Judge Bashes Artist Royalties

SACRAMENTO -- Collectors in California are not required to pay a royalty on sales that take place outside of the state, a federal appeals court ruled recently. But buyers must still pay a 5% royalty on works purchased inside California.

Art collectors of Art Kabinett social media network are always perplexed about California's royalty tax, which is not found anywhere else in the U.S., but exists in Europe, Australia, and elsewhere.

The royalty tax -- similar to the European 'Droit de Suite' -- allows artists and their heirs to claim a percentage of gallery and auction receipts on their re-sold works.

The decision by California's Ninth Circuit Court of Appeals raises questions about how far collectors will go -- and whether they will take their business out of state -- to avoid paying the royalty.

The decision by a panel of judges (eight voted against the royalty, three in favor) limits the scope of the 1976 California Resale Royalty law, the only one of its kind in the U.S., which originally provided American artists a 5% royalty on works of art resold in California or by a California resident for more than $5,000.

The decision stems from a class action lawsuit filed by a group of artists and foundations, including Chuck Close (artwork pictured here), Laddie John Dill, and the Sam Francis Foundation, against the auction houses Sotheby’s, Christie’s and eBay. A judge dismissed the case in 2012, and the artists appealed.

The federal appeals court reinforced the lower judge’s decision that the most controversial portion of the law violated the U.S. Constitution by attempting to regulate sales outside California’s own borders.

“If a California resident has a part-time apartment in New York, buys a sculpture in New York from a North Dakota artist to furnish her apartment, and later sells the sculpture to a friend in New York, the act requires the payment of a royalty to the North Dakota artist—even if the sculpture, the artist, and the buyer never traveled to, or had any connection with, California,” wrote the judge Susan Graber. “We easily conclude that the royalty requirement, as applied to out-of-state sales by California residents, violates the dormant commerce clause.”

The rest of the case has been sent back to a three-judge panel for further consideration.

The droit de suite was first proposed in Europe around 1893, in response to a decrease in the importance of the salon, the end of the private patron, and to champion the cause of the “starving artist.”

According to Renaud Donnedieu de Vabres, droit de suite was created in France following the sale of Millet's 1858 painting, the Angélus, in 1889 at the Secretan sale.

The Angélus was sold by Millet for 1,000 francs in 1865. Just 14 years later in 1889, after Millet's death, it was sold by the copper merchant Secretan for 553,000 francs

The owner of the painting made a huge profit from this sale, whereas the family of the artist lived in poverty. Many artists, and their families, had suffered from the war, and droit de suite was a means to remedy socially difficult situations.