Exchange Rates, VAT, and Pricing of Euro Gear in US

CPP said:
Sales tax is collected by the retailer when the final sale in the supply chain is reached via a sale to the end consumer. End consumers pay the sales tax on their purchases. Businesses issue resale certificates to their sellers when buying business supplies/inputs that will be resold since sales tax is not due. Tax jurisdictions do not receive the tax revenue until the sale is made to the final consumer.



VAT (Value-Added Tax) is collected by all sellers in each stage of the supply chain. Suppliers, manufacturers, distributors and retailers all collect the value added tax on taxable sales. Suppliers, manufacturers, distributors, retailers and end consumers all pay the VAT on their purchases. Businesses must track and document the VAT they pay on purchases that will be resold in order to receive a credit for the VAT paid on their tax return. Tax jurisdictions receive the tax revenue throughout the entire supply chain as opposed to at the sale to the final consumer chain.
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Chris, are you saying the US has an equivalent to the VAT as its known in the EU? give me an example.
 
Chris, nice explanation. In the US we don't have VAT. Sales tax is similar, but not the same and it is not uniform across the US. For example, VAT is collected only on new goods (at least in the UK where I buy a lot of used records.) However, sales tax is collected on both new and used. A few states as mentioned earlier don't have a sales tax, and the percentage differs from state to state and even city by city. Also many states exempt certain good from sales tax. Unfortunately hi-fi equipment is not one of these. However, since the goods must be tangible, sales tax is collected on new CD's but not downloads. However, there is signficant pressure to expand the sales tax to include services which typically escape sales tax in most states. Services have been growing to become a greater proportion of expenditures and so sales tax revenues are captured from a smaller base.

Currently, there is a big push by states to collect sales tax on as many sales outside the state as possible. In the past, the states didn't bother to collect tax from non in state purchases - not that much, and quite difficult. However, the internet, and in particular Amazon, has changed all that. As internet sales increased, the companies that were located out of state (or country) had a very significant competitive price advantage over companies that were located in the states with sales tax. Amazon has now moved to collect sales tax on all their sales and remit them to the states of the purchaser. It also means that the in state stores are getting more business since they no longer are at a competitive disadvantage to Amazon. States have been losing significant revenues compared to pre internet days.

In California, a high sales tax state, the most recent income tax forms require one to give the total out of state (and country) expenditures one made over the previous year and pay the sales tax (called use tax) on those items. If you can't or won't total your out of state purchases, then the form has a table which has the use tax you must pay based on your reported income. I see other states following suit if they don't do it already.

So one living in the US purchasing a piece of equipment from Europe shipped to the US would not have to pay VAT, but may have to pay sales or use tax in the state where they live.

Mike may want to comment on this from his perspective as a dealer in Florida who most likely sells not just to Florida, but to customers in other states and countries.

Larry
 
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