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Great question! The key difference lies not in whether VAT or sales tax is applied to exports, but in how VAT-based economies structure taxation throughout pro
by firesteelrain 2y ago
Great question!
The key difference lies not in whether VAT or sales tax is applied to exports, but in how VAT-based economies structure taxation throughout production versus how the US does.
The imbalance exists not because VAT is unfair. It exists because the US system does not have a VAT that can be “discounted” and therefore US exporters end up paying more and baking the cost into their products. Consumer ends up paying more on the other EU end.
In VAT systems, businesses prepay taxes at every stage, then receive a full refund on export, removing embedded costs. I think I said that? There is no equivalent mechanism on the US side.
- alexanderchr 2y agoExactly, and in the US no sales tax is prepaid? So there is nothing to return upon export. You seem to be saying that having a tax that is refunded gives a different result than not having the tax at all, which sounds like nonsense to me.
- firesteelrain 2y agoBottom line is US businesses cannot discount or deduct state and local sales taxes on purchases made from their suppliers in the same way that VAT operates. Correct that sales tax is not paid on export.
- alexanderchr 2y agoBut US companies can get sales tax exemptions, no? And these exemptions serve the same purpose as VAT refunds.
- firesteelrain 2y agoNo
- alexanderchr 2y agoYes, for example https://comptroller.texas.gov/taxes/publications/94-124.php https://comptroller.texas.gov/taxes/publications/94-124.php