Payment for Consigned Merchandise Does Not Require a 1099-MISC!
The Internal Revenue Service (IRS) does not require Consignees to give Consignors a 1099-MISC, so there’s no reason to give your art gallery, consignment shop, museum or retailer your Social Security number (SSN). Identity theft is one of the fastest growing crimes in the world. Keep your SSN number confidential, except when authorized by law.
My partner, Armand Cabrera, and I are in the art business. Armand is a fine artist that consigns his paintings to galleries across the United States. When the paintings sell, the art gallery writes a check to Armand for his portion of the proceeds. Occasionally, a gallery erroneously requests Armand to provide his SSN on a W-9 Form. We do not send it to the gallery because the IRS does not require it.
Armand consigns merchandise (artwork) to the gallery and they pay him for merchandise they sell. He is not considered an Independent Contractor, nor is the gallery paying him money for “services”. The gallery is paying him for merchandise. Merchandise is considered an “Exception” to the IRS. The IRS does not require galleries or consignment shops to report payment for consigned merchandise to artists or other consignors—although the payment is taxable to the consignor.
Let’s look at it like this…You purchase merchandise from Nordstrom, Safeway, Petco and Home Depot. At the end of the year, you don’t ask for their SSN (or Federal ID #) and issue a 1099-MISC! You’ve purchased merchandise—you haven’t employed them or hired them to perform a service.
Don’t take my word for it. You can view this information on the IRS.gov website on this page:
You will see the merchandise reference on the left side under “Exceptions”, 2nd bullet. The Internet is riddled with misinformation about this subject. Please—get your facts from the IRS official website—not from accountants and bookkeepers who make their living by preparing your taxes.
I don’t know why galleries and other consignees ask for this unnecessary information.Perhaps their CPA’s insist on it so they can make more money from their clients by creating needless paperwork. Maybe they’re just clueless. In any event, hang on to your SSN and only provide it when required by the IRS!
About the Author:
Diane Burket is an award-winning Voice Over Professional. She has been voicing scripts for over 20 years. She can be heard on National Commercials, Corporate Films, Training Videos, Telephone Prompts, Internet Sites and Multimedia recordings. In addition to her Voice Over, Diane also is the Agent for Armand Cabrera, a nationally-known oil painter represented by fine art galleries across the United States.