The New NY Sales Tax Law as it pertains to Fine Art Transportation out of state

The basic understanding is that in NY and the USA, it is the responsibility of the seller to collect NY Sales Tax, not the responsibility of the buyer to pay it.

Recently, the NY Department of Taxation and Finance (NYDTF)  has clarified its own language as it pertains to the seller’s responsibility to collect NY Sales Tax.

In the past, we all worked under this principle:

If an artwork leaves NY State after it is sold, then the seller is NOT obligated to collect NY Sales Tax.  It only mattered that the work left NY State by a licensed shipper that could produce licensed shipping documents proving the departure from NY State (like an IATA AWB for instance). It did not matter whether the seller or buyer arranged the shipment or who paid whom for the shipping itself.

Important note: NY State defined what I call a ‘licensed shipper’ above as a ‘common carrier’.  The greater art handling industry here and abroad simply interpreted ‘common carrier’ favorably to mean virtually any licensed shipping agent, and according to the now defunct Interstate Commerce Commission, it was. With this favorable interpretation, the seller needed only a bill of lading from any licensed shipper showing the property was delivered out of state. Until this year, the NYDTF more or less agreed with this interpretation of common carrier.

However, things have indeed changed:

The State has narrowly defined their position on common carriers as follows:

A common carrier is different from a private or contract carrier in that a common carrier does not operate under a private arrangement of contract with negotiated terms. A common carrier is one that…

– Holds itself out to the public as one who will agree to transport personal property for all who apply

– Is required to carry for all who apply

– Agrees to carry for a specified and standard rate of compensation; and makes deliveries under standard delivery schedules.

In short, a common carrier is FedEx, UPS, or the Unites States Postal Service.

So, fine art shippers are now defined as private carriers, NOT common carriers.

How does that affect your client?

Well, the NY Department of Taxation and Finance  (NYDTF) now states that if a foreign buyer arranges the shipping to the foreign port directly with private carriers/agents such as those in our industry, then essentially  the NY private carrier is acting as an agent of and for the buyer. When the NY private carrier picks up the artwork in NY,  the buyer is taking control of the property in NY, and NY Sales tax must be collected by the seller.

How to avoid this situation?

Now the seller MUST arrange shipping to the foreign port to release themselves from the responsibility of collecting NY Sale Tax.   If the seller arranges the shipping up to the foreign port (or to the door), the NYDTF determines that the seller has maintained control of the artwork until it reached the foreign port; ie, the seller maintains control of the artwork until it has left NY State. Thus, no NY Sales Tax is due because in this scenario the buyer does not take control of the work until it is out of NY State.

NOTE: in the above scenario which absolves the seller from collecting Sales Tax, the seller MUST arrange for the shipping to the foreign port AND directly pay for the shipping up to the foreign port.

In summary, if a foreign or out of state party wishes to avoid paying NY Sales tax on a purchase, they MUST allow the seller to handle all shipping arrangements from NY.  Indeed, they must tell the seller to do so. The NY agent cannot tell the seller on behalf of the purchaser.  Additionally, purchaser must expect to reimburse the seller (in most but not all cases) for shipping costs up to the foreign port or out of state. An auction house, for instance, will wish to be reimbursed. The State does allow that the seller can be reimbursed for shipping by the buyer.  Your purchaser can pay you directly for all foreign import & delivery costs.

The purchaser will in many cases be able to dictate to the seller which foreign or partner agent they wish to use, but they must be proactive in this regard.


Simone Modigliani

Dietl International Services