> I assume a reseller deducts only the VAT paid on items he/she actually
> resells.

No, everything, including (for instance) toilet paper. It is all
considered part of the cost of making your product.

> As another poster pointed out, this DOES get interesting with 
> interstate
> commerce since each state is responsible for sales tax. In addition, a
> portion of the sales tax goes to the local governments who 
> set the rate of
> their "add on" to the basic state tax. How does this work in VAT
> countries? Is VAT a national instead of state/local tax? How 
> does it apply on international sales?

When selling to a private person in another EC country I charge VAT in
my country (the sellers country, at the rate valid in the sellers
country). AFAIK there is no mechanism to report to the authorities even
how large such sales is. When selling to a company in another EC country
I sell without VAT, but the buying company is responsible for paying the
VAT in his country (at the rate valid in his country). He must provide
me his VAT registration number, and I must mention this number on the
invoice, and report to the authorities the total of such sales for each
VAT registration number.

This might seem a bit complicated but it is very easy to do once you get
the routine. The complications in the system are caused by the
exceptions, like:
- me (as a company) buing from a private person (there is a rule for
this, but only if this is your main way of doing business)
- things that are not VAT taxed, which are of course not 100% defined
(me selling USB PID regions is probably a border case)
- things that are VAT taxed but lower than normal

Wouter van Ooijen

-- -------------------------------------------
Van Ooijen Technische Informatica: www.voti.nl
consultancy, development, PICmicro products
docent Hogeschool van Utrecht: www.voti.nl/hvu
 

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