How VAT Works (EU & UK)
VAT is a multi-stage consumption tax collected at every step of the supply chain. Businesses charge VAT on their sales (output tax) and reclaim the VAT they paid on purchases (input tax), remitting only the net difference to the tax authority. The end consumer bears the full cost because they cannot reclaim the tax. The basic formula is VAT = Net Price × Rate. Brutto / Netto (Germany), TTC / HT (France), and Inc. VAT / Ex. VAT (UK) all express the same concept.
How GST/HST Works (Canada)
Canada's federal Goods and Services Tax (5% GST) applies nationwide and is functionally identical to VAT — a multi-stage tax with full input tax credits. Five provinces (Ontario, New Brunswick, Nova Scotia, Newfoundland & Labrador, and Prince Edward Island) harmonise their provincial sales tax into a single HST. Nova Scotia is 14%, while New Brunswick, Newfoundland & Labrador, and Prince Edward Island are 15%. British Columbia, Saskatchewan, Manitoba, and Quebec charge GST plus a separate provincial sales tax (PST or QST), requiring dual remittance.
How US Sales Tax Works
Unlike VAT, US sales tax is applied only at the final point of sale to the end consumer. Businesses generally do not reclaim sales tax on their purchases, and there is no federal sales tax — rates are set at the state, county, and city levels, creating over 10,000 unique tax jurisdictions. This is why US tax compliance requires ZIP-code level lookup tools, while EU and UK compliance only needs the country rate.