Auction buyer's premium and all-in cost calculator

Why the hammer price is not what you pay

On Canadian online auctions -- HiBid-hosted sales, ViewBid, and the local liquidation and estate auctions that run their own bidding sites -- the winning bid is only the starting point. The invoice adds a buyer's premium, often a lot or handling fee, sales tax on all of it, and sometimes a surcharge for paying by credit card. Then you still have to get the item home. The calculator above adds those lines in the same order an auction invoice does and gives you the all-in cost, the percentage you paid over the hammer, and, if you enter a budget, the highest bid that still fits inside it. The results are estimates only; the auction's own invoice is the final word.

The site does not store any auction house's premium or fees. Every auction sets its own, and they change between sales from the same company. Read the terms for the specific sale (usually a "Terms and Conditions" or "Bidding Terms" link on the auction page) and type in what they say. The only rates this calculator supplies are the federal and provincial sales tax rates, taken from government sources.

How the premium compounds with tax

A buyer's premium is a percentage of the hammer price that goes to the auction house. Sales tax is then charged on the hammer plus the premium plus any lot fee. A card surcharge, if there is one, is charged on everything above including the tax. Each layer multiplies the one before it, so the costs compound rather than simply add.

Worked example: an Ontario pickup auction, a $200.00 hammer price, a premium of 15 percent, a $5.00 lot fee and a card surcharge of 3 percent.

The $200.00 bid cost $273.52, almost 37 percent more than the hammer. Paying by e-transfer or debit instead of a surcharged card brings it to $265.55. The same lot picked up in British Columbia, with GST of 5% and PST of 7%, works out to $271.10 with the card surcharge; in Alberta, with GST only, it is $254.15. The premium is the same in all three; the tax is what moves.

Why sales tax is charged on the premium too

In Canada the buyer's premium is treated as part of the price you pay for the goods, not as a separate service you could decline. GST and HST apply to the whole consideration for the sale, so the premium is taxed along with the hammer. Provincial sales taxes in British Columbia, Saskatchewan and Manitoba generally treat it the same way, and so does Quebec's QST. Lot, handling and "internet bidding" fees charged on the same invoice are normally taxed for the same reason, which is why the calculator includes the lot fee in the taxable amount. If an invoice shows tax on the hammer only, ask the auction why before you assume you have found a bargain; it may be an error that gets corrected later.

Where provinces differ

Which tax applies depends on where the goods are supplied. For a pickup auction that is the province you collect in. If the auction ships to you, the tax usually follows the delivery address instead, so an Alberta buyer having an Ontario lot shipped home will often be charged GST only. Check the invoice: it shows what the auction actually charged. Choose the auction location in the calculator to match.

In Quebec the QST is calculated on the price before GST, not on top of it, so the two rates simply add. The calculator does the same. HST is a single combined tax, so HST provinces show one line.

Buying for resale: what tax you can and cannot avoid

If you buy at auction to resell, two different rules apply and they are often confused.

• GST and HST are not avoided, they are recovered. A GST/HST registrant pays the tax on the invoice like anyone else and then claims it back as an input tax credit on the next return. The cash still leaves your account on purchase day and comes back weeks or months later, so it belongs in your cash planning even though it is not a final cost. If you are not registered (for example, a small supplier under the registration threshold who has not opted in), the GST or HST is a real cost.
• PST can sometimes be avoided at purchase. In British Columbia, Saskatchewan and Manitoba, a business registered to collect the provincial tax may be able to buy goods for resale without paying PST or RST by giving the seller its provincial registration or vendor licence number. Each province has its own rules on what counts as resale, what the seller must record, and whether the exemption covers fees. Auction houses also have their own policies: many require the number on your account before the sale closes and will not refund tax after the invoice is paid. Check the provincial rule and the auction's terms before you count on it.
• Quebec works like GST. QST registrants pay the QST and claim input tax refunds rather than buying exempt.

The "buying tax-exempt for resale" box in the calculator removes all sales tax from the result. Use it only to see a PST-exempt purchase in a province where that applies to you, and remember that in practice you will usually still pay the GST portion and recover it later.

Lot fees, handling fees and card surcharges

Read the terms for each of these before the auction starts, not after you win:

• Lot or handling fees are flat amounts per lot. On a cheap lot they matter more than the premium: a $5.00 fee on a $10.00 hammer adds half again before tax.
• Online or internet premiums are a second percentage some sales add for bidding through a platform rather than in the room. Add it to the buyer's premium field so both are taxed and compounded correctly.
• Card surcharges apply to the full invoice including tax. If the auction accepts e-transfer, debit or cash at pickup without a surcharge, that is the cheapest way to pay.
• Storage or late pickup fees start if you miss the pickup window. They are not in the calculator; avoid them by booking your pickup slot when you win.

The max-bid formula

If you know the most you are willing to spend in total, the calculator works backward to the highest hammer price that fits. The formula is:

max hammer = (budget - fixed costs) / ((1 + premium) x (1 + tax) x (1 + card surcharge))

Fixed costs are the lot fee (with the tax and card surcharge it attracts) plus shipping or pickup cost. For the Ontario example with a $300.00 budget: the multiplier is 1.15 x 1.13 x 1.03 = 1.3385 (the 1.13 is one plus 13%); the fixed cost is $5.00 x 1.13 x 1.03 = $5.82; so the maximum hammer is ($300.00 - $5.82) / 1.3385 = $219.79. Bid more than that and the invoice goes over $300.00. Without the card surcharge the same budget allows a $226.51 hammer.

A quick check you can do in your head at a premium of 15 percent in Ontario with no surcharge: every $100 of hammer costs about $130 on the invoice. Divide your budget by 1.3 and you are close to your ceiling.

Use the max bid as your proxy or maximum bid and do not raise it during the closing minutes. Soft-close auctions extend the timer each time someone bids, which is exactly when people overpay.

Pickup versus shipping

Most liquidation and local auctions are pickup only, within a set window at a warehouse. Put your real pickup cost in the shipping field: fuel and the time to drive there and back, and a trailer or helper if the lot is large. A $20.00 lot an hour away can cost more to collect than to buy.

Where an auction offers shipping, it is usually quoted after you win, by the auction or a third-party shipper. Get the quote basis before you bid if you can, especially for heavy or bulky lots. Shipping charges are often taxable too; if your invoice taxes the shipping line, enter the shipping cost with its tax included.

Inspect at preview if the auction offers one. Many liquidation lots are sold as-is with no returns, and photos do not show missing parts, a cracked case or a box that has already been opened and taped shut.

Frequently asked questions

Where do I find the buyer's premium for an auction?

In the terms and conditions for that specific sale, usually linked from the auction page and repeated on the lot page. It can differ between sales run by the same auction house, and some add a separate online bidding premium. This site does not keep a list of auction premiums.

Is sales tax really charged on the buyer's premium?

Yes, in general. The premium is part of the price of the goods, so GST, HST and the provincial taxes apply to it along with the hammer price. Lot and handling fees on the same invoice are normally taxed too.

Can I get my GST or HST back on auction purchases?

If you are a GST/HST registrant buying for your business, you can usually claim it as an input tax credit on your return. You still pay it on the invoice. If you are not registered, it is a cost.

Why does the max bid come out so much lower than my budget?

Because the premium, tax and any card surcharge multiply each other. At a premium of 15 percent in an HST province with a surcharge of 3 percent, more than a quarter of your budget goes to things other than the hammer.

Does the calculator know which province my auction is in?

No. Choose the province where you will pick up the goods, or where they will be delivered if the auction ships to you. The invoice shows which tax was actually charged.