Avalara Taxrates > Blog > Sales Tax News > Art Collectors Consider Tax Savings (Not the Greater Good) - Avalara

Art Collectors Consider Tax Savings (Not the Greater Good)

  • Oct 27, 2015 | Gail Cole

 Delaware: Liberty. Independence. And tax-free.

Why store artwork in far-flung freeports when you can keep it in Delaware (or Oregon or New Hampshire), sales-tax free?

Art collectors who purchase art as an investment rather than as adornment for walls have long avoided hefty sales tax bills by having New York sellers ship their investments directly to tax-advantageous international destinations, such as Switzerland and Luxembourg. Yet, as many collector-investors know, you can avoid sales tax without the international travel.

Delaware, conveniently located near New York City art galleries and auction houses, has no sales or use tax and therefore sales tax is not collected on purchases of art shipped directly to Delaware. To help art collector/investors take advantage of that little perk, a growing number of savvy entrepreneurs are creating climate-controlled art storage facilities throughout the small state. Fritz Dietl, one such man, anticipates his facilities will house close to $100 million worth of art well before the end of the year.

Art is stored safely and tax-free until its owners are ready to sell it (also a tax-free transaction if the sale takes place in Delaware). However, should the owner decide to keep it and display it in New York or any other state with sales tax, the tax authorities of that state will likely come knocking. The tax on a piece of art valued at millions of dollars is worth a wait.

For the greater good?

Although the mushrooming art storage facilities in Delaware are relatively new, art collectors and investors are well versed in sidestepping sales tax. Many ship their new purchases directly to museums in tax-free states — such as the Jordan Schnitzer Museum of Art in Eugene, Oregon — thereby potentially avoiding high use taxes in their home states.

It has been argued that this is for the greater good (in addition to the good of the buyer): Art that goes to museums is seen by the general public, while art housed in private collections is not. Mack McFarland, curator of Portland’s Pacific Northwest College of Art, said, “It is an amazing opportunity for these smaller cities to show these works. But one does have to wonder, doing a cost-benefit analysis on a more global scale, whether or not the tax break for these wealthy collectors is worth it.”

Better a museum than a storage facility. Few members of the public will have the opportunity to see much of the art stored in Delaware.

Simplify sales tax compliance.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.