California Resale Royalties Act

May 9, 2015, Update:

STILL SOME LIFE TO THE CALIFORNIA RESALE ROYALTIES ACT

The California Resale Royalties Act (Act) was enacted in 1976 and amended in 1982. Civil Code § 986. The law covers resale of artist fine art for $1,000 or more. Fine Art is defined as an original painting, sculpture, or drawing, or an original work of art in glass. Artist is defined as a person who is actively and principally engaged in or conducting the business of selling works of fine art for which business such person validly holds a sales tax permit. Under the Act the artist is entitled to 5% of the resale price if (1) the seller resides in California or (2) the sale takes place in California. The Act applies to artists living after January 1, 1983, and the rights continue for 20 years after the artist dies.

In May 2012, a federal district court in Los Angeles ruled that the Act was a violation of the Commerce Cause of the United States Constitution. Estate of Graham v. Sothey’s Inc., 860 F. Supp.2d 1117 (C.D. Cal. 2012). The case was appealed to the Ninth Circuit Court of Appeals. On May 5, 2015, the en banc Ninth Circuit Court decision held that the Act’s provision for all sales taking place outside of California is a violation of the Commerce Cause. However, the Ninth Circuit Court reversed the district court as to holding all the Act unconstitutional and left operative the remaining provisions of the Act for resale within the state of California. Estate of Graham v. Sothey’s Inc., 2015 DJDAR 4954. The Ninth Circuit Court did not decide the issue of whether the Act violated the federal copyright laws.