How Much Buyer's Premium to Charge: A Guide for Auction Houses

What is a buyer's premium?

A buyer's premium is a percentage added to the hammer price and paid by the winning bidder to the auction house. It's separate from the commission consignors pay, and together they fund the sale: staff, space, software, marketing and payment costs.

A worked example: on a $100 hammer with a 15% premium and 8.25% sales tax, the winner pays $124.49. On a $20,000 sale, a 15% premium brings in $3,000; at 18% it's $3,600, and at 10% it's $2,000.

How do you choose your buyer's premium rate?

Start with three numbers: what nearby houses charge for similar sales, what your sale costs to run, and how much your consignor commission already covers. The rate that's right sits where those meet. Write down your all-in cost per sale; it's the floor your premium and commission need to clear together.

• Local norms: read the terms of houses that sell what you sell in your area. Bidders compare.
• Item value: high-value lots can carry a lower rate and still bring in more dollars.
• Your costs: software, card processing, labor and rent for each sale.
• Online versus in person: online sales add platform and payment costs, which is why some houses charge more online.

Does a higher buyer's premium lower bids?

Partly. Experienced bidders decide what they'll pay in total and work backward to their max bid. With $120 to spend before tax, a bidder facing a 20% premium bids up to $100; at 10%, they can go to about $109.

So the premium isn't free money, but it isn't a wash either: not every bidder does the math, and the premium also applies to lots that sell at the opening bid. Showing an all-in price removes the guesswork, so winners aren't surprised by the invoice.

Is sales tax charged on the buyer's premium?

In Texas, the premium is generally treated as part of the taxable sales price when the item is taxable, so tax applies to hammer plus premium. Buyers with a valid resale certificate (Form 01-339) are the usual exception. Our Texas auction sales tax guide explains more, and the Texas Comptroller or an accountant can confirm how it applies to your sales.

Whatever the rule for your items, put tax in the terms and show it in the price bidders see. A bidder who budgets $124.49 for a $100 hammer pays without complaint; surprises on the invoice, not the tax itself, are what start disputes.

Can you charge a different premium for cards and cash?

Some houses set a lower premium for cash or check and a higher one for cards, to offset processing costs. Card network rules and state law govern how card surcharges and cash discounts must be presented, so check both before you set one up.

A simpler path is one rate for everyone, set high enough to cover your average processing cost. It's easier to show all-in and easier to explain at the pickup table.

Should you use a tiered buyer's premium?

A tiered premium charges one rate up to a threshold and a lower rate above it, for example 15% up to $5,000 and 10% above. On a $20,000 lot, that's $2,250 instead of $3,000 at a flat 15%, which keeps big-ticket bidders interested while low-value lots still carry their share.

Whatever you choose, state it in the terms, show it on every lot, and keep it the same across a sale. On Auktia, you set the premium once for the sale, and bidders can see each lot's all-in price before they bid.