How to File Taxes as a Consignment Store

Every owner knows that running a consignment store is a big responsibility with endless details. And though the hard work can be incredibly rewarding, filing taxes is just one of those things no one wants to do— especially since ensuring that your financial records are in order is crucial to your business’s success. This post is to make things a little less nebulous for any of you who may feel daunted by the 1120. 

Sales Reports

One of the most fundamental aspects of filing for a consignment store is pulling sales and revenue accurately. For this you will need a report that includes all transactions over the tax year. This report should naturally detail the sale of consigned items, surcharges, and taxes collected or any additional revenue streams. These will all be reported under “total sales” in the tax form. 

There are two easy ways to pull this information from your ConsignCloud Account. For a simple overview as shown above, go to Menu > Reports > Sales Summary, choose ‘This Year’ and depending on your OS either ‘Command+P’ or ‘Ctrl+P’ which will print a document with this yearly information. This includes all the information gathered as you were running sales with our POS. For more details, you can go to Menu > Inventory > Item Sales (which includes both online and in store sales) and export. You can add ‘Sold’ date filters to narrow down to the current year. 

Inventory Reports 

Inventory tracking for consignment is another critical step to ensuring an easier time with filing taxes. An inventory report should include information about each consigned item, such as its description, selling price, and most importantly: the consignor’s share. A well-organized inventory report simplifies the process of calculating cost of goods sold (COGS) in any cases where you have BOR (buy outright) items. 

It’s important that your consignment software gives you the ability to pull records like these. In ConsignCloud, all this information is readily available through the Inventory tab. You can add any number of Columns like Batch, Brand, Category, Color, Surcharges, and Cost Per to ensure that when you export to a spreadsheet, everything needed for tax purposes is available. If you do have Buy Outright (BOR) items, make sure ‘Cost Per’ is added. You can find the total COGS by adding up that column in Excel which is important for Line 2. See also Form 1125-A. Subtract your COGS from your gross sales and receipts for Line 3.

Expenses and Payouts Reports

To maximize deductions and minimize tax liability, keep a record of all business expenses. This includes rent or lease payments, utilities, marketing costs (Line 6), employee salaries, and any other expenses (Line 13) directly related to operating your consignment store like the amount owed to your consignors (Line 29a— since amount owed is typically an “operating expense”). These expenses can significantly impact your taxable income. Along with the general expenses highlighted above, you will need your bank and credit card statements if you have accounts open just for your store. And don’t forget that if you have employees, you will likely have to fill out Form 941, the Employer’s Quarterly Federal Tax Return.

The process for accessing the amount paid out to consignors is similar. You can add the yearly payout information needed for your taxes through the Accounts tab > Balance History and then Exporting. 

Consignor Agreements

Consignment agreements are the legal documents that outline the terms between the store owner and consignors. These agreements play a pivotal role in tax reporting as they dictate the revenue-sharing arrangement. Make sure to have a clear record of all consignment agreements, specifying the commission rates, payment terms, and other relevant details. Here’s a sample consignor agreement for your purposes. And you can easily attach these to the accounts by adding a note.

Summary

Filing taxes for consignment stores requires careful attention to detail and thorough documentation which is why it is important that your consignment software or resale management system gives you the ability to easily make, keep, and pull these records. By preparing and organizing the reports mentioned above and by keeping consignor agreements, you can streamline the tax filing process and position your business for financial success. Do consult with a tax professional or accountant to ensure compliance with tax laws and regulations specific to your location. (For example, Washington has a Retailing B&O tax.)

Take a look at this if you need a step-by-step walkthrough of filling out the 1120!