Trust Accounting, Settlement, and Recordkeeping
This domain tests how auctioneers hold other people's money and document the sale. Bidder deposits, buyer payments, and sale proceeds held for sellers are fiduciary funds. They should go into a separate trust or escrow account, not the auctioneer's operating account, and must not be commingled with business funds or used for expenses before settlement.
Accounting and settlement rules
- Open and use a dedicated trust account; reconcile deposits, withdrawals, and balances.
- Do not disburse seller proceeds until the buyer's funds have cleared and the sale is final under the contract.
- At settlement, provide the seller with a written statement showing gross hammer price, buyer's premium if applicable, commission, authorized expenses, sales tax treatment, and net remittance.
- Collect and remit Maine sales tax on taxable tangible personal property unless an exemption or resale certificate applies; real estate is generally not subject to sales tax.
- Keep consignment agreements, bidder registrations, bid logs, buyer invoices, settlement statements, bank records, and tax records for the period required by Board rule and tax law.
Worked example
A hammer price is $10,000, with a 10% buyer's premium, a 15% commission on the hammer, and $200 in authorized expenses. The buyer pays $11,000. The seller's net is $10,000 minus $1,500 commission minus $200 expenses, or $8,300. The auctioneer retains the $1,500 commission, $1,000 premium, and $200 expense reimbursement, subject to the contract and any sales tax collected separately. The $2,000 deposit should have been held in trust until closing.
Traps
Do not use trust funds to cover payroll or overhead. Do not pay a seller before the buyer's check clears. Do not rely on a verbal settlement. Do not discard bidder or settlement records after the auction.