[physicsguy]

In many states in the US, if you go and buy materials, as a business, you pay a sales tax. There are exemptions and partial rebates, but there's nothing across all industries, and it varies by state. So if you were a farmer you might find you were exempt on fertilizer and tractors but not on a pickup truck.

That's different to a VAT, because there, as long as you're a registered business for VAT purposes, all purchases you make are exempt from VAT - either you don't pay it when you purchase and are invoiced by a business, or you can claim it back if you keep receipts. Companies have to register for VAT when revenue hits a certain amount; here in the UK it's £85k for e.g.

[AnAfrican]

>either you don't pay it when you purchase and are invoiced by a business

As a business you pay VAT when you purchase. And you collect VAT when you sell. Then you pay to the government the difference between collected VAT and paid VAT. That's what the "Value Added" part means.

[physicsguy]

No, if you provide a VAT number, in business to business transactions, companies will not normally charge VAT in the first place, so you don't pay it when you purchase in many cases as a business.

However if you go into something aimed at consumers, and make a purchase, they're normally not set up for this, which is why you're able to reclaim when you have paid it.

[AnAfrican]

This may be an arrangement set up in some jurisdictions and probably widely used nowadays.

The default (as in « the original setup ») is what i’ve described.

[AnAfrican]

> So if you were a farmer you might find you were exempt on fertilizer and tractors but not on a pickup truck.

There are items that generate a non-deductible input tax in VAT countries (often entertainment items or cars). But usually, those will be the exception and deductible would be the default.