Ok, I have a client that sells children's clothing. They not only sell on consignment (vendor gets 30%; my client keeps 70%) , they sometimes buy the clothing outright and then sell for their own account. I told my client that I wanted to do some research first but my gut feel is that in the latter case, I didn't think they needed to send a 1099 regardless of how much they paid for the vendor's goods. But in the case of a consignment, the 30% commision paid would be subject to the 1099/$600 or more rules. So by way of example:
1. Example 1: Vendor A comes in with children's clothing that my client feels she can sell for at least $2,000. My client suggests that she pay Vendor A $650 for this inventory and Vendor A agrees. I am thinking that no 1099 is required because my client is buying inventory for $650 not paying a commission.
2. Example 2: Vendor B comes in and says I have children's clothing that I would like my client to sell on consignment. My client and Vendor B agree that if sold, my client will pay Vendor B 30% of what my client realizes from the sale of some or all of this clothing. In this case, my client is paying a commission and if the aggregate amount of commissions paid during the year to Vendor B equals or exceeds $600, a 1099 would be required.
Thoughts?
