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> buy $5000 worth of steel in the US, inclusive of sales tax Sales tax is only charged on retail sales to consumers, there is no sales tax on raw materials for
by dragonwriter 2y ago
> buy $5000 worth of steel in the US, inclusive of sales tax
Sales tax is only charged on retail sales to consumers, there is no sales tax on raw materials for production. So if material costs are the same, and sales tax and VAT rates are the same, the steel will be less in the USA, because there will be no sales tax. In your example, the steel would only be $4k in the US.
You are calling the US tax sales tax but acting like it was applied like a VAT.
- locallost 2y agoExactly. So in reality the US car was produced for less than 5k* worth of steel because the steel price in Europe includes VAT, and in the US it does not. End of story. *This is true if the price of steel is the same in Europe and the US. It might not be, and a country or a region might have a competitive advantage. For instance a country might add tariffs on steel imports and increase the costs of manufacturing.