Bookkeeping & Tax Preparation
Correct bookkeeping is the difference between a profitable consignment shop and one that struggles during tax season. In resale, your accounting must reflect that a large portion of the money in your register belongs to your consignors.
The "Gross Sales" Trap
Reporting your total sales as income is a common mistake. In a consignment model, your actual income is only the commission you keep.
| Item | Tax Treatment |
|---|---|
| Total Register Sales | Subject to Sales Tax (usually on the full price). |
| Consignor Payout | A liability/expense (not taxable income for the store). |
| Store Commission | Your actual taxable gross income. |
Handling 1099-NEC Forms
If you pay a consignor more than $600 in a calendar year, the IRS typically requires you to issue a 1099-NEC. Staying on top of this requires collecting W-9 information from high-volume consignors early in the year.
Integration with Software
Using specialized software is vital. It tracks the split automatically, meaning you don't have to manually calculate what you owe the government versus what you owe your consignors.
Related Reading: Understanding Permits and Licenses.