Term of Art: Art for Tax Purposes (Part 1)

February 2, 2011

This story appeared in The Cardozo Jurist (February 2011): When you look at a Flavin creation, do you see a “light installation” or light fixtures and fluorescent bulbs? Dan Flavin is a famous American minimalist artist and pioneer of using fluorescent light fixtures to create sculpture. In 2006, contemporary art gallery Haunch of Venison contested the United Kingdom’s Revenue & Customs classification that Flavin’s installations, such as Six Alternating Cool White/Warm White Fluorescent Lights Vertical and Centered (1973) were little more than projectors and light fittings. Why? For the love of art and for a reduced customs duty and import tariffs. The math is simple: the rate for importing art into the United Kingdom is five percent, while the rate for importing light fittings is 17.5 percent plus 3.7 percent customs duty. Perhaps most shockingly, the duty would be assessed against the market value of the art works, not the fair market value of their hardware components.

This recalls the famed Brancusi embarrassment, when, in 1928, Constantin Brancusi successfully defended his now-iconic Bird in Space (1919) against a U.S. Customs duty on the sculpture because the assessors considered his bird a propeller blade. Brancusi v. United States, 54 Treas. Dec. 428 (Cust. Ct. 1928). For Flavin, the Value Added Tax (VAT) Tribunal in London heard the dispute in December 2008 and held that Flavin’s works of art were indeed sculptures, subject to discount import rates. However, the victory of the art mavens was short lived.

More than a century ago, Justice Holmes opined, “[i]t would be a dangerous undertaking for persons trained only to the law to constitute themselves final judges of the worth of pictorial illustrations, outside of the narrowest and most obvious limits.” Bleistein v. Donaldson Lithographing Co., 188 US 239, 251 (1903). Bleistein concerned lithographic posters advertising circuses, and Holmes’ aphorism should hold true for post-modern art as well. In 2010, the European Commission’s Customs Code Committee in Brussels (“the EU commission”) issued regulation No. 731/2010, holding that disassembled lighting fixtures, such as Flavin’s, may not be classified as sculpture because they are “not the installation that constitutes a ‘work of art’ but the result of the operations (the light effect) carried out by it.”

Another artist similarly affected is Bill Viola, who works with video installations and sound environments. According to his own website, “Viola’s video installations—total environments that envelop the viewer in image and sound—employ state-of-the-art technologies and are distinguished by their precision and direct simplicity.” Viola, too, is renowned for his contributions to the contemporary art world.

To reduce shipping costs and prevent damage, works of Viola and Flavin, as well as many other contemporary artists, have to be turned off and boxed before they are shipped from gallery to gallery and from a collector to an auction house. The EU commission, however, reasoned that while “the individual components or the whole installation, when assembled, can be considered as a sculpture…[they] have been slightly modified by the artist, but these modifications do not alter their preliminary function of goods.” In May 2010, Sotheby’s sold Flavin’s Monument for V. Tatlin (1969) for $1.4 million. Assuming Flavin did not modify the florescent bulbs enough to alter their “preliminary function,” the price alone indicates that the fixtures are not used for lighting offices. However, the logic of the regulation suggests that people are buying florescent bulbs that, standing alone, are worth the price paid at auctions. This would make for very expensive replacement bulbs.

The regulation is binding on all the EU member states. With the art market up in arms, where dealers and collectors stand to lose hundreds of thousands of pounds and euros to customs fees, the regulation is likely to be challenged in national courts or before the European Court of First Instance in Luxembourg. No such claims have been filed yet; the Regulation has been in force since September 3, 2010.