Consign This: How to Tax Consignment
- Sales Tax News
- Nov 21, 2014 | Gail Cole
Consignment has long been a popular way to buy and sell, particularly clothing. You bring clothes in, sell them, get some cash, buy more, sell more, and so on. It’s a great way to pass along gently used children’s clothing (Jr. had another growth spurt!) and to purchase the next size up. It’s also a great way to breathe new life into your wardrobe without breaking the bank.
The Washington State Department of Revenue has updated a special notice on the tax reporting for consignment stores. Somewhat surprisingly, reporting requirements vary depending on whether or not you know who actually owns the goods.
Selling in your own name
If the buyer is not aware of the actual owner of the item being sold (although aware, of course, that it is consigned), then you are essentially making retail sales in your own name. Consignment sales should be reported under the Retail Sales tax classification.
Selling for someone you know
If the buyer knows who actually owns the goods because you are selling on behalf of a specific person or party, you must report consignment sales under the Retail Sales tax classification. Generally, the seller is responsible for remitting sales tax to the Washington Department of Revenue. However, if the owner of the goods is also registered with the department, the seller can remit the collected sales tax to the owner, who must remit it to the department.
In this case, the seller can take a deduction under “Other” and should write the explanation “Sales tax remitted to owner.”
If the seller remits sales tax on behalf of an owner who is registered with the department, the owner may take a deduction from retail sales tax, identifying the deduction as “Sales tax reported by agent.”
For additional information, including B&O tax reporting requirements, see the special notice.