Consignment Agreements: Selling Goods Through Someone Else's Shop

In a consignment, an owner leaves goods with a shop or seller who tries to sell them and takes a commission. The owner usually keeps title until the item sells.

Terms to cover

• A list of items, prices and minimum sale price.
• The commission or split and when payment is due.
• How long items stay on consignment.
• Who pays for insurance, display, marketing and shipping.
• Risk of loss, theft or damage.
• What happens to unsold goods.

Ownership and creditors

A seller who holds your goods may have creditors. Some states have laws protecting consigned art, and a written agreement and records help prove the goods are yours.

Tips

1. Keep a signed inventory with photos.
2. Ask for regular sales reports.
3. Set a clear payment deadline.
4. Confirm insurance coverage.
5. Know how to end the arrangement and collect your goods.

For shops

• Track consigned goods separately.
• Report and pay on time.
• Handle sales tax correctly.

How consignment sales work step by step

1. The owner delivers goods to the seller with an inventory list.
2. The seller displays and markets the items.
3. When an item sells, the seller collects the price.
4. The seller deducts a commission and any agreed fees.
5. The seller pays the owner by the agreed deadline with a sales report.
6. Unsold items are returned or reduced in price after a set period.

Setting price and commission

• Agree on the minimum price the owner will accept.
• Decide who may discount the item and by how much.
• Set the commission as a percentage or flat amount.
• Clarify who pays for payment processing, shipping and marketing.

Risk of loss and insurance

State who bears the risk of theft, damage and loss while goods are in the seller's possession. Owners should ask whether the seller's insurance covers consigned property. Sellers should keep consigned items separate and labeled.

Special protections for artists and creators

Some states have laws that treat consigned artwork as the artist's property and protect it from the gallery's creditors. Others rely on contract and commercial law. Written agreements and signed receipts make it easier to prove ownership.

Sales tax and records

• Decide who collects and remits sales tax.
• Keep sales reports and payment records.
• Reconcile inventory regularly.
• Issue 1099 forms where required.

Ending the arrangement

1. Give notice as the agreement states.
2. Count inventory together.
3. Pay amounts owed.
4. Return unsold goods promptly.
5. Collect a signed receipt.

A sample consignment workflow

1. Sign the agreement and inventory list.
2. Photograph items and note condition.
3. Set pricing and markdown schedule.
4. Track sales and send monthly reports.
5. Pay the owner by the agreed date.
6. Reconcile inventory and return unsold items at the end.

Disputes to prevent

• Missing or damaged items.
• Disagreements about discounts.
• Late payments by the seller.
• Items sold below the agreed minimum.
• Unclear ownership of unsold goods.

Art, antiques and high-value goods

For valuable items, add appraisals, insurance requirements and security terms. The agreement should say who may display or ship the item, whether it may leave the premises and how the title passes on sale. Consider recording a notice of consignment where state law provides for it.

Online consignment platforms

Platform terms can set fees, authenticity checks and return rules that differ from a standard written consignment agreement. Read them closely and keep your own records of what you shipped and when.

Frequently asked questions