Selling on consignment means handing your items to a shop that sells them for you and takes a cut of the price when they sell. You keep ownership the whole time the goods sit on the shelf; the shop acts as your agent, sets up the display, handles the customer, and pays you your share after the sale closes. It’s a common route for clothing, furniture, art, antiques, jewelry, and sporting goods because you get access to a storefront’s foot traffic without running one yourself.
Who Owns What During a Consignment
The person placing goods for sale is the consignor. The shop taking them in is the consignee. Dropping a couch off at the store does not transfer ownership to the store. Legal title stays with you until a buyer pays, and then it passes straight from you to the buyer. The shop never owns the merchandise.
That distinction becomes urgent if the shop hits financial trouble. Under the Uniform Commercial Code, a consignee in possession of your goods is treated, as far as the shop’s creditors are concerned, as if it had the same ownership rights you do.1Cornell Law Institute. UCC 9-319 – Rights and Title of Consignee With Respect to Creditors and Purchasers If the shop goes bankrupt and you haven’t taken a specific protective step, its creditors can claim your property as part of the shop’s inventory.
The protective step is a UCC-1 financing statement. The UCC defines a consignment as a delivery of goods worth at least $1,000 per item to a merchant who sells that kind of product under its own name.2Cornell Law Institute. UCC 9-102 – Definitions and Index of Definitions If your consignment fits that definition, Article 9 treats your ownership interest like a security interest that needs to be perfected in public records to hold up against third-party claims.
You perfect it by filing a UCC-1 with the secretary of state where the consignee is organized. The form names you as the secured party, the shop as the debtor, and describes the goods. Fees generally run between $10 and $100, and filings last five years and can be renewed. Once filed, your interest takes priority over the shop’s general creditors, so your items cannot be swept up in a bankruptcy or seized to pay the shop’s debts.1Cornell Law Institute. UCC 9-319 – Rights and Title of Consignee With Respect to Creditors and Purchasers
For a few boxes of used clothes, this paperwork isn’t worth the trouble. For fine art, expensive jewelry, vintage instruments, or high-end furniture, skipping it is a gamble.
What Your Contract Needs to Cover
Never consign anything on a handshake. Without a signed agreement, you’ll have almost no recourse if the shop loses your item or pockets the proceeds. The clauses that carry the most weight:
- An inventory schedule listing every item with descriptions, condition notes, and serial numbers where they apply. Both parties sign it. This is your receipt.
- The initial asking price and a floor price below which the shop cannot mark the item down without your approval.
- The commission split. Splits commonly range from 50/50 to 60/40, with the consignor taking the larger share in a 60/40 arrangement. Luxury and high-demand goods sometimes command better splits.
- The listing period, typically 60 to 90 days, and whether it renews automatically.
- Insurance. The shop should carry property and liability coverage for goods in its possession and provide a certificate on request.
- Every fee that comes out of your payout, not just the commission: credit card processing, flat per-item fees, online listing fees, check fees. Undisclosed deductions quietly shrink your share.
- When and how you get paid after a sale.
- What happens to unsold items when the listing period ends, and how long you have to collect them.
Read every clause even if you’re working from a template. The most common source of consignment disputes is ambiguity about markdowns, fees, and what counts as abandonment.
Who Pays if Something Is Lost, Damaged, or Stolen
A consignee holding your goods for compensation owes a duty of reasonable care under general bailment principles. The shop has to take sensible steps against theft, water damage, and breakage. If it can’t show it did, liability lands on the shop.
Don’t leave this to the default rule. Your contract should require the shop to insure the goods against fire, theft, and casualty while they’re in its possession. If the contract is silent and something disappears, you’re stuck arguing after the fact about what reasonable care meant.
Check your own coverage too. Homeowner’s and renter’s policies often exclude personal property you’ve voluntarily placed in a commercial location, so don’t assume you have a backup.
Getting Paid
When a customer pays for your item, the shop subtracts its commission and any agreed-upon fees, and the remainder is yours. Credit card processing fees run roughly 1.5% to 3.5% of the transaction and are sometimes passed through to you rather than absorbed by the shop, depending on what the contract says.
Most shops pay consignors on a monthly cycle by check or electronic transfer on a set date. Every payment should arrive with a settlement statement showing which items sold, the sale prices, and every deduction. Keep those statements for your taxes.
If the Shop Sells Your Item and Doesn’t Pay
You have two main claims. One is breach of contract: the shop agreed to pay and didn’t. The other is conversion, the legal term for wrongfully taking control of property or money that belongs to you. Depending on your contract and state law, you may recover the owed proceeds plus interest and attorney’s fees. For smaller amounts, small claims court is usually the quickest route.
Taxes on Consignment Income
The IRS treats consignment proceeds as reportable income. How you report depends on whether you’re clearing out personal belongings or running a business.
Personal Property
If you consign items you originally bought for personal use, any profit is a capital gain reported on Schedule D using Form 8949.3Internal Revenue Service. Instructions for Schedule D (Form 1040) Profit here means selling for more than you paid, which is uncommon for used clothing and furniture but does happen with collectibles and luxury goods.
The trap: if you sell personal property for less than you paid, that loss is not deductible.3Internal Revenue Service. Instructions for Schedule D (Form 1040) You still have to report the transaction if you get a Form 1099-K, but the loss can’t offset other income.
Business Sales
If you consign as part of a trade or business — you’re an artist, a crafter, or a dealer moving inventory — the income goes on Schedule C as self-employment income, subject to both income tax and self-employment tax. You can deduct the shop’s commission and related business expenses against that income.
1099-K Forms
Payment processors and third-party settlement organizations must send you a Form 1099-K if your gross payments exceed $20,000 and you had more than 200 transactions in a calendar year.4Internal Revenue Service. Publication 1099 – General Instructions for Certain Information Returns (2026) Most casual consignors never hit those thresholds. You’re still required to report taxable gains whether or not a 1099-K shows up.
Sales Tax
In states that charge sales tax, the shop generally collects and remits it because the shop is the retailer completing the sale. Your payout should be based on the pre-tax price, not the tax-inclusive total. Confirm this in the contract; some poorly drafted agreements are vague about whether the commission split applies to the gross figure or the net-of-tax figure.
Recalled Goods You Cannot Consign
Federal law bans the sale of any recalled consumer product, whether through a big-box store, a garage sale, or a consignment shop.5Office of the Law Revision Counsel. 15 USC 2064 – Substantial Product Hazards The Consumer Product Safety Commission publishes rules for resellers that are strictest for children’s items.6Consumer Product Safety Commission. Resellers Guide to Selling Safer Products Recalled products must be destroyed or repaired per the recall instructions before resale. All drop-side cribs must be destroyed. Full-size and non-full-size cribs manufactured before June 28, 2011, must be destroyed unless there’s written proof they meet current standards. Children’s products carry lead limits and small-parts restrictions.
Both parties are exposed. If you consign a recalled item and it injures a buyer, the liability can reach everyone in the chain. Before dropping off children’s gear, baby equipment, or electrical items, check the CPSC recall database at cpsc.gov.
When Items Don’t Sell
The contract controls what happens at the end of the listing period. Most agreements give you a short window, commonly seven to fourteen days, to collect your unsold items. If you don’t retrieve them in time, the contract may treat the goods as abandoned. Abandoned items are typically donated or become the shop’s property to dispose of as it chooses. Set a calendar reminder before the retrieval deadline if there’s anything you’d want back.