The arithmetic of a buyer’s premium
Why the number on the board is never the number you pay, how premium and sales tax compound, and how to work backwards to a maximum bid that fits your budget.
The most common first-time-buyer email we get is some version of: the lot was $14,500, why is the invoice $17,000? The answer is not a trick, it is arithmetic, and it is on every lot page — but arithmetic that is on a page and arithmetic you have actually done are different things.
The stack
Three things sit on top of the hammer price, in this order:
- Buyer’s premium, a percentage of the hammer. 10% on vehicles and equipment here, 13% on restaurant and estate, 15% on electronics and storage.
- Sales tax, assessed on hammer PLUS premium. This is the part people miss. In Cook County that is 10.25% of a number that is already bigger than the one on the board.
- A flat per-lot documentation and loadout fee of $79.
That is 21.8% on top of the number you were watching. On a 15% premium category it is closer to 27%.
Working backwards
The useful skill is going the other way: you have a budget, what is your maximum bid? Divide your all-in budget by (1 + premium) × (1 + tax), then subtract the lot fee. For a $20,000 budget on a vehicle: 20,000 ÷ (1.10 × 1.1025) = $16,492, minus $79 of fee headroom, so bid no more than about $16,400.
Every lot page on this site has that calculator built in, with that lot’s actual premium and an exemption toggle if you hold a resale certificate. Use it before you decide your maximum, not after you win.
Resale certificates
If you are buying to resell, a valid Form CRT-61 on file before the invoice is issued removes the sales tax line entirely — on a $14,500 vehicle that is $1,635 back. It has to be on file BEFORE the invoice. We cannot retrospectively unpick a raised invoice, and the number of people who discover this on a Friday afternoon is depressing.
Why premiums exist at all
They are how the house is paid on the buy side, and they let us quote sellers a lower commission than we otherwise could. You can dislike the structure — plenty of people do — but it is universal at auction, and a house advertising "no buyer’s premium" is charging the seller more and pricing it into the reserve. The money comes from the same place either way; the only question is whether it is disclosed.
This is a demonstration site. Bidding Floor, its staff, its lots and every figure quoted in this article are fictional, and nothing here is legal, tax or financial advice.