Consignment sales

Goods that you hold on consignment are goods that you are offering for sale, but that belong to someone else. The way GST applies to goods sold on consignment depends on:

• the nature of the consignment arrangement
• whether or not the owner of the goods is registered for GST.

If you sell goods on consignment, you sell goods without first buying those goods from the owner. Typically, you have an agreement that specifies one of the following:

• you agree to purchase the goods for an agreed price when you find a buyer (sale or return)
• you agree to sell the goods on behalf of the owner as an agent (agency sale).

Consignment sales often involve second-hand goods owned by people who are not registered for GST.

There are no restrictions on what goods can be sold on consignment. Goods regularly sold on consignment include motor vehicles, boats, wedding and formal dresses, cameras, farm machinery and artworks.

'Sale or return' sales

A sale is 'sale or return' when you only purchase the goods from their owner once you have found a buyer for the goods. This means you're selling the goods in your own right because you're purchasing the goods from the owner and selling them to the purchaser. In this situation, if you're registered for GST you must pay GST on the full sale price of the goods.

It is likely you're making 'sale or return' sales if any of the following apply:

• the amount you pay to the owner when a buyer is found is agreed in advance
• any amount you receive from the buyer that is over the agreed amount you have to pay the owner is yours to keep
• you set the sale price of the goods
• you don't have to tell the owner of the goods the final selling price or details of how much profit you made on the sale
• you have to provide a warranty on the goods
• you have to guarantee title to the goods
• you are prevented by a state law from selling goods as an agent - this is common in the motor vehicle industry
• you do not bear any commercial risk; that is, if the goods are not sold, you don't have to purchase them.

Claiming GST credits

If you sell goods on a 'sale or return' basis, you can claim a GST credit for the GST you pay in the price of the goods you purchase from the owner if:

• the owner is registered for GST, and
• the sale by the owner to you is a taxable sale.

If the owner is not registered for GST, there is a special GST credit available on second-hand goods you purchase to resell or exchange as part of your business.

See also:

• GST and second-hand goods - completing your activity statement.

Agency sales

You're making an agency sale when you sell goods as an agent on behalf of their owner. Under these circumstances, you are not liable to pay GST on the sale. However, you must pay GST on the commission you receive.

It is likely you are making sales as an agent if:

• you do not set the sale price of the goods
• you receive either a flat rate or percentage commission on completion of the sale
• you do not hold the goods in your own right
• you and the owner of the goods agree that you will act as an agent.

The owner of the goods is liable to pay GST on the sale if:

• they are registered for GST, and
• they make the sale in the course of running their business.

If the owner is not liable for GST, you must still pay GST on the commission you receive but the owner does not have to pay GST on the sale.

See also:

• Using an agent