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From: Richard Kahn Sent: Tuesday, November 29, 2016 7:29 PM To: Jeffrey E. Subject: Art my take after reading two articles below on =hether or not Leon should pay and handle shipping two pieces to PBI and =aris is that we are safer having Leon do rather than Haze =rust please advise thank =ou http://www.herrick.com/jason-kleinman/publications/new-york%E2%=0%99s-sales-and-use-tax-%E2%80%93-lessons- for-art-collectors/ May 2016 New York Sales and Use Tax and Works of Art Sales tax on the purchase of artwork =dds up to a significant amount in the high-end art world. Art dealers =nd collectors should be aware of two recent New York sales tax developments when it =omes to selling or purchasing works of art. Resale certificates The New York State Attorney General =nnounced a $7 million settlement of a sales and use tax claim against a =eal estate developer for misuse of resale certificates that he used in order to =urchase artwork free from sales tax but later displayed the artworks in his residence or business premises. The Attorney General =lso announced a settlement with an employee of an art gallery who had registered a separate business as a vendor and =sed the resale certificate to purchase art she later used. A valid resale certificate enables a =etailer to purchase goods free of sales and use tax based on the fact =hat the retailer will then sell the goods to an ultimate consumer and that sale will be =ubject to tax. A vendor does not have to collect sales tax when the resale certificate is presented within 90 days of the =urchase and is offered in good faith. Acceptance in good faith generally means that the vendor has no knowledge that the =ertificate being offered is false or fraudulently presented. 20 NYCRR5532.4(b)(2)(i). For example, if someone =urchasing beer, wine, or liquor presents a resale certificate in the name of a hardware business, =t would appear on its face that the certificate is being misused since =ne cannot sell those products legally without a proper license. EFTA_R1_00110145 EFTA01787039 However, even a business that has a =alid resale certificate will owe the use tax if the goods are =ubsequently taken out of inventory, held for sale to customers, and put to the =usinesses' own use. Consequently, a retail furniture store that =akes some desks out of its inventory and uses them to furnish its =ffices owes use tax on those desks. 20 NYCRR§531.3(a). In a case involving the publisher of =enthouse magazine, Bob Guccione, artworks purchased by a registered =endor were held to be subject to sales tax since they were not purchased =E2 for one and only one purpose: resale" and were =isplayed at the residence and offices of Mr. Guccione. (P-H Fine Arts, Ltd. v. NYS Tax Appeals Tribunal, October 13, 1994 aff'd. 227 AD2d 683, 3rd =/span>Dept., 1996). The New York Department of Taxation and Finance =as opined that lending art for display at a 1 2 museum in New York is 'use' that =ould trigger the tax if the owner was a resident for sales and use tax =urposes when purchased. TSB-A-08(7)S. Delivery On Aug. 6, 2015, the New York State =epartment of Taxation and Finance issued TB-ST-155, =ntitled "Delivery Rules for New York State Sales Tax." This tax bulletin =iscusses the rules governing where delivery of property or services =ccurs and the resulting tax consequences. The bulletin also =e-emphasizes that a use tax is due if tangible personal property is purchased by an individual who maintains a place of abode in New York =without regard to how many days it is used) or by anyone engaged in business in New York who brings the goods into the =tate. The bulletin restates the rule that =he amount of sales tax due is determined based on the location where =elivery of tangible personal property is made—nothing new there. In an ordinary transaction where a =urchaser takes the goods with them upon the sale, the location of the sale determines the amount =f state and local sales tax due. If goods are purchased and then delivered by the seller's own =rucks, the location where delivery is made determines the tax due. =lso, if the seller ships the goods by common carrier (such as the =.S. Postal Service, FedEx, UPS, etc.) or the seller arranges shipment by a private or contract carrier, the location where the goods =re delivered determines the tax due. However, the bulletin makes clear =hat if the purchaser makes arrangements for =he goods to be picked up by a common carrier or private contract carrier, or if the =oods are delivered to an employee, agent, or representative of the =urchaser, sales tax is due based upon that location. This is a particular problem =or those whose purchases are very valuable and require special handling which, for many reasons not related to tax, a =urchaser may want to control. For example, if you are buying a =aluable, fragile piece of art, like a sculpture or large painting, =hich needs to be packed with extraordinary care and shipped through a service that specializes =n handling that type of art the purchaser might want to make those arrangements himself even if the location of ultimate =elivery is outside New York. In that case, New York sales tax would be due if you take delivery or send your agent to =ake the goods from New York to its ultimate destination in another state or foreign country. The tax consequence is =aced, in part, on the narrow definitions of delivery. This has caused uproar throughout the =alleries and art sellers in New York. Within weeks, TB-ST-155 =isappeared from the Department's website, except for one reference on =age 32 of Publication 750 (A Guide to Sales Tax in New York), 2 EFTA_R1_00110146 EFTA01787040 =ith a link to the bulletin that ultimately takes you to a note =E2 webpage not found.' The Department is reviewing the =ulletin and will reissue it after the review. The good news is that the Department =eard the uproar and is reconsidering its position; the bad news is that =ithout guidance otherwise, gallery owners, art dealers, and purchasers may have =o pay and collect sales tax in New York and file protective refund claims until the issue is resolved. Sales and use tax issues can be =ifficult and expensive to deal with since the tax is calculated on =ross receipts from sales without regard to profits. If the tax is not collected from =he purchaser it becomes the seller's liability and, if not =aid, can be collected from officers, employees, or directors who are =E2 responsible persons' and are personally liable for the delinquency. GT has an experienced team handling state and =ocal sales and use tax issues around the country including nexus questions, exempt and non-exempt goods and services, exempt =rganizations, and voluntary disclosure agreements. This GT Alert was prepared by Glenn Newman. Questions about =his information can be directed to: > =nbsp;Glenn Newman > =nbsp;Or =our Greenberg Traurig attorney Richard Kahn HBRK Associates Inc. 575 Lexington =venue 4th Floor New York, NY 10022 tel= fa cel 3 EFTA_R1_00110147 EFTA01787041