3 ms·
The comment to which you replied said you can deduct sales taxes paid against income taxes. I think this means that paying $10 would reduce your income tax by
by rahimnathwani 6y ago
The comment to which you replied said you can deduct sales taxes paid against income taxes.
I think this means that paying $10 would reduce your income tax by $3 (if income tax is 30%). This is different from getting a 100% credit ($10) which is what you'd get with a VAT system.
- gamblor956 6y agoNo, you don't get a 100% credit for VAT against your income taxes; the credit only exists as an offset against your VAT payable liability. If for some reason you can't offset your input VAT, then you get the same deduction against your income as you would for a sales tax, because it's part of your expenses. BUT NOTE: that if the acquired good is depreciated, then in both cases (VAT or sales tax) the tax-related deduction is spread over several years rather than all at once.
- rahimnathwani 6y agoSorry, I didn't mean to imply that you get a 100% credit against income taxes, only that you get a 100% credit. (The comment to which I replied seemed to think that GP's point - that sales tax can be deducted from income for income tax purposes - was equivalent to a credit for input VAT, which it's not.)