An auction buyers premium is a fee charged to the buyer when he or she purchases an item at auction. The rate is typically listed in the terms and conditions of the auction house, but it may also be noted in the special conditions for each lot. The premium is generally higher in higher-end auctions, but it can be lower in lower-end auctions. The rate may be subject to sales tax or VAT depending on where the lot is being sold.
The buyer’s premium is included in the total purchase price, along with the sales tax. In some cases, the premium is taxable, so be sure to review the tax regulations before making any changes. The company-level change does not affect any complete or active auctions, but will affect new auctions created after you make the change. If you want to change the settings for a specific auction, you must edit the settings for that auction individually.
You may also choose to specify a sliding or cumulative scale in the Buyer’s Premium field. If you don’t specify a scale, the system will default to the default value. If you choose a sliding scale, the rate will decrease as the hammer price increases. If you choose a fixed rate, the percentage will remain the same for all auctions.
The buyer’s premium is not a new concept. In fact, it has been around for thousands of years. In ancient Rome, the emperor Augustus required that buyers pay 1% of the total price. This model is still widely used, and it benefits both the buyer and the seller. The modern form of buyer’s premium was first introduced in 1975 in London. Initially, the premium was set at 10% of the final purchase price, and the practice was controversial. It was the subject of a seven-year investigation by the British Government.
The Buyer’s Premium can be taxable or non-taxable. You can select the appropriate tax code on the invoice. You can also choose to show the Buyer’s Premium tax separately from the sales tax on your invoices. This way, you can easily track which type of tax you charge on the auction buyers premium and not lose any revenue because of it.
In addition to the buyer’s premium, the auctioneer charges a documentation fee for each item sold. The fee varies from auction to auction, but it is usually set at forty dollars per titled item. In addition, a 2% Internet fee is applied to any payment made online by a purchaser.