The United States consists of 50 states, Washington and the District of Columbia. All of them are territories for taxation. And Puerto Rico, Guam, the Virgin Islands, American Samoa, and others are subject to American jurisdiction, but not American taxation. Also, these territories are not parties to US international economic treaties.
In other words, formally these are US territories, but with their own tax systems. Some of them are international offshore companies. The rest of the states pay taxes as required by law. What is the VAT in the USA? In the article we will answer this question in more detail.
What is VAT and is there VAT in the USA
Value Added Tax is a type of indirect tax. When paying for it, the taxpayer may not be aware that the VAT rate has already been included in the price of the goods. Arriving at the store, we buy goods. We think that all the money goes only to the owner of the store, which deducts taxes on profits. However, it is not.
In addition to direct taxes - deductions that must be paid by the tax service, there are indirect taxes: excise taxes, customs duties, and VAT. Based on the name of the latter, we can understand how it is formed. The final value of the goods is equal to the sum of the base value, value added of intermediaries and sellers and VAT - a percentage of the state of value added. Thus, the buyer pays both the sellers' requests and the mandatory tax to the state.
By the way, there is no VAT in the USA. However, this does not mean that there is a tax haven for taxpayer entrepreneurs in this country. Later we will explain how the VAT in the USA is replaced.
VAT example
Suppose Firm A acquired from Firm B a batch of boots of 500 rubles each. for a couple. The VAT rate is 10%. Of this amount, firm A will pay 50 rubles each. for each pair to the fiscal authorities. This means that firm B paid 450 rubles for each pair, and 50 rubles. - This is VAT.
Boots are sold to end customers for 1,000 rubles. for a couple, i.e., firm B added another 500 rubles to the initial cost. Of which 450 rubles. will go to the firm itself as income, and 50 to the state. In total, the end customer will pay 100 rubles. to the state treasury, and 900 rubles. will go to the accounts of manufacturers and intermediaries.
Firms A and B reflect VAT as a separate line in payment documents for various mutual offsets and offsets. We will not dwell on this topic in detail, since we are interested in the question of what VAT is in the USA. We think that we have covered the basic concept.
Sales tax
Value added tax is believed to be a more advanced sales tax system. We will analyze in more detail. This is the amount that is withheld from each sale, regardless of the initial purchase price.
For example, the sales tax rate is 5%. Firm A sold to firm B the same batch of boots for 500 rubles. for a couple. Sales tax will be 25 rubles per unit. Firm B decided to sell boots for 1000 rubles. Sales tax will be 50 rubles. with a couple. However, the difference from VAT will be that there will be no mutual deductions and offsets. Firm B will no longer be able to keep the amount that it gave back upon the initial purchase of a batch from Firm A, and it may be able to pay VAT. This is the main difference: VAT is a progressive tax that applies only to value added. Sales tax is levied on the entire amount, regardless of the number of intermediaries.
If firm B buys a batch of boots from firm A at a certain cost and sells it for the same amount, then VAT will be zero, but sales tax in this case will still have to be paid at the approved rate.There is no VAT in the USA, but sales tax is still applicable here.
Many readers may immediately ask the question - why does a progressive advanced state not introduce a progressive tax system? We will answer in the next chapter.
The reason for the lack of VAT in the USA
The United States is always proud to be one of the most conservative economic states in the world. In other words, they deliberately do not change the "rules of the game" for entrepreneurs. No matter what difficult situations — floods, fires, wars, destruction, terrorist attacks — the United States never changes the internal business environment. That is why the dollar still maintains the status of the world currency, and the American economy - the status of one of the most stable and calm in the world.
The logic is simple: why change the rules of doing business for those who decide to start it on the old system? Economic stability is the main reason that many large international corporations choose the United States as their permanent location. Several times, the US Congress brought up a public hearing on the issue of replacing sales tax with VAT, but each time this initiative was perceived with hostility among the population. Conservatism in politics and economics are the basic principles of American ideology.
US tax system
So, we said that the VAT rate in the United States is zero, since this tax simply does not exist in the country. Let's analyze the tax system of this country.
The USA is a federation. And, unlike other countries, this legal status is expressed not only on paper, but also in real life. The country has three levels of taxation:
- Federal taxes. They are paid by all US residents.
- State taxes. They are paid by state residents.
- Municipal taxes - additional fees in counties and cities.
Each state has great authority to create its own tax system.
For example, in the United States there is a mandatory federal income tax for all residents. However, some states set an additional income tax for their residents, for example, in the state of California. In Texas, there is no such tax at the local level, so state authorities say that "there is no income tax in Texas."
US Sales Tax
US sales tax is considered regional. Each state independently sets its rate depending on the economic situation of the state, the presence of developed or developing economic sectors. In addition, some states have separate areas that are subject to local income tax - Local Surtax.
For example, in the state of Delaware, there is no sales tax at all, and in Alaska, some cities and certain districts are allowed to set their local rate to 7%, although it is not officially at the state level.
But, despite everything calculated, the amount of VAT in the USA is zero, since this tax does not exist in the country.
