When is sales tax applied in relation to the buyers premium?

The correct understanding of when sales tax is applied in relation to the buyer's premium is that it is determined before the buyer's premium is added. In auction scenarios, the buyer's premium is an additional fee that the buyer pays to the auctioneer on top of the winning bid amount. By applying sales tax before the buyer's premium, it ensures that the sales tax is calculated solely on the sale price of the item being auctioned, without the additional cost of the premium added to the equation. This method reflects sales tax regulations that typically dictate that sales tax is assessed on the fundamental item price rather than any additional service fees or premiums associated with the auction process.

Understanding this concept is crucial for buyers and auctioneers alike, as it affects the total amount paid by the buyer and the manner in which sales tax compliance is handled in auctions.