Consignments and Tax Forms

[betasportscards]

Hello fellow eBayers!

If I sell something for someone on ebay, and take a percentage, like on consignment, I am assuming my agreed upon percentage between customer and I is a cost of goods sold. ... But eBay is still going to report the full sale price on my 1099.

For example. If I sell something for $2,000 and have ebay fees of 11%, after shipping costs (~$80) and my cut is 20%

Sell price $2,000

fees $220

Shipping $80

NET $1700

My cut on $1700 20% = $340

So my customer gets $1360... 

Is my assumption correct, that the $1360 is a cost of goods sold, and I can deduct that on my taxes, that would ease my tax liability on the full $2000 sale...

Hope this makes sense.

Thank you

[wildpitchsports]

Yes but you will need the information from the person that you are paying out to, odds are their SSN or tax Id # will they be comfortable with that? The IRS will want to make sure they are collecting income tax from the person that is actually receiving the income.

[heckofagame]

You will probably need to issue a 1099-misc to the person for whom you are selling.

[caldreamer]

You must report gross sales to IRS.   1099 shows gross sales (purchase price $2,000 + shipping $80) total amount that you got from customer.   

When you deduct you expenses (EBAY fees, cost of goods, packing materials, mileage) be sure to include cost of "shipping label" (because shipping is included in your gross sales).

I strongly urge you to consult with CPA to get a better understanding of paperwork involved (especially if you are going to do "consignment sales".   

[divwido]

Oh my God, my head hurts.  What????  As the consigner you have no cost of goods.   Take an accounting course and get a Lawyer to make you a contract.

[divwido]

THE OWNER OF THE ITEM HAS COST OF GOODS, IF THEY ARE A BUSINESS.    This is accounting 101, basic stuff.

[divwido]

No.   The person who doesn't own the item, who only sells it, doesn't have a cost of goods-only expenses.

[dnasilver]

It would be best to consult with a CPA or Tax Attorney. We believe you will need to issue a 1099 which will require you getting the proper info from your customer (the owner of property) We would suggest you making sure that the items you are selling are rightfully owned by the person you are selling for.

[wildpitchsports]

 A payout via contract for a business (consignment) would constitute an expense. Why should the seller have to eat the income tax when he's making a cash payout to the person who wants the items sold? They are receiving funds in excess of $600 so if they don't get a 1099 from the seller, where are they going to get it from?

[dbfolks166mt]

     As others stated get an accountant and/or tax professional involved and potentially a lawyer. You have NO COGS since you do not "own" the item. Your income and what eBay will report on the 1099 YOU receive will be all revenues from the sale of the items. Your expenses and deductions on schedule C will include fees, actual shipping costs and the payouts to the consigner which need to be tracked and reported to the IRS along with the issuance of a 1099 to your consigner. 

     Your consigner will deduct your fees/commission and the COGS against their own schedule C along with reporting the 1099 income you paid them and reported on the 1099.