What is a buyer's premium in auction terms?

A buyer's premium refers to an additional fee that is calculated as a percentage of the winning bid, charged to the buyer at the conclusion of an auction. This fee is typically added to the final bid amount to determine the total price that the buyer must pay for the item. For instance, if an item receives a winning bid of $100 and the buyer's premium is set at 10%, the total cost for the buyer would be $110. This practice is common in auctions and serves to provide a revenue stream for the auction house or auctioneer, covering costs associated with conducting the auction and sometimes contributing to their commission.

The other choices do not accurately describe the concept of a buyer's premium. A discount on the total sale price does not align with the nature of buyer's premiums, which are always an additional charge rather than a reduction. A tax on auction proceeds typically refers to government-imposed taxes that may apply to the sale but is not the same as a buyer's premium. Lastly, a fee paid to the auctioneer prior to bidding does not encapsulate the buyer's premium, which is only assessed after the bidding concludes and the buyer has secured an item.