Best practices for using Square for a group sale (i.e., multiple sellers in one sale)

[ajk222]

I am in a hobby organization, and we sell our wares together as a group. The group changes every year. We have a way to keep track of each persons sales (we make each person an "item" with variable price) that has worked well for years: we use one person's square account for all sales for the group, and that person then writes checks/transfers the each person's sales to that person to pay the sales tax and report the income on their own taxes. Due to space limitations in our venues, it is not possible to have everyone present to run their own sales through their own Square account. One of the advantages of the way our group runs is that we don't all have to be present for the entire sale.

With the new IRS reporting requirement for transactions over $600, we are looking for a different way to approach our sales, so the person whose Square account we use is not at risk of having to explain/prove to the IRS that all the income from the sales does not belong to that one person. (For 2022, that person is going to send 1099K forms to each person who brought in over $600 to help with the reporting.) Does Square have any way to somehow assign sales to different people using the same POS app login so those sales would directly be attributed to different people? Or does anyone else have a creative way to deal with a number of individuals selling together as a group? 

[Donnie-M]

@ajk222 I think you might be creating yourself a logistical nightmare.  The only true way to do it is to 1099 each person from the person who has the account.  This would be the cleanest easiest way (as though they are paying a vendor) then the person with the account would have a legal record of the payout and be able to show the money wasn't "income" but an expense.  Definitely consult a tax expert as this really is a tax question.

I am thinking that the better way might be to set up each person as an independent contractor and do 100% commission on their items.  I haven't used this function, but I am sure you could probably assign each sale to the right "salesperson" and then generate a 1099 for each person.

I don't see any way around the reporting requirement.  It seems as though this is very much a consignment type sale if you are using 1 square account for everyone's processing.

Alot, of people are scared of the $600 reporting requirement, but it is not a big deal on business taxes where you itemize and show expenses.  It is very easy to show where the money went and that is the only real concern, was the money income or money you got from selling a lawn chair.  You might want to look at setting up a simple business to process this for the organization and file taxes.

Yes, all of this costs money, but you are going to run into that situation.

Another creative idea might be to just have each person set up a free website on their square account with their items for the show and you can facilitate customers checking out on the websites at the sale.  The only problem is really if the person wants to buy from multiple different people in one transaction.

[ajk222]

Thanks for your ideas! I definitely created a logistical nightmare 🙂 For this year, I do plan to just do the 1099 for each person, which is pretty straightforward, though I don't really love the idea of having people's social security numbers. I've talked with a tax person about the situation, and they recommended only doing the 1099 for people above the $600 threshold, though I couldn't get a clear reason why out them. (I thought doing one for every person, even those below the threshold, would more easily show that the income belonged to others...I'm going to get a second opinion on that.) The tax person said there is also a way to report the payments to individuals on our tax forms (even for non-business income), which would reduce the audit risk, though I'd need to start my taxes to figure out how that would work. I am confident my records will make it clear I don't owe taxes on the whole amount if audited, but I really would prefer to avoid the work of an audit.

I agree the $600 threshold is creating more fuss than necessary. The income always should have been reported on taxes, so it shouldn't change anything for most people/businesses. It's a pain for us because of the way we've run things, but we are a unique situation, and we'll figure out how to adapt (and some in our group will just need to accept that it means they will have to do some additional work, even when selling for the first time).

The commission/independent contractor idea could be a way to do things in a way similar to what we have been doing, and I'm going to look into that. I didn't realize that Square may have the capability to do that. 

We have just raised the possibility of an LLC, which I do think could be a good option, assuming we continue to have continuity of at least the person doing the financials from year to year. I'm sure there are downsides to it, but we really don't want any financial risk or extra tax burden on someone, just because we used their Square account. We have someone in the group now who is familiar with tax law (though not actually doing taxes), so that makes the LLC option much more viable than it would have been in the past.

I like the idea of the websites. I don't think it would ultimately be a huge hassle for customers, because most people buy form only a single person; very few buy from more than two. Some people in my group will probably not like having to get their own Square account and no one will love having to enter inventory, but that just may be the cost of working with the group. I had been tossing around how we might be able to have QR codes or something for each vendor that would charge to their own account, but I hadn't figured out the logistics of making it work. The websites would probably be more straightforward. 

Again, thanks for your great ideas!