Francis Bacon’s “Three Studies of Lucian Freud,” one of the most expensive works ever sold at auction,
was lent to the Portland Art Museum. Credit Leah Nash for The New York Times
Buyers Find Tax Break on Art: Let It Hang Awhile in Oregon
Robin Pogrebin and Carol Vogel contributed reporting from New York.
EUGENE, Ore. — The Jordan Schnitzer Museum of Art, tucked into a quiet corner of a college campus here in the hills of the Pacific Northwest, is hardly the epicenter of the art world. Yet major collectors, fresh from buying a Warhol or a Basquiat or another masterpiece in New York, routinely choose this small, elegant redbrick building at the University of Oregon to first exhibit their latest trophy.
The museum’s intimacy and scholarship are likely to play some role in their choice. But a primary lure for the collectors is often something more prosaic: a tax break.
Collectors who buy art in one state but live in another can owe thousands, tens of thousands, even millions of dollars in state “use taxes”: taxes often incurred when someone ships an out-of-state purchase home. But if they lend the recently purchased work first to museums like the Schnitzer, located in a handful of tax-friendly states, the transaction is often tax-free.
Beyond the benefit to museums, this lucrative, little-known tax maneuver has produced a startling pipeline of art moving across the United States as collectors cleverly — and legally — exploit the tax codes.
Dozens of important works have come to the Schnitzer in recent years, largely because of the tax break, museum officials believe — so many that the museum has a program called “Masterworks on Loan”; the featured works are housed in a second-floor gallery.
Similar loans — which rarely extend beyond a few months — also flow into other museums in Oregon, and occasionally New Hampshire and Delaware, all states that have neither a sales nor a use tax.
This is the first I have heard of the "First Use" tax exemptions. I have had the occasional request to ship an empty box to a summer home in another State to try and avoid sales tax, something I have never done. My feeling has always been that cheating on taxes is cheating on society in the long run. I guess I'm one of the few left that feels tax revenue is important for the States and our citizens shared quality of life. It also makes me wonder if all the talk of a flat national sales tax to replace our current tax code wouldn't be filled with these kind of creative sales tax exemptions for high ticket items. GL