Discussion:Consignment Sales-GET

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Discussion Forum Index --> Hawaii User Group --> Consignment Sales-GET


Bengoshi (talk|edits) said:

17 May 2006
Hey there Hawaii folk,

A LONG GET question: I have a client who sells some merchandise on a consignment basis. Client (consignor) physically places the goods in a retail store (consignee), who then sells the goods to end consumers.

But the consignor does not transfer title to the consignee -- the consignment agreement reads that title passes directly from my client to the end consumer who buys the goods at the retail store.

Retail store sells each good at $20, and remits $12.50 to my client after the product is sold. The difference ($7.50) is called "compensation" to retail store which they shall be entitled to keep. Retail store charges its customers regular 4.166% at point of sale on the $20.00.

Does anyone know what the proper reporting for this is? My client could report as gross proceeds either $20.00 or $12.50 @ 4%... or maybe $20.00 gross less $7.50 deduction??? And what of the GET tax collected by the retail store--I wonder if that can be apportioned somehow?

Actionbsns (talk|edits) said:

17 May 2006
The rule for GE Tax to be owed or not depends on if the seller is "in the business". So somebody having a garage sale doesn't have to pay GE Tax on the monies they receive. Therefore your consignee would most likely not owe GE Tax. It seems that if the ownership rights have not been transferred to your client, then the GE Tax owed by him is based on his commission for the sale. This is a tricky question, though and I've had it come up a couple of times on an irregular basis. You might be well advised to call the state tax office to see how they suggest handling it.

Paula

Bengoshi (talk|edits) said:

17 May 2006
Thanks Paula. Yes, this is a tricky transaction. If the GET were a sales tax, I would say the consignee would have responsibility for the tax. But since the GET is imposed on the "privilege of doing business," conceivably both consignor and consignee could be subject to the tax. But the only entity that is actually passing on the tax to consumers is the consignee (retail store).

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