A commission warehouse (German: Kommissionslager) is a store in which a commission agent holds goods belonging to another company, the principal, and sells them to third parties in his own name but for the principal’s account. German law sets out the rules in sections 383 to 406 of the Commercial Code (HGB): the goods remain the principal’s property until they are sold, the agent earns a commission under section 396 HGB once the deal is carried out, and for VAT section 3(3) of the German VAT Act treats the handover between the two as a separate supply. The model is typical in the art, antiques and wine trade and for used cars (Wikipedia, Kommissionsgeschäft). It differs from consignment stock in what the goods are for: there, a customer who is already known withdraws them for his own use, while in a commission warehouse they wait for a buyer the trader still has to find. Anyone who wants to stock insulation parts for their own production therefore almost always needs a different model: a call-off order, a kanban store or consignment stock. Kanban stores and stockholding for call-off quantities are part of our custom products. Below you will find the four meanings of the word, rights, liability and VAT with a worked example, and which storage model fits which need.
The German word Kommissionslager covers four different stores
The confusion has a linguistic root. In old commercial German, Kommission means an order or commission, and “in Kommission geben” means having goods sold on the owner’s behalf (Duden). In everyday use this has produced four meanings that appear side by side in contracts, delivery notes and tenders. English adds a twist of its own: “consignment” is used both for goods sold by an agent and for stock held at a customer’s site, two arrangements German law keeps apart.
| Meaning | Who stores | Who owns the goods | Basis |
|---|---|---|---|
| Commission warehouse under the HGB | Commission agent, a trader | Principal, until the agent sells to a third party | Sections 383 ff. HGB |
| Consignment stock, colloquially also called Kommissionslager | Customer, or supplier at the customer’s site | Supplier, until the customer withdraws | Warehousing contract under section 467 HGB with sales-law elements |
| Order-allocated call-off store | Supplier or forwarder | Set by contract, goods are firmly allocated to one customer | Sales contract with call-offs |
| Order-picking store (Kommissionierlager) | Warehouse operator | No ownership question, purely internal | VDI 3590 Part 1 |
The first row is the meaning used by reference works and the law. The German Wikipedia expressly separates consignment stock from commission warehouses, whereas a credit insurance broker writes “Konsignationslager (auch Kommissionslager genannt)” (GFL Broker). The logistics provider Cargo International uses Kommissionslager for goods already allocated to a customer and waiting for call-off. The order-picking store, finally, is the area where part quantities are assembled from a range according to orders, as defined in VDI 3590. According to Industrie Fachwissen, order picking accounts for 40 to 55% of warehouse operating costs, but it has nothing to do with ownership.
Our advice to purchasing and sales: write the model into the contract, not the word. Who stores, who owns the goods until when, when they are invoiced and who pays in case of loss are four sentences. Once they are in the contract, it no longer matters what the store is called on site.
In a commission sale the trader sells someone else’s goods in his own name
The commission agent concludes the sales contract with the customer himself, issues the invoice himself and becomes the contracting party. The customer does not need to know who owns the goods. Wikipedia calls this indirect agency and contrasts it with the commercial agent, who acts in the principal’s name. A sale on commission runs like this:
- Principal and agent sign a commission agreement with price limits, commission rate and settlement interval.
- The principal delivers the goods to the commission warehouse; from now on they are goods on commission. The agent takes possession, ownership stays with the principal.
- The agent sells in his own name and transfers title to the customer, which the principal has authorised him to do under section 185(1) of the German Civil Code.
- He reports the sale, renders account and hands over everything he obtained from the deal (section 384(2) HGB). If he does not name the buyer when reporting the sale, he is liable for the buyer’s payment himself (section 384(3) HGB).
- He keeps his commission. Unsold goods go back to the principal as agreed.
Many guides oversimplify this process. Some say the agent acts in the manufacturer’s name, others that he stores the goods at his own expense. Both contradict the statute. The agent’s own name is written into section 383 HGB, and under section 396(2) HGB the principal reimburses the agent’s expenses, expressly including the use of his storage space and vehicles. Anyone who wants to split costs differently has to agree it.
Rights and duties in a commission warehouse are set by the HGB
| Question | Rule | Section |
|---|---|---|
| How carefully must the agent work? | With the care of a prudent merchant, following the principal’s instructions | 384(1) HGB |
| Who is liable if goods are lost or damaged in storage? | The agent, unless the damage could not be prevented with a merchant’s care | 390(1) HGB |
| Must he insure the goods? | Only if the principal has instructed him to | 390(2) HGB |
| Who is entitled to an unpaid purchase price if the agent becomes insolvent? | Towards his creditors, the claim against the buyer counts as the principal’s claim | 392(2) HGB |
| Who bears the risk that the buyer does not pay? | The principal, unless the agent has given a del credere guarantee for an extra fee | 394 HGB |
| When is commission due? | Once the deal is carried out; expenses are reimbursed on top | 396 HGB |
| What secures the agent? | A lien on the goods for costs, commission and advances | 397 HGB |
Two rows matter most to the principal. Insurance is the owner’s business unless he expressly hands it over, so a fire in the commission warehouse hits him in full if the agent worked with due care. And the lien means the agent may hold back goods as long as commission or expenses are outstanding. Both belong in the contract before the first pallet goes into storage.
These rules explain the advantages and drawbacks that most guides list without giving reasons:
- The principal sells through someone else’s store and customer contacts without a branch of his own. Purchase prices the buyer has not yet paid still belong to him if the trader becomes insolvent.
- He pays for this with commission and expenses, carries the insurance risk and keeps the goods on his own balance sheet until they are sold, so his capital stays tied up.
- The commission agent widens his range without buying or pre-financing any goods.
- In return he is liable for damage in storage and earns only on goods he actually sells.
Commission warehouse and consignment stock differ in what the goods are for
Both models have goods in someone else’s possession that still belong to the supplier. Because the goods are resold in one case and consumed in the other, the parties, the invoicing and the VAT differ. How the purchasing model at the customer works day to day is covered in the article on consignment stock.
| Feature | Commission warehouse | Consignment stock |
|---|---|---|
| Parties | Principal, commission agent, buyer | Supplier and customer |
| Purpose of the goods | Resale to third parties | Consumption or processing at the customer |
| Location | At the trader | At or near the customer |
| Title passes | From the principal straight to the buyer | From supplier to customer on withdrawal |
| Who invoices the end customer? | The agent, in his own name | The supplier, after the withdrawal is reported |
| Remuneration of the store keeper | Commission and expenses | Usually none, the customer pays only for what he takes |
| Legal basis in Germany | Sections 383 ff. HGB | Warehousing contract under section 467 HGB with sales-law elements |
| VAT | Two supplies at the time of sale, section 3(3) UStG | One supply on withdrawal; across EU borders, the call-off stock rules |
The usual objection is that everyone says Kommissionslager and means consignment, so where is the harm. It does harm as soon as someone has to interpret the contract, in a dispute or a tax audit. A genuine commission sale creates two supplies, and the agent has to declare the full sales proceeds as his own turnover (Gabler, Kommissionär). Anyone who means consignment but writes commission also risks a dispute over whether the store keeper holds a lien under section 397 HGB.
Anyone shipping consignment goods across an EU border has, since 1 January 2020, been able to use the call-off stock simplification (section 6b UStG in Germany) only if the acquirer is known in advance, his VAT number has been provided, the supplier is not established in the destination country and the goods are withdrawn within twelve months of the end of transport. Otherwise the supplier has to register for VAT in the country of arrival (Forum Verlag). In its explanatory notes on the 2020 quick fixes, the European Commission states that a commissionaire can also be the acquirer in such a stock, and under the VAT Committee guidelines losses below 5% of the value or quantity of the stock that arise from the nature of the goods or from unforeseeable circumstances do not trigger a transfer. Neither model decides how often and in what quantity stock is topped up; that is the job of a kanban store.
VAT in a commission warehouse arises only when the goods are sold
Section 3(3) of the German VAT Act treats a commission sale like two purchases in a row: the principal supplies the agent, and the agent supplies the customer. Putting the goods into storage is not yet a supply. The supply to the agent is deemed to take place at the moment he delivers the goods to the buyer. The taxable amount is his sales proceeds minus commission and any own costs passed on (smartsteuer, lexicon entry on commission sales). An example with round figures: a trader sells goods on commission for €20,000 net, with an agreed commission of 8%.
| Transaction | Net | VAT at 19% |
|---|---|---|
| Supply by the agent to the customer | €20,000 | €3,800 |
| Commission 8% | €1,600 | No separate invoice, it sits in the difference |
| Supply by the principal to the agent, at the same moment | €18,400 | €3,496 |
| Agent’s VAT payable after input tax deduction | €304, which is 19% of his commission |
The agent may invoice the principal’s supply himself, as a self-billed credit note under section 14(2) UStG, if both have agreed this in advance, for example monthly. With this credit note he deducts the €3,496 as input tax. On the balance sheet the goods stay with the principal until they are sold, because under section 246(1) HGB assets belong in the owner’s balance sheet. The principal therefore has to include his stock in the third-party warehouse in his stocktake. We recommend agreeing a stock confirmation as at the balance sheet date, otherwise nobody counts your goods on 31 December.
For series parts a commission warehouse is rarely the right model
A maker of motors, transformers or appliances builds its slot insulation and slot liner covers into its own products. That removes the basis of a commission sale, which requires a sale to a third party. Anyone asking for a commission warehouse for insulation parts usually means one of three other models. They differ in where the goods are and when they are paid for.
| Model | Goods are | Paid for | Fits when |
|---|---|---|---|
| Call-off order | At the supplier | Per call-off | Annual quantity known, call-off dates open |
| Kanban store | With you, in fixed bins | Per delivery | Consumption is regular and replenishment should run without orders |
| Consignment stock | With you, owned by the supplier | Per withdrawal | You want stock on site but no tied-up capital |
| Commission warehouse under the HGB | At the trader | After resale | A trader is to sell your goods to third parties |
Call-off orders are covered by section 6(9) of our terms and conditions, which are published in German. We may produce the entire order quantity in one run, which saves repeated set-ups. If the customer does not call off the goods as agreed, we may invoice them as delivered after a reasonable grace period. Under section 8, title stays with us until all payments have been received. This shows that ownership by the supplier is not enough to make consignment stock: a retention of title secures a receivable, while consignment moves the purchase itself to the moment of withdrawal.
For recurring requirements with varying call-off quantities we offer production with stockholding, on request as a kanban store with a fixed quantity per bin. We stack and package stamped parts in special packaging, pick kit packs to your requirements and also process special material you provide. Our own purchase conditions cover the reverse case in section 11: material we supply to a vendor remains our property, must be stored separately and may only be used for us. Separate storage is the rule for other people’s property, whether in a commission warehouse, in consignment stock or for free-issue material.
These points belong in every contract about someone else’s goods in storage
- The model in one sentence: commission, consignment, call-off or kanban
- The moment title passes, and whether a retention of title applies on top
- Who insures the goods, because a commission agent only does so on instruction
- Stock confirmation at the balance sheet date and rules for shrinkage and count differences
- Settlement interval, price limits and, for commission, the commission rate
- Return of goods not sold or not withdrawn, with a deadline
- For stock in another EU country, the twelve months of the call-off stock rules and the record-keeping duties
For insulation parts the technical details come on top: drawing, material, thickness from 7 µm to 3 mm depending on the material, annual demand and quantity per call-off, and for rolls the width, length and core diameter. We produce from a single piece and deliver within two weeks at most when the material is in stock. Discuss which supply model suits your part with our technical consulting team. We reply within 24 hours, Monday to Friday.
