The sale is to a dealer or someone else who provides the purchaser a valid resale certificate.
For example, California has four common exemptions: In a private sale transaction not involving a dealer or an auction house, the seller should collect sales tax from the purchaser and remit the sales tax to the appropriate taxing authorities in the state, unless an exemption applies. A seller who sells through a dealer should make certain that the contract obligates the dealer to collect sales tax and indemnifies the seller against the tax.
All standard auction contracts with reputable auction companies obligate the auction company to collect sales tax and indemnify the seller against imposition of the tax. If a seller of a work of art sells through a dealer or an auction house, the dealer or auction house will collect the sales tax from the purchaser. The seller of tangible personal property generally is responsible for paying sales tax in the state in which the sale occurs and typically collects the sales tax from the purchaser as part of the purchase. Knowing the nuances of both the state in which the property was purchased and the state in which the property will be used will enable sellers and purchasers to minimize the tax to the extent possible. (Montana and Alaska have no statewide, but do have local, sales and use taxes.) All states that have sales and use taxes have various exemptions to the imposition of the taxes. Only three states-Delaware, New Hampshire and Oregon-do not have statewide or local sales and use tax laws. If she paid sales tax in the state where the car was purchased, the buyer generally gets a credit against the use tax liability in her home state. Under the typical sales and use tax structure, when the buyer brings the car into her home state, she must pay a use tax if she paid no sales tax (or a lower sales tax) in the state where the car was purchased. For example, without the use tax, a person could avoid sales tax in her home state by purchasing a car in another state that has no sales tax. The use tax is a complement to the sales tax. The use tax, which is more obscure, generally is assessed when a purchaser buys tangible personal property in one state, without paying sales tax (or paying sales tax at a lower rate), with the intent to bring the property into another state (usually the purchaser’s “home” state). Most people understand that a sales tax is imposed by a state on the sale of tangible personal property (works of art, automobiles, jewelry and furniture, for example) within that state. For collectors who purchase high-end art-and who have family members, residences, or business or family offices in multiple states-navigating the sales and use tax rules that apply in different jurisdictions can be challenging but may also provide opportunities for tax savings. In some areas, the combined state and local tax rate can exceed 10 percent, a significant cost when applied to art valued in the millions or tens of millions of dollars. In most states, the sale or purchase of a work of art may be subject to a statewide sales tax, a local sales tax, or both, depending on the location of the sale and any applicable exemptions. As art prices reach record highs, collectors and advisers increasingly are focused on planning to minimize sales and use taxes when art is bought and sold.
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