Suppliers, manufacturers, distributors, and retailers all collect VAT on taxable sales. VAT, on the other hand, is collected by all sellers in each stage of the supply chain. Until the sale is made to the final consumer, sales tax is not collected, and tax jurisdictions do not receive tax revenue. When buying supplies or materials that will be resold, businesses can issue resale certificates to sellers and are not liable for sales tax. In other words, end consumers pay sales tax when they purchase goods or services. Sales tax is collected by the retailer when the final sale in the supply chain is reached. To explain further, let’s outline the similarities and differences between these two types of indirect tax. Sales tax and VAT are a common cause of confusion within the corporate tax community. What is the difference between sales tax and value-added tax (VAT)? Both sales tax and VAT are types of indirect tax – a tax collected by the seller who charges the buyer at the time of purchase and then pays or remits the tax to the government on behalf of the buyer.
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