Philadelphia, looking for ways to raise revenue, is collecting obscure back taxes plus interest from antiques dealers who participate in shows in that city.
First targeted were dealers who exhibit at the venerable Philadelphia Antiques Show, the fund-raiser for Penn Medicine, the healthcare part of the University of Pennsylvania, the largest employer in the city. For more than half a century, this show, which moved from the Navy Pier to the Pennsylvania Convention Center last year, has brought together hundreds of volunteers who have raised $18 million for the hospital, has created an appreciation for art and antiques in a large local audience, and has attracted collectors from across the nation. Some of the volunteers became collectors and supporters of the show, and others became guides at historic properties and now give guided tours of the show; moreover, suburbanites have become connected to the city and to the hospital.
In November 2012, several dealers who have exhibited at the show for a number of years and have dutifully paid their sales taxes (6% to the state and 2% to the city on all sales of objects carried out of the show or delivered to a Philadelphia address) received letters from the Revenue Collections Bureau (RCB), a tax collections agency, telling them they owed additional taxes that they had never heard of: “business income and receipt tax,” “the net profits tax,” and a “commercial activity fee” or business privilege tax, which is in fact a license to do business in Philadelphia. The license costs $50 a year or $300 for a lifetime.
Initially the RCB asked for ten years of back taxes plus interest and penalties, but the dealers who got the letters made a deal to pay six years of past taxes plus annual interest; the penalties were dropped. They must, however, pay the lifetime licensing fee of $300. Two dealers who have paid their bills said it cost them around $6500 for back taxes plus interest. Others paid less. Not all dealers received letters.
“The city found us in the first place because we have been paying city taxes. Why didn’t they let us know about the other taxes years ago?” said Diana Bittel, chair of the dealers advisory committee and one of those who received a letter. “The tax is a small amount, but the interest is a huge percentage at 12% a year. The further back you go, the higher the percentage; for example for the year 2007, mine was 52% of the tax I owed.”
Dealers found the 12% interest onerous at a time when interest rates are at a record low.
The news of the tax problems was only part of the reason why 14 dealers have dropped out of the Philadelphia Antiques Show. Some said they did not want to deal with furnishing the RCB with the past six years of requested federal income taxes. Replacements for these dealers have been found.
Dealers new to the show will need to get and fill out the proper tax forms from the city and are expected to pay the business income and receipts tax at the rate of .00145% of their Philadelphia sales and to pay the net profits tax at the rate of .034985% of their annual gross sales made in Philadelphia. To figure that tax, they must furnish evidence of their gross sales for the year. That is the only way the tax collector can check on what percentage of business was done in Philadelphia. Dealers who have exhibited in Philadelphia for more than six years have been advised to buy a lifetime license for $300. New dealers can pay $50 for a commercial activities license for 2013, because this fee is to be abolished in 2014, according to the city tax Web site (www.phila.gov/revenue).
None of the dealers who received letters knew that any additional taxes were due on sales of objects paid for and taken from the show or delivered to a Philadelphia address—and if they did not pay on time, they received subpoenas to appear in court on March 7. Some dealers said they got their accountants to figure out what they owed, a simple process, but checks they sent to the city were returned, and the dealers were told they had to send the checks to RCB, the tax collection agency, which makes a commission on the taxes collected.
Richard Worley, who heads the antiques show’s advisory committee, looked into the tax matters and wrote a long letter to all the dealers advising them to settle with the RCB, telling them they had to pay interest but that penalties have been removed.
“This was a big bump in the road and caused a lot of anxiety,” said Worley on the phone. “I am not a fan of this tax; it is little known or understood. I wish we had known about it earlier, and I am sorry about the cost to the dealers, but they have paid up and know what they must do in the future. We will have a good show; the economy is improving, and so is the antiques market.”
Dealers are blaming the show management for not informing them. When they were told to go to the Philadelphia tax Web site and read the law, they saw that these taxes were spelled out clearly and learned that “corporations are exempt” from the net profits tax but not the other taxes and fees. Few dealers are corporations, and those that are said their accountants advised them to pay the net profits tax because a corporation tax would be about the same and would require more paperwork and accountant’s fees.
“This is not a new tax,” said RCB’s Shawn Heslin when reached by phone. “It has been on the books as long as I have been a tax collector, and that’s around twenty years.”
He said he had no idea exactly when the laws first appeared on the books. A search of the Web site suggests the laws were there before 1998, when some updates were made, but no other dates are posted. Heslin said, “These laws apply to all performers, athletes, and vendors who earn income in the city, residents and nonresidents alike.”
Show manager Josh Wainwright had no knowledge of the law and did not include the information when he sent contracts to the dealers. “I had no way of knowing about this law,” said Wainwright. “I had to pay my own back taxes plus interest too.”
Dealers, who blame Wainwright for not checking the tax law, also fault the city of Philadelphia for not publicizing the law and blamed the University of Pennsylvania, which owns the show, for not informing them. They said the committees of volunteers that run the show haven’t a clue about business practices. They wonder if any liabilities to the city are spelled out in the lease that the University of Pennsylvania signed with the convention center. One dealer questioned, “Where was Penn legal when the contract for the convention center was drawn up? They should have informed us or at least told Josh Wainwright about any tax liabilities.”
This tax problem, which makes Philadelphia seem hostile to business, may have been partly responsible for 14 dealers dropping out of the show this year. Gone are Paul Cava, the photography dealer; Fred Giampietro, Hill Gallery, and Ricco/Maresca with folk and outsider art; Brant Mackley, a dealer in tribal art; Robert Aibel of Moderne Gallery; textile dealers Cora Ginsburg and Jan Whitlock; American art, furniture, and decorative arts dealers Hirschl & Adler Galleries; American paintings dealer Godel & Co.; folk art dealer Jewett-Berdan; and historic memorabilia and art dealer James Kochan, who signed up for the first time but dropped out two months before the show. Some of the dropouts appear on brochures and on the show Web site.
New to the show or returning after a few years’ absence are the Cooley Gallery, Gemini Antiques, Bernard Goldberg Fine Arts, Hawthorne Fine Arts, Jim’s of Lambertville, Leo Kaplan Ltd., Stella Rubin, Elle Shushan, Somerville Manning Gallery, Steven Still, pewter dealers Bette and Melvyn Wolf (the loan show is American pewter), and Gerold Wunderlich. There are just 60 dealers, but that number is up from 57 last year. American paintings will be a strong suit. With the demise of USArtists, the art show that benefited the Pennsylvania Academy of the Fine Arts, five additional dealers in American art are a welcome addition. The Philadelphia Antiques Show has long been thought of as the finest show for Americana in the country, a place where great things emerge, which is why many of the top Americana dealers in the country want to exhibit there.
The dealers are not coming without grousing about the expense of paying extra taxes at a time when daily booth rent is 25% higher because the show is one day shorter this year. “The management said they did not raise the booth rent this year, but they did. They raised the daily rate twenty-five percent, because the show is just three days, not four,” a dealer pointed out, asking for anonymity.
Only two dealers showing at Frank Gaglio’s annual 23rd Street Armory Antiques Show have received letters asking for their tax returns for the past six years. Gaglio said that he was aware of all the city taxes, and he has been paying them as manager, but he did not know they applied to dealers in town for such a short time. He said he has sent a letter to all his exhibitors spelling out what they must do to comply. He was clearly upset that it affects “so many hard-working antiques dealers at a time when the industry needs cheerleaders, not revenuers,” he said.
Gaglio said that he was hesitant to put out a list of his exhibitors because the dealers might be targeted, but the list is on his Web site and on his brochures, so he finally named half a dozen dealers, several of them from the U.K, who are new to his show, including dealers in jewelry and paintings. Among the Brits are Sue Brown, a jewelry dealer, and Jesse Davis with majolica. Kelleher Fine Art is coming from California, and Art Link International is from Florida. Moylan-Smelkinson/The Spare Room will bring English ceramics, small boxes, and jewelry from Baltimore. Bertolet House Antiques, Oley, Pennsylvania, dealing in American country gear, is a late addition. Roger Winter, a Bucks County dealer in English furniture, and Frances Purcell, with mantels and garden furniture, are returning after missing a year or two.
Originally published in the April 2013 issue of Maine Antique Digest. © 2013 Maine Antique Digest