Do Consignment Stores Have to Send 1099s to Consignors? Short answer: usually no.

A consignment store does not have to send a 1099 to a consignor for their share of sold items. The IRS excludes payments for merchandise from Forms 1099-NEC and 1099-MISC. Here is what matters for 2026:

• Consignor payouts for sold items: no 1099 in the normal case.

• Services you pay for (alterations, cleaning, photography, bookkeeping): a 1099-NEC once you pay one person or business $2,000 or more in 2026. For 2025 payments the limit was $600.

• Payments made by card or payment app: the payment company reports those on a 1099-K, not you.

• Deadline for 2026 payments: Monday, February 1, 2027 (January 31 falls on a Sunday).

This is general information based on IRS instructions, not tax advice. Ask your accountant to confirm how it applies to your shop.

1. Why consignor payouts usually don't need a 1099

The IRS instructions for Forms 1099-MISC and 1099-NEC list payments that do not have to be reported. One of them is payments for merchandise. When a consignor's item sells and you pay out their share, you are settling a sale of goods. You are not paying them for work they did for your shop.

Example: Dana runs a consignment boutique. In 2026, Maria's items sell for $5,200 in total. Dana keeps a 40% commission and pays Maria $3,120. Dana does not send Maria a 1099-NEC or 1099-MISC.

The same logic applies to:

• Buy-outright inventory. Stock you buy from a seller is merchandise, so no 1099.

• Shop-in-shop and vendor payouts. If the money is the vendor's share of items sold, it is a merchandise payout.

Good to know: The IRS instructions do not mention consignment stores by name. Consignment software providers and many tax professionals apply the merchandise exclusion to consignor payouts. Ask your accountant to confirm it for your shop.

Tip: Label these payments "consignor payout" or "sales proceeds" in your books, not "contractor pay." The label shows what the payment really is.

Your consignors may still owe tax on a profit from selling items. That is their responsibility, not a reason for you to issue a form.

2. When you do need to send a 1099 as consignment store

You send a 1099-NEC when you pay someone who is not your employee for services for your business and the total reaches $2,000 or more in 2026. You send a 1099-MISC for rent of $2,000 or more. Both amounts are counted per person or business, per calendar year.

Notes on the table:

• Rent paid to a real estate agent or property manager is not reported by you. They report it to the owner.

• Parts and materials a contractor supplies as part of a service count toward the total.

• If a consignor also does repairs or photography for you, keep the two payments separate. The payout is merchandise. The repair fee is a service.

3. 1099 thresholds for 2026 at a glance

The limit for 1099-NEC and most 1099-MISC payments went from $600 to $2,000 for payments made in 2026, under the 2025 tax law (P.L. 119-21). The IRS instructions say it may be adjusted for inflation starting in 2027. The forms you filed in January 2026 covered 2025 payments and still used $600.

4. 1099-K: the form your payment company sends, not you

A 1099-K reports card and payment-app transactions. The IRS says it is filed by the payment company, and apps and marketplaces only have to file it when payments to a seller are over $20,000 and over 200 transactions. The 1099-NEC and 1099-MISC instructions say payments made by card or third-party network are reported on a 1099-K and not on those forms.

What this means for your shop:

• You never issue a 1099-K to consignors.

• If you pay a freelancer by card or payment app, you skip the 1099-NEC for that payment.

• Your own payment processor may send your store a 1099-K.

Example: Leila's Closet takes card payments through its POS. Her processor reports $62,000 in gross sales to the IRS. That amount includes items that belong to consignors. Leila keeps her payout reports so her accountant can show which part of those sales went to consignors.

Being under a 1099-K limit does not make income tax-free. It only means no form is sent.

5. W-9s and backup withholding as consignment store

A Form W-9 is how a payee gives you their name and taxpayer identification number (TIN). You need it to file a 1099.

• Service providers and landlords: ask for a W-9 before the first payment. Do not wait for January.

• Corporations: you usually do not file a 1099 for them. A W-9 on file still shows their status.

• Consignors: the 1099 rules do not require a W-9 for merchandise payouts. Some shops collect one anyway for their records. That is a store policy, not an IRS rule.

Backup withholding is the risk of skipping the W-9. If a payee does not give you a TIN in the required way, the IRS requires the payer to withhold a flat 24% from reportable payments. The 2026 instructions say the $2,000 threshold applies to backup withholding too. If you do withhold from someone, you file a 1099 for them whatever the amount.

6. Deadlines for 10999 as consignment store

You file in early 2027. January 31 and February 28, 2027 both fall on a Sunday. The IRS instructions move a due date that lands on a weekend to the next business day.

7. E-filing and state rules

E-filing. If your business files 10 or more information returns in a year, you must file them electronically. The IRS counts all types together: 1099s, W-2s and others. A shop with six service providers and five employees reaches 11 and must e-file. The IRS offers a free online portal called IRIS.

State rules. The limits above are federal. States can set their own filing rules, and some use lower thresholds. Ask your accountant once which rules apply in your state, write the answer down, and follow it until something changes.

8. Your 1099 checklist for 2026

• Sort everyone you pay into three groups: consignors, service providers, landlord.

• Label consignor payouts as "payout" or "sales proceeds," never "contractor pay."

• Get a W-9 from every service provider and your landlord before the first payment.

• Track 2026 totals per service provider and flag anyone close to $2,000.

• Keep payout reports by consignor so your accountant can match them to your sales.

• Ask your accountant about your state's filing rules.

• Put Monday, February 1, 2027 in your calendar.

• Plan to e-file if you will file 10 or more returns.

9. FAQ - 1099 reporting for consignment stores

Do consignment stores have to issue 1099s to consignors?
Usually no. Payouts for sold items are payments for merchandise, which the IRS instructions exclude from 1099-NEC and 1099-MISC reporting.

Is the 1099 limit $600 or $2,000?
$2,000 for payments made in 2026. $600 applied to 2025 payments.

Does my store send a 1099-K to consignors?
No. Payment companies send 1099-Ks, and only above $20,000 and 200 transactions.

Does a large payout change the merchandise rule?
The $2,000 limit applies to services and rent, not to merchandise. If a consignor's sales look like a full business, ask your accountant.

What about artists who are paid royalties?
The IRS describes royalties as payments for rights such as copyrights, patents or trademarks. If you pay an artist for the right to print their design on products, that is a royalty and a 1099-MISC is due at $10. Selling their finished artwork on consignment is a sale of goods.

What if a consignor also repairs or photographs items for us?
Treat it as two payments. The payout is merchandise. The service fee may need a 1099-NEC at $2,000 or more.

Staying 1099-ready with Circle-Hand

The rules above come down to keeping records clean. Circle-Hand helps consignment and resale businesses keeping items apart, link each item to its consignor or vendor, and track payouts. Consignors and vendors get a login with live sales updates.

When your accountant asks what you paid each consignor in 2026, you can answer from your payout history instead of a spreadsheet.