[Jewelry making - Article 00029] - Re: [Orchid] Consignment and taxes

[Kimberly Starbard]

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Hi:

>     I have never encountered this situation in any of the galleries
>     that I've consigned to, and I've not required the 60 plus artists
>     who consign in my gallery. They do NOT WORK for me, I pay state
>     sales tax on items sold. I would question the need for this sort of
>     documentation. Please keep us posted. 

    With all due respect, a 1099 is not for an employee, it is for (what
    the IRS refers to as) a subcontractor. It is possible that the
    galleries that you have been dealing with are treating items on
    consignment as inventory purchases, but only accounting for them as
    "bought" after a customer has purchased them. I know this sounds
    confusing, but hypothetically I could have a store full of consigned
    items, but not have to record much of it in my inventory account
    because I don't technically pay for the items until I have sold them
    and I cut a check to the artist. This is good for me right? I have a
    much lower inventory account number at the end of the year and so my
    tax bill is also lower. Remember, there are several components to
    income, one being money in the door, another being change up/down in
    the level of inventory. 

    May I ask you how you account for inventory? If, on Dec. 31st, you
    have items in your gallery that are there on consignment, where do
    you have your accountant put them on your tax return? There seem to be
    many questions/concerns about 1099's so here is a link to the IRS
    instructions 

    http://tinyurl.com/8vr2n 


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