to funnel works to its live auctions and risk the works going
unsold. The team staffed up on salespeople in London, Paris, Hong
Kong and elsewhere to sell art privately but for several years
didn't charge New York sales tax on works sold to New York
residents, a Christie's official said.
From 2013 to 2017, Christie's global private sales team, based
in London, conducted $189 million in sales that should have been
taxed in New York, prosecutors said. Prosecutors said the state
sales tax would have to be collected, if there were a "nexus" with
New York, such as the art being intended to reside there.
Citing internal Christie's documents, prosecutors said
Christie's employees and customers repeatedly questioned whether
some private sales should be subject to New York's tax, as is
artwork auctioned in Christie's Rockefeller Center sale room in New
York.
Manhattan prosecutors said a senior Christie's tax adviser told
the firm at the time that its London entity didn't need to register
to collect New York state and local sales tax for any privately
brokered art sales. The tax adviser no longer works for Christie's,
prosecutors said.
Christie's entered into a deferred prosecution agreement to pay
up to $16.7 million over two years to the Manhattan District
Attorney's Office, which said it would forward the money to the
state.
Today, private sales remain a sizable part of Christie's sales
program; in the past two weeks, the company said it has sold items
privately that range from $50,000 to $35 million.
Manhattan District Attorney Cyrus Vance said settlements like
this one "put multinational companies across the world on notice
that the privilege of doing business in Manhattan comes with the
obligation to comply with our tax, business and criminal laws."
Mr. Vance said the agreement took into account Christie's
cooperation with investigators.
"For the past several years Christie's has worked in cooperation
with the Manhattan District Attorney's Office to resolve specific
issues created as a result of incorrect tax advice Christie's
received regarding the application of sales tax obligations for
specific non-US affiliates," a spokeswoman for the auction house
said. "The company has since reviewed its advice and internal
processes to ensure compliance with relevant tax law. This
settlement agreement brings the matter to full resolution."
Write to Laura Kusisto at laura.kusisto@wsj.com and Kelly Crow
at kelly.crow@wsj.com
(END) Dow Jones Newswires
April 09, 2020 19:01 ET (23:01 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.