1099 issue

[Bjorn]

Is it necessary to issue a form 1099 to an artist under this circumstance?

Mable owns an art gallery and displays local artist work on a consignment basis. When the art sales Mable keeps 30% and turns over the balance to the artist.

There is debate on the issue. Is this exempt because of merchandise or does Mabel need to issue a form 1099.

Mahalo,

Bjorn

[veritas]

I would

have the artist fill out a 1099 and report the money paid to Mable if $600 or more paid in the year.

[JG EA]

I don't see this type of thing in any of the boxes. Box 7 is not it unless the money was paid for compensation for services. Actually a few years ago I researched consignments and a 1099 was not required. I'll look up the research tomorrow if you want.

[erchess]

have the artist fill out a 1099 and report the money paid to Mable if $600 or more paid in the year.

Veritas the artist did not pay anyone. The gallery owner sold the painting and gave 70% of the proceeds to the artist.

[Jesse]

I was off base on the 1099INT thread as I did not know it was necessary to to file for the interest portion on a loan obligation but here is my thoughts on this for whatever it's worth.

Items on consignment are not inventory to the consignment shop as the are not "owned" by the shop. But upon selling the artwork isn't it similar to COGS - you are paying the 70% as a cost of what was sold? As JG EA stated it really isn't box 7 nonemployee compensation so where else would you put it.

Another question, what about the 30% that is retained? Would the artist need to file a 1099MISC if total retained is greather than $600? As the artist is indirectly "paying" for the studio's selling services. Or is the fact the customer is paid the monies retained make it a mute issue?

[Burke]

IMO, this is no different from a real estate firm that collects rents for an owner and retains a commission percentage. The firm reports the net rents distributed to the owner on 1099MISC at the end of the year. There is a box for rents. (The owner does not give the real estate firm a 1099 for the commissions retained.) This is accomplished by use of a separate escrow account, so that only the commissions are reported by the real estate company as income, not the gross rents received. The gallery owner could use the same process. I believe the gallery owner should report the net amt paid to the artist in box 3, Other Income. The artist should report this income as gross sales on a Sche C, LLC, or other entity.