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

An auction's buyer's fees and seller's fees are the auction house's commissions. The buyer pays the hammer price (prix marteau) plus the buyer's fees; the seller receives the hammer price minus the seller's fees. These commissions, set freely, are subject to VAT.

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.

The total amount payable by the successful bidder is therefore: hammer price + buyer's fees + the applicable VAT. 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 the seller's side, the mechanism is symmetrical. The seller (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 (and, where applicable, specific disbursements such as photography, transport or restoration, if provided for in the mandate). Like the buyer's fees, the seller's fees are set freely and stated in the sale mandate or the general conditions.

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, which translates into accounting through a third-party (escrow) account, separate from the house's result.

In our files, the most common mistake is to record the hammer price as income. This artificially inflates turnover, distorts the VAT collected and clouds the reading of the real margin.

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.

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.

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.

An item is knocked down at 10,000 euros. The buyer pays this hammer price plus the buyer's fees set out in the conditions of sale, plus the corresponding VAT. The seller receives the 10,000 euros minus the seller's fees. The auction house records as turnover only its two cumulative commissions, on which it pays VAT; the 10,000 euros of hammer price pass through a third-party account before being remitted to the seller.

This mechanism looks simple, but it determines the accuracy of the VAT return, the margin calculation and the compliance of the third-party accounts. This is precisely the sensitive point in the files of voluntary sales operators we support: if the nature of your auction house's operations needs to be secured, our accounting and tax support for auctioneers and auction houses frames the treatment of commissions, third-party funds and the VAT regime suited to your activity.