Ebay Consignment 1099 requirement

[maggie54]

I sell Collectible Photographs on Ebay for other people.  Do I issue them a 1099 for the amount I pay them?  I will get a 1099-K from Ebay and I know I will deduct the amount I pay out to them on the Schedule C.  If I have to issue them a 1099, would it be 1099 Misc?

[ee-ea]

They send you the 1099. You do not send any  1099 to Ebay.

[Opus 17 · Accepted solution]

@ee-ea 

Are you sure about that?  They said they were a consignment business.  eBay sends a 1099 for their gross sales, but they need to track the percentage paid out to the owners of the consigned property.  

@maggie54 

As I read the instructions, since you are a business, you are required to issue a 1099 to anyone whom you pay more than $600 during 2021.  In this particular case, it would be a 1099-MISC with the payments in box 3.  You should be sending all of your consignors a form W-9 before you start doing business with them, to collect their tax number. 
https://www.irs.gov/pub/irs-pdf/fw9.pdf

This should be part of your standard on-boarding process along with getting their PayPal or bank information to make the remittances.

You can be penalized for not having a W-9 from each of your consignors.   If any of your consignors indicate that they are an S or C corporation, you do not have to issue those entities a 1099, but you should keep the W-9 in your records in case the IRS comes asking questions.

If your consignors refuse to give you a W-9, you may be required to withhold part of their payment as backup withholding and send it to the IRS in their name.  They could claim it as a refund by filing a tax return and including their consignment income.