The hammer falls at $8,000, the buyer's premium adds 20% ($1,600), the buyer pays $9,600, and your ledger shows $9,600 in revenue if you are typical — and 4× the actual business if the hammer was not yours.
Auction house bookkeeping is consignment bookkeeping with a theater. The hammer price belongs to the consignor; the buyer's premium belongs to you; sales tax and card fees belong to someone else. Booking the gross as your revenue is the fastest way to create an IRS notice and a consignor lawsuit.
The Split: Hammer, Premium, Tax, Fees
For a lot that hammers at $8,000 with a 20% buyer's premium and 7% sales tax where applicable:
- Hammer price $8,000: Proceeds you hold for the consignor. It is a liability, not your revenue.
Dr Cash $9,600/Cr Consignment Liability — Consignor $8,000/Cr Revenue — Buyer's Premium $1,600/Cr Sales Tax Payable $0–$560depending on taxability. The buyer's premium is your contracted compensation from the buyer. - Seller's commission: If your contract charges the consignor a 15% seller's commission, that commission is not a reduction of the liability — it is a separate revenue you earn from the consignor:
Dr Consignment Liability $1,200/Cr Revenue — Seller's Commission $1,200.
Net due to the consignor after a $1,200 seller's commission on an $8,000 hammer: $6,800, plus any reimbursable charges.
The Account-Sales Settlement
After the sale, the account-sales report lists each lot, hammer, premium, tax, fees, and net due. The consignor settlement is Dr Consignment Liability $6,800 / Cr Cash $6,800. Until you pay, the liability ages on your balance sheet. An aged consignment liability is a question, not a float.
1099 and Sales Tax
- 1099-K: The processor reports gross buyer payments ($9,600) to you as the merchant. Keep the gross-to-net reconciliation so the CP2000 that matches $9,600 to your $1,600 buyer's premium revenue is answered.
- 1099 to the consignor: If you pay a non-corporate consignor $600+ for their goods, you may owe a 1099-MISC/NEC for gross proceeds. Collect the W-9 at intake, not at 1099 season.
- Sales tax: You collect as the marketplace or auctioneer in most states; the tax is a liability, not revenue. Remit on the filing cadence the state requires.
Keep Your Finances Organized From Day One
An auction house is a consignment liability business with a premium revenue. Book the hammer as a liability until the account-sales, and the buyer's premium becomes the business.
Beancount.io keeps each lot as a liability account with premium and commission as separate revenue, version-controlled and reconcilable to the processor and to the 1099. Get started for free and make the hammer that excites the room also balance the books.