sales tax and vat difference

The difference between sales tax and VAT (Value Added Tax) lies in how and when they are applied throughout the supply chain. Sales tax is charged only at the point of sale, typically to the end consumer, and collected by the retailer. In contrast, VAT is applied at each stage of production and distribution, with businesses collecting VAT on sales and reclaiming VAT paid on purchases. While sales tax is simpler and only added at the final transaction, VAT is a multi-stage tax system that ensures tax is levied on the value added at each stage of the supply chain.