How does a Value Added Tax (VAT) work?

A Value Added Tax (VAT) is a consumption tax that is applied to goods and services in Washington at the state and federal level. VATs are designed to be paid by the consumer when they purchase the goods or service, as opposed to the business producing the goods or service. This means that the business only pays the VAT when it is passed on to the consumer, thus allowing businesses to remain competitive. In Washington, VATs are most commonly applied to items such as food, clothing, and other consumer goods and services. In most cases, the tax is applied by the business as an additional charge on the purchase of each item. As the business adds VAT to the cost of the item, they also add a record of the VAT paid on the purchase to their books. The government then collects the tax from the business after the purchase has been made. The goal of a VAT is to provide a steady source of revenue for the government while also encouraging businesses to remain competitive. By making sure that businesses pay the tax only after it has been passed on to the consumer, the government ensures that businesses are not taxed twice for the same product or service, which can help keep prices competitive. Overall, a VAT is a method of taxation used in Washington that is designed to help businesses remain competitive while also providing a steady source of revenue for the government. By making sure that businesses only pay the tax when it is passed on to the consumer, the government is able to balance the need for revenue while also encouraging businesses to remain competitive.

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