Sales tax
A sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax is usually set as a percentage by the government charging the tax. There is usually a list of exemptions. The tax can be included in the price (tax-inclusive) or added at the point of sale (tax-exclusive).
Most sales taxes are collected by the seller, who pays the tax over to the government which charges the tax. The economic burden of the tax usually falls on the purchaser, but in some circumstances may fall on the seller. Sales taxes are commonly charged on sales of goods, but many sales taxes are also charged on sales of services. In a highly idealized case, a sales tax would have a high compliance rate, be difficult to avoid, and be simple to calculate and simple to collect.
Most sales taxes are collected by the seller, who pays the tax over to the government which charges the tax. The economic burden of the tax usually falls on the purchaser, but in some circumstances may fall on the seller. Sales taxes are commonly charged on sales of goods, but many sales taxes are also charged on sales of services. In a highly idealized case, a sales tax would have a high compliance rate, be difficult to avoid, and be simple to calculate and simple to collect.
Turn Over Tax
A turnover tax is similar to a sales tax or a VAT, with the difference that it taxes intermediate and possibly capital goods. It is an indirect tax, typically on an ad valorem basis, applicable to a production process or stage. For example, when manufacturing activity is completed, a tax may be charged on some companies. Sales tax occurs when merchandise has been sold.
A different meaning of Turnover Tax: The turnover tax is a sales tax used in planned economies to fund the jurisdiction and control demand for some product. The central authority in a command economy leaves the supplier a profit deemed to be fair, and takes the rest as a turnover tax (i.e., money turned over to the government.) If the cost of production exceeds the market price, a negative turnover tax (a subsidy) may be used.
VAT
VAT is a tax on consumer spending. It is collected by VAT-registered traders on their supplies of goods and services effected within the State, for consideration, to their customers. Generally, each such trader in the chain of supply from manufacturer through to retailer charges VAT on his or her sales* and is entitled to deduct from this amount the VAT paid on his or her purchases.
[*In some circumstances, particularly in the construction industry, VAT is not charged by the supplier, but instead the customer simply accounts for the VAT as if it had been charged.]
The effect of offsetting VAT on purchases against VAT on sales is to impose the tax on the added value at each stage of production – hence Value-Added Tax. For the final consumer, not being VAT-registered, VAT simply forms part of the purchase price.
