New York sales tax case regarding art leasing

Article 24 May 2022 Experience: Art

As recently reported in the art press, the New York Tax Appeals Tribunal issued a decision earlier this year on the tax treatment of entities that enter into art leasing transactions. The February 28, 2022 decision, In the Matter of the Petition of Objet LLC, concerned whether an entity which owned and occasionally leased artwork could obtain a New York sales tax refund on sales tax it had paid in a prior art purchase where the purchased art was immediately leased to a third party by the purchaser.

An Administrative Law Judge initially rejected the petitioner’s claim for a sales tax refund, but the New York Tax Appeals Tribunal reversed the Administrative Law Judge’s decision and held that the petitioner’s original purchase of the artwork was a sale for resale and therefore exempt from New York sales tax (and due a refund). This finding was based on the facts that the petitioner had on the date of purchase established an intent to resell the art by virtue of: (i) already obtaining a New York Certificate of Authority for the purpose of occasional art leasing; and (ii) immediately entering into a lease agreement for the lease of the art. While we have noted that this decision is being discussed by the art press, we stress that the decision is fact specific and all details should be discussed with your tax professionals before relying on this decision when taking any tax position.

If you have any questions regarding art leasing structures or this decision, please contact the Withers Art Law Team for more information.