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By Canadian Press

Bought a $450M painting? In NY, don’t worry about the tax

Dec 8, 2017 | 12:56 PM

New York collects sales tax on even the smallest items, but it probably won’t collect a cent on a nearly half-billion dollar painting by Leonardo da Vinci.

The Italian Renaissance artist’s “Salvator Mundi” sold for $450 million (380 million euros) during a record-breaking auction at Christie’s last month by a Saudi prince and appears to be headed for display in a museum.

But unless he decides to hang the work in a Manhattan pied-a-terre, or ships it using a certain type of carrier, he’ll likely be spared the roughly $39 million in sales taxes a regular New Yorker would have to pay for buying a work of art at that price at a local poster shop.

That’s because the state’s laws are structured so that out-of-town buyers generally don’t get hit with big tax bills. If they did, New York’s status as a global centre for art sales might be jeopardized, an expert said.

Christie’s declined to identify the buyer of the 500-year-old artwork, but the Saudi Arabian embassy in Washington, D.C., said in a statement Friday that a member of the royal family, Prince Bader bin Abdullah bin Mohammed bin Farhan al-Saud, had purchased the painting on behalf of the Department of Culture and Tourism in Abu Dhabi, capital of the United Arab Emirates, so it could be displayed there at the newly opened branch of the Louvre museum.

The Wall Street Journal and New York Times both reported Thursday that Bader was actually acting as a proxy for Saudi Arabia’s crown prince, Mohammed bin Salman.

The identity of the owner and ultimate destination of the artwork plays a big role in whether the sale is taxed.

If the painting of Christ raising a hand in blessing had been bought by someone who planned to keep it in New York, the buyer would be on the hook to pay an 8.875 per cent state and local sales tax, which on a $450 million purchase would amount to around $39 million (30 million euros), said Jason Kleinman, a lawyer who advises art collectors on the tax consequences of their purchases. That probably won’t happen if the painting is shipped to the Middle East.

“We’re not supposed to tax the Saudi guy if he takes the painting outside the U.S.,” Kleinman said. “The caveat is that New York has very particular rules about how a painting needs to be shipped out of the city. If those rules are not abided by, there will be some inadvertent sales tax.”

The painting’s buyers could be forced to pay the tax if they hired a specialized fine-art shipper to deliver the painting to Saudi Arabia or Abu Dhabi. New York state authorities say purchases by out-of-state buyers who use specialized art shippers as opposed to common freight carriers like UPS or FedEx are subject to sales tax.

Christie’s advises buyers on its website that it must collect tax on items collected by certain carriers. It also notes that buyers shipping artworks to 10 other U.S. states also would be on the hook for sales taxes.

New York has socked art houses in the past for failing to collect sales tax.

New York Attorney General Eric Schneiderman reached a $4.28 million (3.6 million euro) settlement last year with New York’s Gagosian Gallery over unpaid taxes on art sales. As part of that settlement, the gallery created its own shipping division so it could legally avoid incurring tax liability.

“We will continue to remain vigilant in order to ensure that art dealers and collectors fully abide by the state’s tax laws,” Schneiderman said at the time.

Schneiderman’s office had no comment on the sale of “Salvator Mundi,” Latin for “Savior of the World.”

Karen Matthews, The Associated Press



by Canadian Press