[gumby]

> VAT is applied to business to business transactions. Sales taxes are just applied to consumer transactions.

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.

[chopin]

>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).

[gumby]

I'm sorry I wasn't clear: I was clarifying that all end consumers pay sales tax in the USA (for transactions subject to sales tax; not every jurisdiction has them, or has them for all products).

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