What is a "buyer's premium" in an auction?

A "buyer's premium" is defined as an additional charge that the buyer must pay, which is typically a percentage of the winning bid. This fee is a common practice in auctions and acts as a source of revenue for the auction house or organizer, helping to cover the costs of hosting the event, marketing, and facilitating the sale.

Understanding the concept of buyer's premium is essential for participants in auctions, as it effectively raises the total cost of acquiring a lot beyond just the winning bid amount. For example, if an item is auctioned for $1,000 and the buyer's premium is set at 10%, the total amount the buyer would need to pay is $1,100.

In contrast, the other options refer to different aspects of auction transactions. Fees charged to sellers pertain to commissions or listing fees that the auction house may impose. Taxes on auction sales would typically be a separate concern, governed by state or local taxation laws, rather than being a direct aspect of the auction itself. A fixed fee that applies to all auction items would not vary based on the bid amount, which distinguishes it from the conditional nature of a buyer's premium that is percentage-based.