Unless you are arguing for a federal sales tax, which OK sure federal tax is great, except it doesn't pay for local services. Also, now you also have to argue about the regressive nature of sales tax in general.
- VAT is applied to business to business transactions. Sales taxes are just applied to consumer transactions.
- Sales taxes are applied to total amount of sales. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed.
- Since value is not generally created in a second hand sale. (Unless the item is restored) VATs are usually not applied to used/second hand items. Sales taxes are.
This is not true. The final user pays the sales tax. So if a company buys a bolt and uses it to make its product: no tax. If they buy bolts and build shelves to hold inventory: pay the tax.
At least for Germany even that is not true. As a business all VAT payments are refunded (Vorsteuerabzug).
However your comment is about VAT and the end result is also the same: the Vorsteuerabzug only applies to goods sold on to a subsequent buyer.
So the business pays VAT on everything it buys (that is subject to tax), but when it sells something it collects VAT on the sale. It can then deduct VAT paid on the inputs to that sale (i.e. the bolts in my example). This is central to the concept of VAT thus is basically how it works in every country with a VAT/GST.
This is explained in the law itself: https://www.gesetze-im-internet.de/ustg_1980/__15.html
I'm in Denmark, where the rate is 25%.
I pay 25% on something I order from a Danish online shop.
I pay 25% on something I order from a large German online shop, even though the VAT rate in Germany is lower.
I pay 19% (the German rate) on something I order from a small German shop, to reduce the administrative burden on that shop.
(In every case the advertised price includes VAT, although the middle case may use 19% until I input a delivery address, depending on how they guess my location.)
My understanding is that, in reality, people pay 0% in the USA if they order from a different state.
The key here is that when something is classified as "interstate commerce" different laws apply than if you're buying something in-state. Enforcement varies, and can be expensive, and the laws are catching up sometimes, and purposefully not present in others, depending on the state and their approach to interestate commerce.
As an American, I'm quite happy there is no Federal sales tax. There is no reason to capture value at that level and allocate at the Federal level. States already have these taxes, and are much better equipped (in terms of need / proximity - not in terms of functioning government at times) to allocate the money toward local services.
That used to be the case, but online retailers now must collect sales tax for any state that demands it [0]. Many states have complicated rules on the matter, for details consult an attorney.
[0]: https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair%2C_Inc.
Most states are now imposing sales tax on online retailers, so the point is pretty much moot now.
embedded taxes benefit the tax man and the easiest to make regressive thereby clawing back much of the money spent on services
My question was honest though. Is there something special (good) about VAT vs. sales tax that I'm missing? Because the OP implied we don't pay sales tax in the US, which is (generally) not true.
Now, I don't disagree that a mechanism that tames American consumption would be good, and is also counter cycle to the economy.
But the question remains unanswered: How about the effect of sales tax on people and families at the margins [0]? 20-25% sales tax is a lot for them. A sales tax rebate check at the end of the year like Canada does? $70 hardly covers the bite of the sales tax!
[0] Including my in-laws, so I'll admit this is a bit personal.
It’s a middle class cop-out. The American middle class says they want to help those at the margins, but they don’t want to pay 25% VAT on MacBook Pros. They’re only in favor of increased welfare if Jeff Bezos is the one who pays for it.