Sales tax is only collected once, at the final point of purchase by a consumer.
On the other hand, a value-added tax (VAT) is a consumption tax that is levied on a product repeatedly at every point of sale at which value has been added.
Both Sales Tax and Value Added Tax or VAT are consumer taxes, paid whenever one purchases a product or a service.
While the sales tax is directly calculated on the selling price, VAT is actually is based on the profit that is made at each step of the manufacturing and selling process.
Suppliers, manufacturers, distributors, and retailers all collect VAT on taxable sales. Until the sale is made to the final consumer, sales tax is not collected.
Businesses must track and document the VAT on purchases to receive a credit on their tax return.
Sales tax obligations are triggered by economic nexus. VAT collection is required under permanent establishment.
On June 21, 2018, the U. S. Supreme Court ruled 5-4 in South Dakota v. Wayfair that states can require businesses without a physical presence in a state, but with more than 200 transactions or $100,000 in-state sales, to collect and remit sales taxes. Since then, nearly all states imposing a sales and use tax have adopted economic nexus standards for remote sellers.
More than 140 countries throughout the world have a value-added tax. Every other region of the world has lower VAT rates on average than Europe. However, not all European countries have high VAT. Switzerland has an 8 percent VAT rate, which is about as high as the state and local average retail sales tax rate in the United States.
European Union (EU)
Standard rates: at least 15%
Reduced rates: at least 5%
- African countries: 15 percent
- Americas and Oceania: 13 percent
- Asia: 12.3 percent
- Canada (federal only), Taiwan, and Zambia: 5 percent
- Hungary: 27 percent
VAT is not charged on exports of goods to countries outside the European Union.
GST – Goods and services tax
IVA – Value added tax (Mexico)
ALBANIA | ALGERIA | ANDORRA |
|---|---|---|
| · VAT 20% | · VAT 14-19% | · VAT 4.5% |
| · Duties 0-15% | · Duties 0-30% | · Duties 0-17% |
ARUBA | AUSTRALIA | AUSTRIA |
|---|---|---|
| · VAT 2% | · GST 2 10% | · VAT 20% |
| · Duties 0-12% | · Duties 0-17.5% | · Duties 3.5-15% |
BELARUS | BELGIUM | BOTSWANA |
|---|---|---|
| · VAT 20% | · VAT 12, 21% | · VAT 12% |
| · Duties 0-100% | · Duties 3.5-15% | · Duties 37.5% |
BRAZIL | BULGARIA | CANADA |
|---|---|---|
| · VAT 7-18% | · VAT 20% | · GST 5% |
| · Duties 10-35% | · Duties 5-40% | · Duties 0-20% |
CHILE | CHINA | CYPRUS |
|---|---|---|
| · VAT 19% | · VAT 17% | · VAT 19% |
| · Duties 6-16.5% | · Duties 0-35% | · Duties 0-17% |
DENMARK | FINLAND | FRANCE |
|---|---|---|
| · VAT 25% | · VAT 24% | · VAT 20% |
| · Duties 5-14% | · Duties 0-35% | · Duties 5-17% |
GERMANY | GREECE | HUNGARY |
|---|---|---|
| · VAT 19% | · VAT 24% | · VAT 27% |
| · Duties 5-17% | · Duties 0-17% | · Duties 0-60% |
ICELAND | INDIA | INDONESIA |
|---|---|---|
| · VAT 24% | · VAT 1-5%, 15% | · VAT 10% |
| · Duties 0-30% | · Duties 0-30% | · Duties 0-15% |
IRELAND | ISRAEL | ITALY |
|---|---|---|
| · VAT 23% | · VAT 17% | · VAT 22% |
| · Duties 0-48.5% | · Duties 0.8-80% | · Duties 0-17% |
JAPAN | MALAYSIA | MEXICO |
|---|---|---|
| · VAT 8% | · VAT 5-10% | · IVA 16% |
| · C. Tax 5% | · Duties 6.1% | · Duties 0-140.4% |
MOROCCO | NETHERLANDS | NORWAY |
|---|---|---|
| · VAT 20% | · VAT 21% | · VAT 25% |
| · Duties 2.5-200% | · Duties 5-20% | · Duties 0-8% |
PAKISTAN | POLAND | PORTUGAL |
|---|---|---|
| · GST 13-17% | · VAT 5-23% | · VAT 23% |
| · Duties 0-30% | · Duties 0-15% | · Duties 0-50% |
ROMANIA | RUSSIA | SINGAPORE |
|---|---|---|
| · VAT 19% | · VAT 18% | · GST 7% |
| · Duties 0-50% | · Duties 5-20% | · Duties 0-1% |
S. KOREA | SPAIN | SWEDEN |
|---|---|---|
| · VAT 10% | · VAT 21% | · VAT 25% |
| · Duties 7.9% | · Duties 0-20% | · Duties 2-14% |
SWITZERLAND | TURKEY | U.K |
|---|---|---|
| · VAT 8% | · VAT 18% | · VAT 20% |
| · Duties 3.2% | · Duties 0-20% | · Duties 0-15% |