Difference between Sales Tax and Value Added Tax
Sales tax and Value Added Tax (VAT) are both forms of indirect taxation imposed on goods and services, but they operate differently.

Sales Tax
- Sales tax is a single-stage tax collected at the point of sale.
- It is calculated as a percentage of the sale price.
- Only the final consumer pays this tax; businesses do not recover any sales tax paid on their purchases.
- The sales tax rate varies by location and can differ for various goods and services.

Value Added Tax (VAT)
- VAT is a multi-stage tax applied at each stage of production and distribution.
- It is calculated on the value added to goods and services at each stage.
- Businesses collect VAT on their sales and can also reclaim the VAT they paid on their purchases.
- This system aims to avoid tax cascading, where tax is charged on tax.

How to Calculate Sales Tax
- Formula: Sales Tax = Sale Price × Sales Tax Rate
- Example: If an item costs $100 and the sales tax rate is 5%, the sales tax would be $5.
- Total amount paid = Sale Price + Sales Tax = $100 + $5 = $105.

How to Calculate VAT
- Formula: VAT = Sale Price × VAT Rate
- Example: If the sale price of a product is $100 with a VAT rate of 20%, the VAT would be $20.
- Total amount paid = Sale Price + VAT = $100 + $20 = $120.
In summary, sales tax is charged only at the final sale, while VAT is levied at every stage of the supply chain, allowing businesses to recover tax paid on inputs. Understanding these differences helps in better financial planning and compliance.