Consumer Protection

Dealing with a Consignment Shop

Reviewed by Amy Loftsgordon, Attorney
Buying and selling unwanted items though consignment shops can be profitable—if you're careful.

You might have antique furniture, old silverware, and a prom or bridesmaid dress that hasn't been touched in years and you're tired of looking at them. Or, tough economic times have you looking for some extra cash, or you're trying to save a few dollars here and there.

People buy and sell though consignment shops for any number of reasons. Buying and selling unwanted items though consignment shops can be profitable—if you're careful.

What's a Consignment Store?

Don't confuse a consignment shop with what we commonly call a thrift shop. With a thrift store, you give away or donate your goods to the store. You might get a tax deduction, but that's it. The thrift shop sells your items and keeps the money for its charitable projects.

With a consignment shop, you still own the property. The shop tries to sell it. If it does, it takes a portion of the money as a commission. You get the rest. If the item doesn't sell, you get it back.

There are brick-and-mortar consignment shops, and probably one is in your neighborhood. You can also find online shops. Auction sites like eBay are similar to consignment shops—they give you a place to sell and take a cut or commission—but they usually don't take possession of the property, and require more work from you.

Simple, Right?

It sounds easy, and usually things go smoothly and everyone's happy. But, it's really not all so simple, and sometimes things go wrong.

Take John Kiskaddon for example. His vintage piano sold for $30,000 at a consignment store. Unfortunately, the shop owner stole $25,000 of it. Over a five-year period, she stole about $140,000 from people selling pianos through her shop. She's spending two years in jail for it, too.

Know Some Rules

It's a good idea for buyers and sellers to know some of the nuts-and-bolts to the consignment business and how to protect themselves.

Sellers

For sellers, also known as consignors:

  • Get your consignment agreement in writing. It should specify how much your property will sell for, how long the shop—called the consigneehas to sell it, how much you and the shop get out of the sale, and how long the shop has to pay you after the sale
  • Remember, the shop is normally responsible for keeping your property safe. Your consignment agreement should specify who's responsible for insuring your property
  • As a general rule, you don't have to pay taxes on items you sell. The IRS assumes you're selling things you bought for personal use and for less than what you paid for them. But, you might have tax issues if sell something at a profit or if you make a living from frequent sales.

Buyers

For buyers, the tried-and-true adage applies: Buyer beware. Yes, you can find bargains at consignment shops. But, if it looks too good to be true, it just might be. As a general rule, just like any other store or business, it's illegal for consignment shops to sell anything it knows—or should know—is stolen or counterfeit.

Also, remember the consignment shop is working for you. If the shop hands over your property but a buyer doesn't pay—or the shop doesn't pay you, like the California case—it's the shop who's responsible for your money.

Questions for Your Attorney

  • What should I do if I notice fake or counterfeit goods for sale in a consignment shop?
  • Do I need a license or anything to open a consignment store?
  • The consignment shop where I was trying to sell some things suddenly closed and the store's empty. What can I do?

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