Goods for sale on consignment can only be deducted as Cost of Goods sold when they are actually sold and you receive the sale price.
When you purchase the items, the sales tax you paid is included in the amount of your purchases.
When the goods are sold, you charge sales tax to the customer and include the amount of sales tax in your income. Sales tax collected is then remitted to the taxing authorities.
Thank you for replying.
Bare with me, as I'm still a little confused. I use the site, therealreal, for all consignments. So would they be the one's collecting the sales tax?
For this year, I received around $4300 in commission from items they sold for me via consignment. Would I need to claim that? And then also input the Cost of Goods? I have reached out to them concerning any tax forms and am waiting to hear back. If they do not supply a tax form like a 1099, how would I go about doing this in Turbo Tax? Thanks again!
Yes, you can deduct the cost of purchasing items that you resell via consignment.
If you are handling the inventory, you would choose this option under the self-employment expenses. Keep in mind that you may need to scroll through the other expenses, and at the bottom click on the "Less Common Expenses" at the bottom of the page.
You should enter the total of sales in the Income Section, and then enter the expenses (including inventory) against the income.
Any sales taxes that you paid when purchasing your items should be included in its cost. For sales tax at the time you sold, you will need to examine the documents that the web site sends you. If you are being charged for the sales tax you should take it as an expense, if they are handling the sales tax on their side, you should leave it off the return.
You can find more information about self-employment here.