Thank you so much for your reply!

A few more details:

Taxpayer buys T-shirts and sneakers for the sole purpose of RESALE.  He sells items both online (Ebay) and at consignment shops.  Items submitted to consignments do not necessarily get sold and paid.  If items are not sold, he will take them back and try to sell via another method.  He does not collect any revenue from consignment shops until the item is sold.  So, I guess the questions I still have are:

1.Since he buys goods to resell, I assume that he should a "cost of goods sold" when the goods are sold during the year, I would report that under "Purchases  Line 36" Schedule C?  

2.He purchases items (T-shirts and sneakers) for the sole purpose of resale.  So, does this mean he has an inventory for the goods that he purchased during the year but did not yet sell by year end?  According to your explanation, are you saying that he does not have an inventory (due to consignment sales) and so this means his items/goods would be considered "supplies" and not "cost of goods sold".

3.I understand what you mean by the items are not considered "non-incidental material and supplies", thank you for the explanation, but does that also mean there is no way to report the unsold items on Schedule C of the current tax year?

THANK YOU!

SW