Sales tax (US) is charged at final retail. VAT (value-added tax) (most of the world) is charged at every step of production, with businesses reclaiming what they paid. Same destination — consumer pays — via completely different paths.
How each works
Sales tax: invisible until the cash register. Manufacturer sells to wholesaler tax-free. Wholesaler to retailer tax-free. Retailer adds sales tax at checkout — the end consumer pays; the retailer sends the money to the state.
VAT: collected at every step. Manufacturer charges VAT to wholesaler, who charges VAT to retailer, who charges VAT to consumer. At each step, the business remits (VAT collected − VAT paid) to the government. Net effect: consumer pays full VAT, but government gets it piece by piece through the chain.
Why VAT is in advertised prices
Most VAT jurisdictions require advertised prices to be VAT-inclusive. The €100 shelf price is what you pay at checkout. Transparent, simple, consumer-friendly.
US advertised prices are pre-tax. The $19.99 price becomes $21.60 at checkout (with 8% tax). This surprises foreign visitors constantly.
Rates compared
- US combined sales tax — ~5–10% typical, 0% in 4 states.
- EU VAT — 17–27% depending on country. Germany 19%, France 20%, Hungary 27%.
- UK VAT — 20%.
- Canada GST/HST — 5–15% depending on province.
- Japan consumption tax — 10%.
- Australia GST — 10%.
VAT refunds for tourists
Most VAT countries refund tax to non-resident tourists on large purchases. In the EU you need to spend above a threshold (~€175 in France), get receipts stamped at customs when leaving the EU, and submit via a kiosk or mail. Refund arrives 6–12 weeks later, typically 10–15% of your total spending.
For US tax math. For VAT-inclusive prices, no calculation needed — the advertised price is the total.