How does a Value Added Tax (VAT) work?

Value Added Tax (VAT) is a type of indirect tax used in many countries around the world, including New York. It is a tax on goods and services which are bought and sold. When a seller makes a sale, they must collect the Value Added Tax (VAT) from the buyer and then pay the collected tax to the government. It’s important to note that the seller can recover the VAT they pay on their own purchases, known as input tax. The VAT rate in New York is 8.875%, which includes a 4% state tax and a 4.875% New York City tax. Taxpayers who are unfamiliar with the value added tax system should pay attention to these rates, as they can often vary between states and even within states. The amount of VAT paid on a purchase depends on the VAT rate at the time the product or service is bought. As a result, the amount of VAT paid will differ from one purchase to another depending on the rate in force at that time. When imported goods are purchased, the VAT is calculated on the customs value of the goods. These customs values are determined by the country of origin. Overall, Value Added Tax (VAT) is an indirect tax collected on goods and services in New York, and the amount of VAT paid depends on the VAT rate in force at the time of purchase. It is important for taxpayers to understand this system and pay attention to the different rates when making a purchase.

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