How to Set Buyer's Premium: Tiered vs Flat-Rate Strategy
Operator-side guide to setting buyer's premium — market benchmarks, tiered vs flat-rate tradeoffs, regional norms, and worked numerical examples.
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Set buyer's premium at the rate the market in your category and region will tolerate, structured as a tiered scale that protects margin on small lots and stays competitive on headline pieces. Boutique houses today sit at 18–22% flat; mid-market houses run 22–26% (often tiered); major international houses run 26–28% on the first band, declining marginally to 15–20% above $5M. Premium changes should be announced publicly with at least 30 days' notice and applied uniformly through your conditions of sale.
Buyer's premium is the single most important number on your P&L. Seller's commission has been collapsing toward zero for a decade — the major houses routinely waive it on consignments above $1M and increasingly share buyer's premium with the consignor instead. That makes the buy-side the only side that reliably pays. Getting the structure wrong by even a percentage point compounds across hundreds of lots a year and can turn a profitable category into a money-loser. This is an operator's guide to setting it correctly.
What buyer's premium is, briefly
Buyer's premium is a percentage surcharge added to the hammer price and collected from the winning bidder. It is calculated on the hammer alone, then sales tax or VAT is layered on top of the combined hammer-plus-premium. It is the auctioneer's revenue from the buy-side and is disclosed in the conditions of sale before bidding opens.
For a deeper definitional treatment see our glossary entries on buyer's premium, commission rate, and premium vs. commission. This article is operational — what rate to set, how to structure tiers, and how the decision interacts with the rest of your fee stack.
Market benchmarks in 2026
The single most useful question to answer before setting your own rate is: where does the market sit today?
Note these are market norms, not floors. A boutique can set 22% if its category supports it; a major house can run 28% if its competitive position allows. The numbers move year on year — premiums have climbed steadily from around 10% in the 1980s to today's levels. Any rate-setting exercise should reference the most recent published rate cards from the houses you compete against.
Tiered vs. flat: the math
The flat-rate question is settled in most categories above $250k average lot value: tiered wins. Below that price point, flat is simpler and the margin difference is small. The decision matters most when you have a long tail of small lots and a few headline pieces.
Worked example: a $50,000 hammer
Take a single $50,000 hammer at three different premium structures and watch the buyer-side revenue.
Structure
Calculation
Premium revenue
Flat 26%
$50,000 × 26%
$13,000
Flat 22%
$50,000 × 22%
$11,000
Tiered 26% / 22% / 20% (breakpoints at $20k and $1M)
$20,000 × 26% + $30,000 × 22%
$11,800
At $50k the flat 26% structure earns the house $1,200 more than the tiered structure with the same headline rate. That seems like a win for flat — but extend the example to a $5M hammer and the picture flips entirely.
Worked example: a $5,000,000 hammer
Structure
Calculation
Premium revenue
Flat 26%
$5,000,000 × 26%
$1,300,000
Flat 22%
$5,000,000 × 22%
$1,100,000
Tiered 26% / 22% / 20% (breakpoints at $20k and $1M)
$20,000 × 26% + $980,000 × 22% + $4,000,000 × 20%
$1,026,400
Flat 26% earns $273,600 more on this single lot than the tiered structure. That looks like a clear win for flat. But the flat-26% house won't get the consignment in the first place — a sophisticated consignor whose alternative is a tiered-22% house knows the buyer-pool math and will steer their property to the venue where bidders pay less premium and therefore bid higher hammer.
This is the trade-off in one sentence: flat protects margin on small lots; tiered wins consignments on big ones. Mid-market houses solve this by using a tiered structure with a high first-band rate (so smaller lots still pay 24–26%) and a moderate ceiling cut (only 20–22% on the top band), capturing both effects.
A workable mid-market structure
A defensible 2026 structure for a mid-market house, calculated marginally per band:
26% on the first $25,000 of hammer
22% on the portion from $25,000 to $1,000,000
20% on the portion above $1,000,000
On a $50,000 hammer, this earns 26% × $25,000 + 22% × $25,000 = $6,500 + $5,500 = $12,000 (effective rate 24%). On a $5M hammer, it earns 26% × $25,000 + 22% × $975,000 + 20% × $4,000,000 = $6,500 + $214,500 + $800,000 = $1,021,000 (effective rate 20.4%). The high first band protects margin where you need it; the moderate ceiling lets you compete for marquee consignments.
Regional considerations
Premium rates and the rules around them vary materially by jurisdiction.
United States
Commercially set, no statutory cap.
Sales tax applies to both hammer and premium in most states. Bidders in California, New York, Florida, and Texas factor this into their max bid.
Disclosure required in conditions of sale; UCC §2-328 governs the auction sale itself but not the premium specifically.
"Absolute" auctions (no reserve) are legally distinct and must be advertised as such — premium still applies.
United Kingdom
VAT at 20% applies to the premium, always. The hammer treatment depends on the lot's VAT status (margin scheme for second-hand goods, standard rate for new).
The Sale of Goods Act 1979 governs auctions; reserve and premium must be disclosed in conditions of sale.
"All-in" rate quoting (premium-inclusive of VAT) is permitted in retail-facing communications but the conditions of sale must show the breakdown.
European Union
VAT treatment varies by member state but generally applies to the premium. Margin scheme available on second-hand goods.
Droit de suite (artist resale royalty) applies to qualifying contemporary art and is sometimes funded inside the premium quotation, sometimes layered on top — disclose clearly which.
The 5th Anti-Money Laundering Directive (5AMLD) requires KYC on transactions ≥ €10,000, which is independent of premium but affects bidder onboarding.
Hong Kong / Singapore
No VAT/sales tax; premiums are quoted gross.
Premium rates at the international houses (Christie's HK, Sotheby's HK, Phillips HK) align with their global structures, typically 26–27% first band.
Local boutique houses run 18–22% flat; the price-sensitive mainland Chinese buyer pool is meaningful and rate-aware.
Australia
GST at 10% applies to the premium for GST-registered houses. Commercial premium rates run 22–25%.
Disclosure under the ACCC's auction guidelines.
How buyer's premium interacts with seller's commission
Setting buyer's premium in isolation is a mistake. The two fee streams together determine your margin per lot and your competitiveness for consignments.
A useful frame: think of buyer's premium and seller's commission as a single pool of revenue split across two parties. Lower seller's commission means you keep more of the hammer for yourself — but only if the buyer's premium covers the cost of running the sale. Today's market reality is that:
Above $1M hammer, seller's commission trends to zero for any consignment with competition. Headline consignments get a "0% commission, plus 2% of buyer's premium" deal with the major houses. Your only revenue is buyer's premium minus that share-back.
Below $25k hammer, both sides pay. Sellers absorb a 15–20% commission, buyers a 24–26% premium. Effective take rate on these lots is 35–40% combined.
Charity sales waive both — buyer's premium often 0%, seller's commission 0%, with the house earning a fixed event fee instead.
Run the unit economics on a typical sale catalogue. If your average lot is $8,000 and you're earning 22% premium + 18% commission, you're at ~40% effective take. If your category drifts upmarket and average lot rises to $40,000 with consignors negotiating commission to 5%, you're at ~25% effective take. You may need a higher buyer's premium tier to compensate.
Should you compete on buyer's premium?
Mostly, no. Buyer's premium is a price-list item, not a competitive lever. Competing on it has three problems:
It signals the wrong thing. A house with a low premium tells specialists and consignors that it cannot command the buyer-pool that a higher-premium house can. The signal is anti-prestige.
It compresses margin permanently. Premium reductions are very hard to walk back without causing a buyer revolt. A "limited time" reduction always becomes the new floor.
The bidder is not actually rate-shopping. Bidders shop categories and consignors, not premiums. They factor premium into their max bid (rationally) and bid less in absolute terms at higher-premium venues, which means the consignor — not the house — bears the premium cost in lower hammers. So lowering your premium doesn't bring more bidders, it just transfers margin from you to consignors who weren't asking for it.
The real competitive lever for buyer-side experience is the platform and bidding tools, not the premium percentage. Faster registration, better mobile UX, lower latency on the simulcast feed, more reliable customer support — these move bid behaviour. Auction Rabbit's <450ms simulcast latency and frictionless bidder onboarding are competitive levers; premium is not.
Communicating premium changes
When you do change the premium — and most houses do every 3–5 years — communication is operationally critical. Bidders feel premium changes more than any other fee shift because it's the line item that's rendered on every invoice they receive.
Best-practice communication sequence
Decide the new structure with at least 60 days lead time before effective date.
Email all registered bidders at least 45 days before the change, with a clear explanation of the new structure, an example calculation, and the effective date (usually the start of a sale season).
Post the new conditions of sale on the website at least 30 days before the change.
Brief your front-line team — client services, registration, and post-sale settlement need to handle questions consistently.
Update every catalogue, registration page, online platform listing, and rate card simultaneously when the change goes live.
Avoid changing premium mid-sale-season. A change that hits some buyers and not others (registrations from before vs. after the cut-over) creates a reputation for inconsistency that lasts years.
How-to steps
How to set buyer's premium for your auction house
Step 01
Map the competitive set
Pull the published rate cards of the 5–10 houses you compete against in your category and region. Note both headline rate and tier breakpoints. This is the floor and ceiling of your decision space.
Step 02
Model your unit economics
Build a spreadsheet of last year's catalogue: every lot's hammer, current premium, current commission. Re-run with proposed structures. Pay attention to lots clustered around tier breakpoints — that's where structure changes bite.
Step 03
Decide tiered vs. flat
If your average lot is below $25,000 and your top lot rarely exceeds $250k, flat is fine. If you handle six- and seven-figure lots, tiered is essential to compete for those consignments.
Step 04
Set the first-band rate to defend small-lot margin
The first band should sit at or above the market median for your tier — 26% for mid-market, 28% for top-tier. This is where most of your lots actually clear, so this rate drives the headline P&L.
Step 05
Set the upper-band rate to win headline consignments
The upper band is the rate big consignors care about because their lot pays the marginal rate on most of its value. Set it where competitive offers will land — 18–22% above $1M is the realistic range.
Step 06
Layer on regional tax treatment
Confirm how VAT (UK/EU), GST (AU), or sales tax (US states) interacts with premium. Update your conditions of sale to disclose treatment line-by-line. Mistakes here trigger refund obligations and bidder complaints.
Step 07
Configure your auction software
Tier logic must apply marginally per band. Confirm category overrides (you may run a different rate for charity events or wine sales). Test with edge-case hammers — exactly at the breakpoint, just above and just below.
Step 08
Communicate the change
If revising existing premium, give 30–45 days notice to all registered bidders. Email, conditions-of-sale update, internal team brief. Avoid mid-season changes.
Step 09
Monitor downstream metrics for two seasons
Track average hammer per lot, sell-through rate, consignor satisfaction (re-consignment rate), and bidder churn. A premium change without these metrics moving meaningfully is a sign the change wasn't material; a metric collapsing is a signal to revisit.
Common questions
Boutique and regional houses run 18–22% flat. Mid-market houses run 22–26%, often tiered. Major international houses run 26–28% on the first band of hammer, declining marginally to 15–20% above $5M. Charity auctions often waive premium entirely. Online-only marketplaces add a 3–5% platform fee on top of the consigning house's premium.
Flat is simpler and acceptable if your average lot is below $25,000 and you rarely handle six-figure lots. Tiered is essential above that scale because headline consignors care about the marginal rate on the top band of their lot's value, and a flat-26% rate pushes those consignments to a tiered-22% competitor. Most mid-market and all major houses are tiered.
Give at least 30–45 days notice via email and conditions-of-sale update. Frame the change in line with market norms (referencing competitor rate cards if they have moved). Avoid combining a premium increase with other fee changes — make it the only change in the sale. Bidders rationally adjust their max bids, so the cost falls partly on consignors via lower hammers; communicate to consignors that this is the dynamic.
No. Premium is calculated on the hammer; sales tax or VAT is then applied to the combined hammer-plus-premium. In the UK, VAT applies to premium at 20%; in most US states, sales tax applies to both hammer and premium; in Hong Kong, Singapore, and the UAE there is no transactional tax on the auction. Disclose your jurisdiction's treatment clearly in the conditions of sale.
Almost never. Bidders factor premium into their max bid, so lowering it raises hammers proportionally — you transfer margin to consignors, not bidders. Premium is a price-list item, not a competitive lever. The competitive levers that actually move bid behaviour are platform UX, simulcast latency, mobile bidding quality, and customer service responsiveness.
They are the two halves of your gross take rate per lot. Above $1M, seller's commission trends to zero on competitive consignments — your only revenue is buyer's premium, sometimes minus a share-back to the consignor. Below $25k, both sides pay and effective take is 35–40%. Run the per-lot math; a healthy structure has buyer's premium covering at least 60–70% of your gross revenue at typical lot sizes.