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Arizona again exempts fine art sold to nonresidents


 Arizona exempts art sold to nonresidents and shipped out of state. Again.

Fine art sold at Arizona art auctions or galleries to nonresidents is once again exempt from Arizona transaction privilege tax, provided the vendor ships or delivers the work of fine art to a destination located outside of Arizona. The exemption is expected to cost the state general fund approximately $1.3 million.

Under HB 2536, signed into law by Arizona Governor Doug Ducey on May 19, 2016, the exemption applies retroactively to taxable years beginning from and after December 31, 2015.

Fine art is defined in section 44-1771 as “an original or multiple original art work which is:

  1. A visual rendition, including a painting, drawing, sculpture, mosaic, or photograph.
  2. A work of calligraphy.
  3. A work of graphic art, including an etching, lithograph, offset print or silk screen.
  4. A craft work in materials, including clay, textile, fiber, wood, metal, plastic or glass.
  5. A work in mixed media, including a collage or a work consisting of any combination of subdivisions (a) through (d).

How was it ever taxable?

TPT didn’t always apply to sales of fine art to nonresidents of Arizona. A regulation that took effect on January 1, 2015 added TPT “for fine art sales to out-of-state buyers who purchase the art [in Arizona] and have the seller ship it out of state.” For more than 30 years prior to that, works of art purchased in state but shipped out-of-state were exempt.

Art gallery owners in Scottsdale spoke out against the tax soon after they learned of it, which for some was not until after making a month or more of exempt sales (some had to pay the tax owed out-of-pocket). They argued that it put them at a competitive disadvantage and drove potential customers to more tax friendly locations like Santa Fe, New Mexico and Jackson, Wyoming, and they immediately began work to repeal it.

However, the tax found support in lawmakers such as Sen. Steve Farley (D), who pointed out that the people who frequent the multimillion-dollar Scottsdale art galleries can afford to pay the tax. Alternatively, they “could get around paying it if they really wanted.”

No tax finagling is necessary now. Art aficionados can put Arizona back on their maps.

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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.