Consignment shops and 1099 requirements

Forum|Forum|4 years ago
January 7, 2022
2 replies
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Does a consignment shop which sells individual's personal items for them, have to file Forms 1099 Misc for payments totaling over $600? These are used items. Or are these payments considered for "merchandise" which the IRS says a Form 1099-Misc is not required.

Not A Product Question

TomK2023

Level 15

Per the IRS, if you pay an individual more than $600 in a tax year, then you are required to issue the 1099-MISC.

For more information, please read IRS publication: Instructions for Forms 1099-MISC and 1099-NEC

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Opus 17

Level 15

If you are buying merchandise and reselling it, a 1099 is not required.

As a consignment shop, you are providing a place for others to display their merchandise, you process the payments and keep a percentage and pay the rest to the owner. You are required to issue 1099s. (You are also required to collect your vendors' tax ID numbers using form W-9.)

AmeliesUncle

Level 15

@Opus 17 wrote:
As a consignment shop, you are providing a place for others to display their merchandise, you process the payments and keep a percentage and pay the rest to the owner. You are required to issue 1099s. (You are also required to collect your vendors' tax ID numbers using form W-9.)

Wouldn't it be the other way around? The Consignment Shop is RECEIVING money (via commissions), not paying money (they don't own the items). If the individuals' activity rose to the level of a business, the individuals would need to issue a 1099 to the Consignment Shop. Right?

Opus 17

Level 15

@AmeliesUncle wrote:

@Opus 17 wrote:

As a consignment shop, you are providing a place for others to display their merchandise, you process the payments and keep a percentage and pay the rest to the owner. You are required to issue 1099s. (You are also required to collect your vendors' tax ID numbers using form W-9.)

Wouldn't it be the other way around? The Consignment Shop is RECEIVING money (via commissions), not paying money (they don't own the items). If the individuals' activity rose to the level of a business, the individuals would need to issue a 1099 to the Consignment Shop. Right?

The consignment shop is the one actually making the payments, so I would say the consignment shop must issue the 1099s. Conceivably, the consignor and consignee have to 1099 each other, under your argument. But the business that is actually making the payment is the consignee.