Some artist once said he preferred the company of businessmen because they liked to talk about art, whereas artists always talked about business. Not so in my experience. Artists are unbusinesslike, and many small gallery owners are artists at heart.
I’m VAT-registered but most of my galleries are not. Some don’t understand how they should charge me commission and charge it on the whole price paid by the customer, including VAT. But my price is the price net of VAT, which I simply collect on behalf of the tax man. If the gallery charges commission on the gross price, they are taking commission out of the VAT, which I have to replace when I pay HMRC.
Say I agree to pay a gallery 50% commission and it sells a piece of work for me at £100 + £20 VAT. Commission should be £50, but some galleries charge me £60. As I have to pay the tax man £20, I have only £40 left instead of £50. I have agreed to pay 50% commission but I have been charged 60%.
VAT-registered galleries understand the system. If they’re not VAT-registered they’re often baffled. The situation is confused even more because galleries are sometimes unclear about the relationship between the artist, the gallery and the customer. When a gallery sells work for an artist, it is being sold by the artist to the customer, not by the gallery. The work remains the property of the artist until sold and the gallery is the artist’s agent. The commission is an agency fee. This should be really be reflected in the paperwork: the customer should be invoiced by the artist in full and the gallery should invoice the artist for its fee. This hardly ever happens and in despair at explaining this, and for the sake of a quiet life, I just invoice the gallery for the money they are to remit to me after deducting commission.
(The picture is “The Tax Gatherers” by Marinus van Reymerswaele, in the National Gallery, London.)