Value-Added Tax

Value-Added Tax
Value Added Taxes are not found too often in the United states, but many countries over in Europe have them. It is when a consumer of a product must pay taxes for a product for the difference in the amount between the costs of production, and the price paid. It is a take on the value that is added to an item by having it made. For example. The parts of a car are not worth what a car are worth if they are all seperate. There is value added to the car when it is actually assembled. This is what a value-added tax is taxing, the value added when the car is assembled.

The US has sales tax. For the end consumer there is little difference between sales tax and VAT. For someone with a business the difference is that businesses can get any VAT paid on their purchases back from the tax office. When an EU businesses purchase goods in a different EU country the seller usually does not put VAT on the price but instead the buyer pays the VAT to his own tax office.

This calculator can be used for computing a gross or net amount:
VAT and Sales Tax calculator: computing the gross and net amount

For the end consumer though, sales tax in the US, at something like 5%-8%, makes purchases a more affordable proposition than here in the UK, where VAT is currently at 17.5%.

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