Sotheby's Settles Tax Fraud Lawsuit with $6.25 Million Payment

Sotheby's has agreed to pay $6.25 million to resolve a lawsuit by the New York Attorney General accusing it of enabling clients to evade taxes on art purchases. The settlement includes damages and reforms, but the auction house denies wrongdoing. The case involved misuse of 'resale certificates'.

Sotheby's has reached a $6.25 million settlement with the New York Attorney General to conclude a lawsuit accusing the auction house of facilitating tax evasion on art purchases. The agreement, announced Thursday, addresses claims that Sotheby's allowed clients to misuse 'resale certificates' to fraudulently avoid sales tax, costing the state millions of dollars.

The lawsuit alleged that between 2010 and 2020, Sotheby's enabled at least eight clients to dodge taxes by falsely identifying them as art dealers rather than collectors. A key client, who spent over $27 million on pieces by renowned artists such as Jean-Michel Basquiat and Anish Kapoor, was allegedly assisted by Sotheby's employees in displaying his purchases at home.

As part of the settlement, the auction house will implement a revised policy on resale certificates and enhance employee training. Despite not admitting or denying wrongdoing, Sotheby's cited a desire to avoid lengthy litigation. It also played a crucial role in providing evidence for an affiliated case involving Porsal Equities.

(With inputs from agencies.)