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State sales taxes can't really be compared to a VAT. A VAT gets collected at each step along the way from raw materials to final product; sales tax is only collected at final sale.



Collecting a VAT is probably more expensive to society than collecting a sales tax, as every business has to keep track of it instead of just the ones that do the final sale. The reason you need VAT is in practice, if sales taxes are higher than around 10%, the number of businesses/people who start to find ways to not pay it starts getting significant. With a VAT each business in effect enforces the tax on the business it buys from or has to pay the tax themselves. Raising a sales tax higher than 10% can net you less tax revenue(highest sales tax in the US is 10.25%, highest VAT 50% (Bhutan) with 25% common in Europe).

I imagine this effect is getting less pronounced as cash is used less and less in transactions.


Conceptually, yes. Most mid and large manufacturers are using gov-sponsored programs that allow deferral of duties and VAT/other taxes until final sale. Source; I work in global trade.




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