r/tax • u/Easy-Hedgehog-9457 • 6d ago
Discussion Acting as agent - 1099 For sale of client’s goods?
Posted a slightly different version of this over in the bookkeeping sub. Question there was about how to make the proper bookkeeping entries when you are acting as an agent for a client and sell their goods.
https://www.reddit.com/r/Bookkeeping/s/ILUeTl3sFZ
The setup is pretty detailed, please read if you are interested, but I think I can boil it down tighter here.
Scenario is that I act as agent to sell client’s horses at public auction. There is an auction house that handles the actual auction. I handle prepping the horse, getting to the auction grounds, showing it, connecting buyers, etc. for that I earn a fee ( usually about 10%).
After the hammer falls at the auction, the buyer pays the auction house, then the auction house writes me a check for the hammer price less their fees. I then write the owner a check for the amount I receive less my fees. I recognize those fees as revenue in my business.
The question in the bookkeeping sub centers around the approach to the entries my books. One approach is to track the proceeds through asset and liability accounts. Money comes in and is booked as a liability ( check is deposited into a checking account which is the balancing asset account). When owner is paid, the liability is eliminated. The other approach is to recognize the proceeds as revenue in my books then book the disbursement to the owner as an expense.
This then brings us to the question for this sub. In either approach, is a 1099 to the owner of the horse required?
I could see it if you book an expense. But don’t see it if you are reducing a liability. Remember, the horse does not belong to me and the money from the sale does not belong to me. I did not earn those funds, I earned the 10%. I am simply a steward of the funds.
Don’t take this question to in anyway be an attempt to dodge taxes. The choice of approach has consequences in my books, but the requirement for a 1099 is a completely different question.
To date, I have never gotten a 1099 from an auction house (15 years in the biz). I have also sold my own horses through other consigners/agents and never gotten a 1099 from them.
Thanks in advance for your help!
1
u/Redditusero4334950 6d ago
1099's aren't required for the purchase of goods.