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Unlike a sales tax, which is only levied on the final sale to consumers, vat is collected by. Demystify value added tax (vat) While businesses collect and pay vat throughout the supply chain, the tax is ultimately borne by the final consumer.

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A vat is a consumption tax, much like a retail sales tax, except that it is collected at each stage of the production process, rather than at final sale to consumers. Unlike sales tax, which is applied at the final sale to consumers, vat is collected incrementally throughout the supply chain. Value added tax (vat) and goods & services tax (gst) are both consumption taxes applied at various stages of production and distribution.