Santa Fe gallery owners and others in the art business say a tax bill introduced in the state Senate would do serious damage to the industry in New Mexico and hurt tourism in the state Capital, known for its sizable art market. But the bill’s sponsor said Monday he doesn’t expect his proposal to pass.
Senate Bill 226, sponsored by Senate Finance Committee Chairman John Arthur Smith, D-Deming, calls for galleries to start paying gross receipts taxes on sales of fine art that is shipped out of state. The legislation would earmark 3.9 percent of the revenue generated for the state Cultural Affairs Department for three years.
“It’s a tax on an un-taxed part of the economy,” Smith told a reporter on Monday. “People are always hounding me, saying we need more money. Well if we want more money we’ve got to put more in the kitty.”
But the veteran senator said he doesn’t really expect the measure to emerge from the current session of the Legislature. “It’s a message bill,” he said. “I can probably get it through a few committees.”
Gallery owners got the message. “The big art collectors have so many other places to go,” Barry Ellsworth, president of the Santa Fe Gallery Association, said in a telephone interview. He said the proposal would “put us at an unfair disadvantage to the art industries in other states.”
Ellsworth also contended that the bill could lead to galleries in and around downtown Santa Fe closing their brick-and-mortar operations and becoming warehouse operations, selling their art online. That’s already a trend nationally, he said. “That’s the world in which we have to compete.”
The gallery organization is promoting an online petition that says, “This is a time we should be incentivising art businesses not adding new tax burdens to them.” The group’s president set up a Facebook page called “Stop the New Mexico Art Tax,” urging readers to contact various members of the Senate Corporations and Transportation, to which the bill has been assigned. (So far no hearing on the bill has been scheduled.)
Laura Widmar, director of the The Owings Gallery in Santa Fe, said in an email that Smith’s bill would “Cripple the art market in Santa Fe and New Mexico.” Requiring New Mexico art galleries to collect tax on out-of-state sales, she said, would “drive business and art tourists to other markets, reducing [New Mexico] tourism and impacting not only the cultural industry but the hospitality industry as well.”
Smith scoffed at the notion that the bill would ruin tourism in the state, saying “Can you imagine someone ready to spend $50,000 on a painting walking away because he has to pay gross receipts tax on it?”
Santa Fe Mayor Javier Gonzales, joined the opposition to the bill on Monday. He issued a statement that said he supports the state Department of Cultural Affairs getting the financial resources it needs, “But I can’t support a special tax that unnecessarily burdens small, local business owners in an economically important industry that is facing significant pressure from online retailers.”
Widmar argued that in addition to art dealers, associated businesses like those framing and art restoration businesses would suffer. Martin Horowitz of Goldleaf Framemakers said Monday that the bill “couldn’t help” his business. Taxing out-of-state sales won’t stop people from buying paintings, he said, “but probably you’ll see people buying two instead of four.”
A 2014 study by The University of New Mexico Bureau of Business & Economic Research, commissioned by the Department of Cultural Affairs, said the state’s art industry directly employs 43,031 people, or 5.5 percent of the economy. When you include those employed in cultural tourism, art and cultural education, and businesses “linked to the unique culture and heritage of the state,” the arts and cultural industries employ 76,780 people, which is equal to nearly one in ten jobs in the state.
“That is more than the state’s construction and manufacturing industries combined,” the study’s executive summary says.