Auction buyer's and seller's fees: who pays what and how VAT applies

Quick answer. At auction, the buyer pays the hammer price (prix marteau) plus the buyer's fees; the seller receives that same price minus the seller's fees. The auction house's turnover is limited to these two commissions, subject to VAT at the standard rate of 20%. The hammer price itself is a third-party fund remitted to the seller (article L321-6 of the Commercial Code).

The fall of the hammer sets a figure, but that figure is neither what the buyer actually pays, nor what the seller actually receives, nor the auction house's turnover. This triple reading is the source of the most common accounting mistakes we correct for voluntary sales operators. Understanding the price breakdown means securing cash flow, the VAT return and the compliance of third-party accounts all at once.

When a lot is knocked down, the fall of the hammer sets the hammer price. That is the amount of the winning bid. But it is not the sum the successful bidder actually pays.

Added to that hammer price are the buyer's fees, the commission the auction house charges the buyer. These fees are set freely by the operator and appear in the conditions of sale published before the auction session. They often take the form of a percentage of the hammer price, sometimes tapering by bands: one rate on the first value band, a reduced rate beyond.

The total amount payable by the successful bidder therefore breaks down as follows:

1. the hammer price (the winning bid);
2. the buyer's fees applicable to the lot;
3. the corresponding VAT, depending on the regime applied.

Before bidding, the first reflex is to read the fee schedule. The same hammer price does not mean the same cash outflow from one house to another: on an item knocked down at 10,000 euros, a few percentage points of buyer's fees materially change the final invoice.

On the seller's side, the mechanism is symmetrical. The seller, known as the principal, entrusts the item to the auction house. In return for the intermediation service, the operator deducts seller's fees from the sale proceeds.

In practice, the seller does not receive the full hammer price. They receive:

• the hammer price;
• minus the seller's fees;
• minus, where applicable, specific disbursements provided for in the mandate (photography, transport, restoration, catalogue costs).

Like the buyer's fees, the seller's fees are set freely and stated in the sale mandate or the general conditions. It is when the mandate is signed that the principal must gauge their impact, because these fees are not negotiable after the sale session.

Hayot Expertise tip. Have the mandate distinguish clearly between the commission itself (seller's fees) and the disbursements re-invoiced. These two items do not share the same VAT treatment or the same accounting logic: conflating them distorts the calculation of the house's real remuneration and complicates justification in the event of an audit.

This is where many lines of reasoning go wrong. The auction house does not generate turnover equal to the hammer price. Its turnover is its remuneration: the sum of the seller's fees and the buyer's fees, in other words the commission.

This commission is subject to VAT at the standard rate of 20%. The hammer price owed to the seller is not income of the operator: it is third-party funds, collected on behalf of the principal and remitted to them. Article L321-6 of the Commercial Code requires operators to represent these funds and to provide financial guarantees. In accounting terms this translates into a third-party account, separate from the house's result, which functions as an escrow: the money passes through without ever becoming income.

The boundary is therefore clear:

• what is the house's income: the buyer's fees and the seller's fees (the commission), with VAT collected;
• what is not the house's income: the hammer price remitted to the principal, which passes through a third-party account.

We cover this accounting architecture, specific to the profession since the merger of ministerial officers, in our analysis of the judicial commissioner's third-party fund accounting, and our dedicated accounting and tax support for auctioneers and auction houses secures this point for our clients.

For public auction sales of second-hand goods, works of art, collectors' items and antiques, the regime can switch. When the organiser acts in its own name, it is deemed to be a buyer-reseller: VAT then applies to the margin (article 297 A of the General Tax Code), that is, the difference between the total price paid by the successful bidder and the net amount paid to the principal.

Two logics therefore coexist, and you must know which applies to the lot sold:

For ordinary second-hand goods, the rate on this margin is the standard rate of 20%. For works of art, specific rules apply, in particular since the reform of VAT on the art market: the rate and the terms must be checked case by case according to the nature of the item and the situation of the original seller. We never fix a works-of-art rate without examining the file.

For a VAT-registered professional buyer: where the invoice separately states VAT, outside the margin scheme, that VAT is deductible under ordinary law conditions. Under the margin scheme, by contrast, VAT is not stated and gives no right to deduction. This is decisive for a dealer or a professional reselling the item: the invoice governs their recovery.

The table below summarises how the sums circulate between the three parties.

Points to check before each sale:

• the schedule of buyer's fees and seller's fees in the conditions of sale;
• the VAT regime applicable to the lot (commission or margin);
• the nature of the item (ordinary second-hand goods, work of art, collectors' item);
• the status of the original seller (private individual or taxable person);
• whether or not VAT is stated on the invoice if you are a professional wishing to deduct.

A few situations fall outside the standard pattern and call for specific treatment:

• The seller is VAT-registered. If the principal is not a private individual but a business or a dealer, the qualification of the transaction changes and the margin scheme may not apply. The status of the original seller is one of the first points to document.
• The sale involves re-invoiced disbursements. Transport, restoration, expertise or catalogue costs charged back to the principal do not have the same status as the commission. Their VAT treatment depends on the re-invoicing terms.
• The successful bidder is established outside France. An export delivery or an intra-Community operation follows its own territoriality rules, which overlay the margin or commission regime.
• The lot is unsold or bought in. No income is recorded on the commission side, but certain fixed fees provided for in the mandate may remain due. Following the mandate avoids disputes.

None of these situations can be handled on the fly: each calls for a check of the invoice, the mandate and the status of the parties.

In the files of voluntary sales operators we support, three pitfalls recur.

The first is recording the hammer price as income. This is the most common mistake, and the one with the heaviest consequences: it artificially inflates turnover, distorts the VAT collected and clouds the reading of the real margin. The hammer price is never income of the house.

The second pitfall concerns the separation of funds. Sums collected on behalf of principals must pass through an identified third-party account, in accordance with article L321-6 of the Commercial Code. Mixing this third-party cash with the house's own cash exposes it to a failure to represent the funds.

The third pitfall lies in the VAT regime applied to works of art without verification. The art market has its own rules, which cannot be guessed: applying a rate out of habit is a reassessment risk.

In a recent engagement, an auction house was entrusted to us after several years in which the hammer price had been recorded as income. The reported turnover was several times the economic reality of the activity, which distorted every analysis: the apparent margin was negligible, the VAT collected was overstated, and both the bank and the insurer were reading accounts inconsistent with the profession.

The accounting correction consisted of isolating third-party funds in a dedicated account, keeping only the commissions as income, and restating the VAT actually due on those commissions alone. The house recovered turnover consistent with its intermediation activity and a readable margin.

Our conviction is simple: for a voluntary sales operator, the quality of the accounts does not hinge on the volume of hammers, but on the rigour of the separation between own funds and third-party funds, and on the accuracy of the VAT regime lot by lot. This is something neither a spreadsheet nor generic reasoning can secure: you have to document the mandate, qualify the seller, and decide the regime case by case. This discipline echoes the one we describe for opening an auction house and structuring a voluntary sales operator.