Consignment rip-off or legit practice?

[vindibona1]

I think this store is going downhill fast... When they first opened, having bought out another long standing guitar and sound store, they had a lot of incredible instruments. They had Fender Custom Shop, Suhr, Tyler, National and others, and some really nice used instruments on consignment...

.... Now... this store is filled with mostly cheap Eastwood (not EastMAN) guitars with a few better leftovers from before. I put the Gibson LP there because they specialized in electrics with virtually no acoustic guitar except for a few cheapies. When I placed my guitar there almost two years ago they were a completely different store. So, without naming the store directly, I've given enough information that you should be able to spot who they are almost the moment you walk in the place. They must need the extra $50-$100 more than I do to try to cheat me by charging commission on tax.

And no, I will never do business with them again. But for $50 they've also created an enemy. I hope the owner thinks it was worth it.

[CarlE]

How much do you think you would have gotten for it if you had sold it on Craigslist, or sold it to Guitar Center?

[Shades of Blue]

Consignment is worth no more than 10-15% IMHO. Yes, you got hosed, especially with the tax situation.

[JayBee1404]

Vin, do you mind telling us what you netted on the deal? How much did you receive from the store, net of their deductions? Not trying to trick you, I just want to understand better what happened.

PM me if you prefer?

[jim1960]

Originally Posted by Tone Gopher

If he is charging commission on tax, then he should be reporting that income as well. That smells like tax fraud.

The 10% does not go into his pocket at all. It is paid by the buyer, and should be passed along in its entirety.

I would discuss the matter with the shop, and offer to refer them to the tax commissioner if they need to better understand the math of doing business.

Tax fraud? You're making a huge assumption, without any proof whatsoever, that the shop owner isn't reporting that income. And even then, this would be tax evasion, not tax "fraud." This is a contractual issue. The seller needs to look at the contract he signed with the business and see what it says. If the contract entitles the business to 25% of the selling price including the tax, the seller has no recourse. If it does not spell that out, he may have a case but it probably isn't worth pursuing over $50 unless he has a lot of money to throw away in order to prove a point.

[guitar george]

He charged you 25% of the $200.00 tax collected? I wonder how much he would have charged you if he had collected $200.00 more for shipping?

[Mycroft]

The consignment percentage seems a little high, but always can vary by locale. 15% to 20% seems pretty standard around here. I am in agreement that taking a percentage of the sales tax does not seem kosher. As to waiting for 3 months to pay you, well... Most shops will have a delay, in case the transaction goes south for some unforeseen reason. But 30 days not 90.

If you do not have a written contract spelling out the terms, then you are not really in a position to challenge. Who is to say what the terms were then? However, I would still contact the shop owner and point out the withholding and the delay in paying you.

And next time get it in writing...

[Edgar Poe]

It's a form of tax fraud. Threaten to turn them in.

Ed

[jjrpilot]

No offense to the OP and while the store's manager sounds shady.... but why would you agree to 25% cut via consignment?

[Tony Burns]

In my state tax would be collected- not sure why they would take a cut of that as well - maybe you should talk to them -becasue what their doing is not entirely honest - you can call a state representative about this -
But my response would be -if you were not notified about this practice beforehand they are in the wrong ( should of gotten this in writing beforehand )-But then again its only 50 bucks -but its your 50 bucks
Im sorry that happened to you !

[TBman]

Maybe a call to the city's finance department might be a good idea. If the consignment sale was not subject to sales tax the shop might be doing something it isn't supposed to, and probably on a larger scale than it may appear. Nothing like a good sales tax audit. Karma.

[menhir]

Business owner here...

I can't answer to the tax laws of every state, but generally speaking, payment of the sales tax is the responsibility of the purchaser...or loosely stated, the final owner of that particular transaction...the person who ends up with the item in question.

Buying wholesale, I pay no tax (with the proper legal licenses) on an item since it is meant for resale. When it is sold, I am responsible for collecting the full tax amount, recording it, and sending in that full amount the the gubmint when the sales taxes are due. I'm just a middleman in the tax part of the transaction. I don't go back and make the wholesaler pay part of the sales taxes I collected from the person who purchased that item from me. Not a penny of the tax collected comes out of my pocket. I just collect it pass it on.

(As an aside, if I use an item I bought wholesale/tax free instead of reselling it, then I am the final owner and I have to record, report, and pay remit the tax paid based on my purchase price. It's called a Use Tax. Again, I don't collect any portion of that tax from the wholesaler I bought it from, either.
So we don't get off tax free, either. But I digress... )

Off the cuff..I'd say that you're dealing with a slippery dealer or a poor businessman.

[frankmcr]

20-25% is what most places charge. I only know one dealer who charges as low as 15%, but he adds on a set-up/inspection fee which just happens to bring the overall cost to you up to the equivalent of 20% (or more).

The red flag for me is that they let three months go by without informing you the guitar had sold.

Just post that on yelp (if you decide to go that route). It's not revenge, it's telling potential consignors something they ought to know.

[personatech]

Tell him that if he wants a commission based on a price that includes sales tax, then this is how it should go:

$2000 selling price + $200 estimated tax = $2200

He gets 25% of the above ($550), you get 75% (i.e. $1650).

Of course, he still needs to settle the tax with a state expecting $200, but that's his problem.

...and yes, I know this is facetious and would never go down, but geez... Wishing you good luck, whatever the outcome!

[seannx]

Originally Posted by frankmcr

20-25% is what most places charge. I only know one dealer who charges as low as 15%, but he adds on a set-up/inspection fee which just happens to bring the overall cost to you up to the equivalent of 20% (or more).

The red flag for me is that they let three months go by without informing you the guitar had sold.

Just post that on yelp (if you decide to go that route). It's not revenge, it's telling potential consignors something they ought to know.

Once that review is on Yelp, say for one star as they did sell the guitar, it will be featured and never come off. The only way it can be removed is by the OP. The store may respond to counter it, but it’s kind of hard to justify 3 months passing after the sale without notification, and charging 25% on the sales tax. The owner could offer you the $50 back to delete the post, but I’d be inclined to say no. Instead editing to add that you got the $50 refund, plus a store policy change to not charge commission on tax, and bumping it up to 3 stars would insure it stays on Yelp.