10.2 Seller Payment, Settlement Accounting, and Record Retention

10.2 Seller Payment, Settlement Accounting, and Record Retention

Tested deadline: Pay the owner or consignor within 15 banking days after the auction unless another statute or the written contract provides otherwise.

Payment Schedule

Rule 67.70 supplies the 15-banking-day default. Count banking days, not generic business days or calendar days. The contract can establish another lawful schedule, and a specialized statute or court order can control a particular sale.

Do not use the obsolete claim that Texas always allows 30 calendar days to disburse net proceeds. A contract that is silent leaves the Rule 67.70 default.

The deadline does not authorize paying with uncleared or disputed money. Address clearance and chargeback risk in the written contract and manage it consistently with the rule. If legal process freezes money or a bona fide ownership dispute arises, document the reason, segregate the funds, and seek qualified direction rather than silently withholding everything.

Settlement Statement

A useful seller statement identifies:

• each lot and description;
• buyer or bidder reference;
• hammer price;
• void, return, or default;
• gross proceeds attributable to the seller;
• seller commission;
• buyer's premium treatment;
• advertising, labor, hauling, or other authorized expenses;
• taxes or lien payoffs when applicable;
• prior advances;
• net amount due; and
• payment date and method.

Only deduct an expense supported by the agreement or a later valid authorization. If the contract permits actual digital-advertising expense and the vendor refunds $500, the settlement should reflect the net cost rather than hide the credit.

Worked Settlement

Assume seller hammer proceeds of $50,000. The contract provides a 12% seller commission and authorizes $1,200 advertising and $800 hauling.

• commission: $6,000;
• authorized expenses: $2,000;
• net seller amount: $42,000.

A separately charged buyer's premium belongs where the seller contract says it belongs. Sales tax collected from buyers is a tax liability, not seller proceeds. The bank and ledgers should show those categories separately.

Two-Year Auction Records

Rule 67.70 requires auction records to be kept for at least two years. A complete file commonly includes:

• written service contract;
• signed itemized inventory and amendments;
• advertising and opening announcements;
• bidder-registration terms and acceptance;
• clerk sheets and platform bid logs;
• invoices, receipts, refunds, and payment records;
• trust-account deposits and disbursements;
• settlement statement and seller payment;
• title, lien, permit, or regulated-property documents; and
• complaint or default correspondence.

Minimum Rule 67.70 Record Fields

The rule's required transaction record is more specific than a folder labeled with the sale date. It must identify the owners' names and addresses, auction date, auctioneer and clerk, gross proceeds, and the location and account number of the trust or escrow account. It must also itemize expenses charged to the consignor, list all purchasers, and describe each item with its selling price.

Rule 67.70 separately requires retention of the documents relating to the auction, including settlement sheets, written contracts, advertising, and clerk sheets. Those documents should reconcile to the transaction record. For example, total lot-level selling prices should support gross proceeds, the expense schedule should match authorized deductions, and the trust-account references should trace deposits and seller payments. A two-year archive that lacks those required fields is still deficient.

Keep records in a form that can be produced and read. A cloud account with expired access is not an effective archive.

Four-Year Tax Records

Tax Code § 111.0041 generally requires tax records for at least four years. That includes invoices, returns, certificates, and sourcing evidence. When one record supports both auction compliance and tax, keep it for the longer period.

Other laws can require longer retention. Federal firearm licensees, TABC permittees, employers, and real-estate professionals follow their own schedules. Litigation holds override routine destruction when a dispute is pending or reasonably anticipated.

Reconciliation and Review

Before paying the seller:

1. close bidding and clerking corrections;
2. reconcile invoices to collected receipts;
3. confirm tax and exemption treatment;
4. identify defaults and approved refunds;
5. compare trust balance to client liabilities;
6. apply only authorized deductions;
7. issue the itemized settlement and payment; and
8. preserve proof of delivery.

Have someone other than the preparer review large settlements when staffing permits. Confirm new wire instructions independently.

Common Errors

• Counting 15 calendar days instead of banking days.
• Treating the 72-hour deposit rule as the seller-payment deadline.
• Paying from an operating account after leaving proceeds there.
• Deducting unapproved expenses.
• Destroying all records at two years despite the four-year tax rule.
• Recording only a net check without lot-level support.

Memory Rule

72 hours into trust; 15 banking days to the seller unless law or contract says otherwise; two years for auction records; four years for tax records.

Correcting a Settlement

If an error is found after payment, issue a revised statement that preserves the original, identifies the changed line, explains the reason, and shows the additional payment or refund. Never silently overwrite the final ledger. A versioned correction protects both parties and keeps the bank, buyer, seller, and tax records consistent.