In a clear sign of increased scrutiny, there has been yet another prosecution in New York for tax fraud in the art world.

According to the State’s allegations, between 2010 and 2015 Sotheby’s enabled a wealthy collector of artwork to avoid sales tax on $27 million worth of art purchases by facilitating the creation and use of false tax exemption certificates – known as resale certificates – even though it knew the buyer was not eligible to claim the exemption.

The State’s press release explained:

Sotheby’s knew that the collector and his company were not purchasing art for resale as art dealers in the normal course of business, but accepted their resale certificates anyway, and, in fact, facilitated the creation and use of these resale certificates. In 2010, Sotheby’s advised the collector he could use a resale certificate and helped complete the certificate, including adding the false declaration that he was an art dealer even though, in reality, the collector had not told Sotheby’s he was an art dealer and Sotheby’s knew he was actually in the shipping business. Sotheby’s not only accepted this resale certificate, but, by 2015, had accepted three more equally false certificates from Porsal Equities facilitated by Sotheby’s employees, despite overwhelming evidence that the collector and Porsal Equities were not art dealers and were only buying art for personal use.

A copy of the complaint that the State filed can be viewed here.

We recently wrote about this very type of fraud – ultra-wealthy NY art buyers avoiding sales and use taxes – and how the NY False Claims Act rewards whistleblowers who report such wrongdoing to the State.  You can view our blog post here.

We applaud the State for protecting taxpayers and using this powerful legal tool to its full potential.