Taxes ? on Auction House Consignments

[insidethewrapper]

I thought I read somewhere on here that consigners don't have to pay taxes on sales of their consignments . Is that true ? The government has no record of someone selling a big item like T206 Wagner etc. for 1 million + dollars.

[swarmee]

You probably should ask an accountant.

But... before 2018, it was routinely accepted that "hobbyists" with sales could subtract the expenses incurred (original cost of item, fees, shipping, etc) and then were only expected to self-report and pay Federal income taxes on their profit margin.

That changed in 2018 with the passage of the new tax law that doubled the standard deduction. Hobbyists now owe taxes on their entire sales prices, while businesses can still subtract deductions. PayPal will send the IRS a 1099 if you have transactions (goods) of over $20,000 in sales and 200 transactions. They might send it anyways. Just because you and the IRS are not sent a 1099 does not mean that you don't owe taxes. Just because you sell through a consignor doesn't mean that you don't owe taxes. You do. You may want to register as an LLC to qualify as a business.
But please confirm with an accountant.

Edit: You may be able to debit cost of goods sold if you report the sale as a Collectible investment, rather than ordinary income.

[sb1]

Collectibles tax rate is 28%. That is net of the cost less the price sold for, regardless of tax bracket. Unless you inherited it, then you would need an appraisal at time of inheritance which would provide you a stepped up basis.

I am not an accountant either but believe these to be the correct answers.

[insidethewrapper]

My question is: If the consignor doesn't let the IRS know , how would they(IRS) know of the sale if not reported by the auction house ? I've never consigned before so I don't know how that works.

[swarmee]

You are required to report the income yourself, and you sign that you've done so on your tax form. Are you willing to lie to the federal government on your official tax form?

[insidethewrapper]

Thanks for the answer, now I know what I need to report if I consign in the future or decide to just leave for inheritance. It appears as a collector ( not business) you must report the full amount ( it doesn't matter what you paid for the item initially ).thanks

[Kidnapped18]

Yes any gains are taxed at the 28% rate
Yes you must self report, unless you want to expose yourself to tax underpayment penalties
You are responsible for your taxes not the auction house

You can check the Code sections for this info, which should also define collectibles which can include baseball cards
As always confirm with an accountant

Tony

[Casey2296]

In my State it's fairly simple to set up a small LLC in which case you could write off expenses against profits and report as Schedule C on line 12 of schedule 1. If you're talking about a substantial profit you may want to look into that. Also, if your heirs inherit your collection their cost basis goes up to current value at time of death, so if they sold the collection there would be no capital gain taxes assessed.
Sidenote, If you trade cards with another person that is a non-taxable transaction.

[GeoPoto]

I am not a lawyer, accountant, or experienced "hobbyist taxpayer". Using common sense, however, I would suggest that the taxable activity is the gain (if any) from selling your cards. The gain is the net sales proceeds minus the original purchase price (including BP and shipping). Just like stocks. The 2018 "change" is a limitation on deducting home "office" expenses like you would have if you ran a business out of your house. It is hard to see how anybody could buy cards at auction, sell them soon thereafter, and come out ahead. If you are doing that, you are running a business and should file a separate tax return in the name of your business.

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