If you’ve shopped or done business across different countries, you’ve probably noticed that consumption taxes go by different names: VAT, GST and sales tax. While they serve a similar purpose, they work in meaningfully different ways.
Sales Tax
Sales tax, common in the United States, is typically charged only once, at the final point of sale to the end consumer. Rates vary by state and even by city or county, which is why the same product can cost a different final price depending on where you buy it.
VAT (Value Added Tax)
VAT, used across the UK, the EU and many other countries, is collected at every stage of production and distribution, with businesses able to reclaim VAT paid on their own purchases. The end consumer ultimately bears the cost, but the collection happens incrementally throughout the supply chain.
GST (Goods and Services Tax)
GST, used in countries like Australia, Canada, New Zealand and Singapore, works similarly to VAT in that it is applied at multiple stages, but the specific rules, rates and exemptions differ by country.
Why It Matters for You
Whether you’re pricing a product, budgeting for a purchase, or invoicing a client internationally, knowing which consumption tax applies and at what rate helps you avoid pricing mistakes. Our calculator tools include VAT, GST and sales tax calculators for multiple countries to make this quicker.
This article is for general informational purposes only and is not tax or financial advice.