As New York State’s tax laws and regulations grow ever more complicated, taxpayers and their advisers increasingly look for ways to obtain clarity on the issues. The need for clarity exists not only with respect to planning matters but also with respect to resolutions of audits, particularly audits that relate to ongoing activities of a taxpayer. One of the most oft used methods for achieving some degree of clarity is to request an Advisory Opinion from the Department of Taxation and Finance (Tax Department). However, a recent advisory opinion reaches conclusions that, if true, would significantly change the taxation of art sales in New York. The opinion illustrates the need to exercise care in preparing a request for an Advisory Opinion and the importance, in researching tax issues, to review published Advisory Opinions skeptically and not to accept blindly the Tax Department’s analysis of the issues.
Background
An advisory opinion is a formal written statement from the Tax Department in response to a petition submitted by a taxpayer or representative.1 The request is made on Form AD-1.8.2 As explained in the Instructions to that form, “An advisory opinion may be sought for a substantive question, such as does a specific transaction give rise to a tax liability, or a procedural question, such as is withholding of income tax required under specified circumstances.”3
