Value added?

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Smitty37

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I think if most of our members here were from Europe, where most of the countries in the EU assess a Value Added Tax (VAT) there would have been more awareness as to what Value Added is.

If I am making two pens from identical kits and blanks and I take one hour to make each but I discover a defect requiring rework in one of the pens. And I spend 1/3 hour reworking that kit. I have increased the cost I have not increased the value added.
 
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TonyL

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Smitty's question from the first post:


"My question is this...How much value does a typical turner add to the product? Specifically when using Kits as most turners appear to be doing. "

I am not sure if this was covered, but do we agree that there is economic value or utility added (cost of materials, labor, marketing, storing, preserving, delivering etc.) ; and then market value (what someone is willing to pay)? They very often do not correlate. Tastes change, there are impulse buys, there's what something may mean to someone's personal collection (I have had baseballs signed by pro ball players and astronauts and used them to play with :)).

But - for me at least - to answer your question, I would have to ask if you were talking about economic value (costs and utlity added) or market value...what someone is willing to pay. It looks like you were talking about market value given the two scenarios that you presented However, the economic or accounting definition was cited.

It's a good subject because for the life of me I don't know anyone would pay (me) $55 for a bolt action kit with 2 inches of turned AA on it. Yet, many cheerfully did. Most were police officers. In fact, some of my BA's were made from mis-turned kits with longer 3/8th tubes. I just shortened the tubed blank to the BA length.
 

Dale Lynch

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I'll jump in,I understand value added as what did I contribute to the product.If I just drilled,glued,turned,sanded,polished a purchased resin blank and fit it to purchased pen components I figure I added about $5.00 per barrel in production value.If I drilled,glued,turned,sanded,applyied a clear finish,and polished a solid wood blank.Then fit it to purchased pen components I figure I added about$10.00 per barrel in production value.If I built a segmented blank then drilled,glued,turned,sanded,finished,and polished the blank before fitting it to purchased pen components then I would increase the value added to $20.00-$40.00 per barrel depending on how elaborate the design.

This is subject from person to person what is your time and skill worth?Me,I'm slow so if I had to spread the value added $ or the lenght of time it takes me to make a pen,I make sweat shop worker $ per hour.
 

duncsuss

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I think if most of our members here were from Europe, where most of the countries in the EU assess a Value Added Tax (VAT) there would have been more awareness as to what Value Added is.

Having lived in 2 European countries that operate VAT systems, I think I know enough about it to state this with certainty: it is not value that is being taxed, but mark-up.

If I buy blanks at $2 and pen tubes at $0.25, drill them, glue them and then sell them for $10, I pay VAT on the difference ... irrespective what "value" I added. (I can apportion the cost of equipment, drill bits, and two dabs of epoxy cement, of course, on my Income Tax return.)

(edit: or more accurately, VAT is assessed on the difference, since it's already been assessed on the price I paid for the items from my suppliers.)

Put another way, as far as Her Majesty's Inspector of Revenue is concerned, "sales price minus costs" is the value added.

I believe I add more "value" by using epoxy than somebody who uses CA to glue tubes into drilled blanks. And I add more value by sanding along the barrel with each piece of sandpaper before moving onto the next grit than somebody who skips that step (unless they have some magic way to eliminate the circumferential scratch pattern.)

Actual dollar representation of all the value I add? I have no idea. :)
 
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Smitty37

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Smitty's question from the first post:


"My question is this...How much value does a typical turner add to the product? Specifically when using Kits as most turners appear to be doing. "

I am not sure if this was covered, but do we agree that there is economic value or utility added (cost of materials, labor, marketing, storing, preserving, delivering etc.) ; and then market value (what someone is willing to pay)? They very often do not correlate. Tastes change, there are impulse buys, there's what something may mean to someone's personal collection (I have had baseballs signed by pro ball players and astronauts and used them to play with :)).

But - for me at least - to answer your question, I would have to ask if you were talking about economic value (costs and utlity added) or market value...what someone is willing to pay. It looks like you were talking about market value given the two scenarios that you presented However, the economic or accounting definition was cited.

It's a good subject because for the life of me I don't know anyone would pay (me) $55 for a bolt action kit with 2 inches of turned AA on it. Yet, many cheerfully did. Most were police officers. In fact, some of my BA's were made from mis-turned kits with longer 3/8th tubes. I just shortened the tubed blank to the BA length.
I thought all of my comments including those in the OP make it pretty clear that I was always referring to Economic 'value added' and not market price.
 

TonyL

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Your questions was clear; I was confused by the "sells for $150" - my fault. Thanks for the correction.
 

jttheclockman

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I see this debate is still going on. Defining the word value seems to be the key. To me Value is a nondescript word or an intangible that has no monetary number attached to it. Every time you make a pen using a pen as the example again, you are including cost or price not value. Someone makes the same pen and adds a segmented blank, he or she did not add value they added cost. Weather a person sand with the grain or uses epoxy instead of CA does not add value, it adds cost. Now you get done making this expensive pen, where is the value??? How much is the value??? It comes with a selling price and to get that price you took all materials, and labor costs to arrive at it.

To me what I see as "added on value" is again that intangible. Take that pen and give it to the President and he signs some Bill with it. You now added value to it. Same pen nothing added. How much value or what is the number is indeterminable because it will be the person who buys it that determines it for the time being. Sell that pen again in a year and the value will change again.

Another example. Take that same pen and sell at a craft show now sell it in Tiffany's and it now has "added on value" just because of the name.

To me that is what I am reading into this. We will have to just agree to disagree.
 

Smitty37

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I see this debate is still going on. Defining the word value seems to be the key. To me Value is a nondescript word or an intangible that has no monetary number attached to it. Every time you make a pen using a pen as the example again, you are including cost or price not value. Someone makes the same pen and adds a segmented blank, he or she did not add value they added cost. Weather a person sand with the grain or uses epoxy instead of CA does not add value, it adds cost. Now you get done making this expensive pen, where is the value??? How much is the value??? It comes with a selling price and to get that price you took all materials, and labor costs to arrive at it.

To me what I see as "added on value" is again that intangible. Take that pen and give it to the President and he signs some Bill with it. You now added value to it. Same pen nothing added. How much value or what is the number is indeterminable because it will be the person who buys it that determines it for the time being. Sell that pen again in a year and the value will change again.

Another example. Take that same pen and sell at a craft show now sell it in Tiffany's and it now has "added on value" just because of the name.

To me that is what I am reading into this. We will have to just agree to disagree.
John, I gave you the definition of value added I am asking about. I am not asking about selling price. Forget selling the finished pen that involves a lot of things not related to the value added by assembling the pen.

Think more like this and make it for just part of a completed pen...there is a pen blank of common acrylic sized for common single bbl pens that was purchased for $1.75 and a similarily sized pen tube that was purchased for $1.00. The parts are worth $2.75.

Now prepare that blank for use making a pen, drill it, insert the tube, square it, turn it. polish it and finish it - now it is ready to use as a pen bbl. What is the blank worth?

If it is now worth $7.75 the value added is $5.00.

That is not directly related to the market value which depends on many many other and unrelated factors. Venue, advertising, packaging, shipping. service after the sale, and warranty work to name just a few.
 
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designer

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This seems to not be at all what the first question was. The original sentence does not at all sound like this example you put forth. Maybe in your eyes it is the same, but to me, it is completely different.

Even though it is an obtuse way of looking at it, it is still only subjective. Since you are only looking at the blank, remove the tube and then tell me what the blank is worth then. You cannot empirically add and remove items from the analysis.

Based on your method, perhaps instead, you would like to know what the tube is now valued instead of the blank. The value of the tube went up $6.75 now. After all, you left it in the equation for the value and ignored it in the value addition of the blank. Why not reverse it then and look at the tube value now?

The tube is the tube. The blank is the blank. The tube glued into the blank that is now finished is an assembly that is now finished and ready for use. It has been changed from it's original state of just an acrylic blank.

This would be a good discussion for a logic's or economics class paper. Realistically they will end up with the same outcome, but the train of thought would probably be different.

Well, I have stirred the pot enough.
 

jttheclockman

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Then I will go back o my original statement again. You are combining the word value and cost or price. All 3 are the one and same and this exercise makes no sense. I wish I could have said it was fun but it actually was a way to pass time. I must move on.
 

Carl Fisher

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I see this debate is still going on. Defining the word value seems to be the key. To me Value is a nondescript word or an intangible that has no monetary number attached to it. Every time you make a pen using a pen as the example again, you are including cost or price not value. Someone makes the same pen and adds a segmented blank, he or she did not add value they added cost. Weather a person sand with the grain or uses epoxy instead of CA does not add value, it adds cost. Now you get done making this expensive pen, where is the value??? How much is the value??? It comes with a selling price and to get that price you took all materials, and labor costs to arrive at it.

To me what I see as "added on value" is again that intangible. Take that pen and give it to the President and he signs some Bill with it. You now added value to it. Same pen nothing added. How much value or what is the number is indeterminable because it will be the person who buys it that determines it for the time being. Sell that pen again in a year and the value will change again.

Another example. Take that same pen and sell at a craft show now sell it in Tiffany's and it now has "added on value" just because of the name.

To me that is what I am reading into this. We will have to just agree to disagree.
John, I gave you the definition of value added I am asking about. I am not asking about selling price. Forget selling the finished pen that involves a lot of things not related to the value added by assembling the pen.

Think more like this and make it for just part of a completed pen...there is a pen blank of common acrylic sized for common single bbl pens that was purchased for $1.75 and a similarily sized pen tube that was purchased for $1.00. The parts are worth $2.75.

Now prepare that blank for use making a pen, drill it, insert the tube, square it, turn it. polish it and finish it - now it is ready to use as a pen bbl. What is the blank worth?

If it is now worth $7.75 the value added is $5.00.

That is not directly related to the market value which depends on many many other and unrelated factors. Venue, advertising, packaging, shipping. service after the sale, and warranty work to name just a few.

I don't believe this can be answered. My time may be worth more or less than your time and it's not up to you to assign that dollar amount. Your jump from parts = $2.75 to $7.75 is a completely made up number.

At best we can apply a formula based on what your feel your time is worth.

If my time is worth $40/hour (picking a round number for this example) and it takes me 1 hour to mark, cut, drill, paint, glue, square, turn, sand, buff, assemble then the value is $42.75 without any further adjustment.

If it only takes me 30 minutes, then the value is $22.75.

So given that relatively simplistic example, what is it you're actually fishing for as this is pretty basic parts plus labor cost.
 

Smitty37

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This seems to not be at all what the first question was. The original sentence does not at all sound like this example you put forth. Maybe in your eyes it is the same, but to me, it is completely different.

Even though it is an obtuse way of looking at it, it is still only subjective. Since you are only looking at the blank, remove the tube and then tell me what the blank is worth then. You cannot empirically add and remove items from the analysis.

Based on your method, perhaps instead, you would like to know what the tube is now valued instead of the blank. The value of the tube went up $6.75 now. After all, you left it in the equation for the value and ignored it in the value addition of the blank. Why not reverse it then and look at the tube value now?

The tube is the tube. The blank is the blank. The tube glued into the blank that is now finished is an assembly that is now finished and ready for use. It has been changed from it's original state of just an acrylic blank.

This would be a good discussion for a logic's or economics class paper. Realistically they will end up with the same outcome, but the train of thought would probably be different.

Well, I have stirred the pot enough.
You are right! That is what is done in this case to add value. The tube and blank were combined into a single assembly and finished and the assembly is has a greater value than the sum of the parts.

The question is how much value do you think a typical pen turner adds by performing that and other operations. Bearing in mind what I think should be obvious - that that value is measured before any of the marketing or selling is performed.

While you seem to consider them tightly linked marketing and manufacturing are totally separate...For instance you might make a pen that you can sell using your normal marketing channels for $250.00 but imagine that you give that pen to me and I sell it through my normal marketing channels stating that you made it. I might be hard pressed to get $100 for it. So your marketing and selling and name recognition in your market (in this case) are accounting for $150.00 of your selling price.
 

designer

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Again, the value is subjective and everyone will have a different value of the same thing. I think pretty much everyone agrees with that....no matter how it is phrased or asked.
 

magier412

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I think that the "typical" turner adds a lot to the finished product, regardless of what it is, not in actual product itself perhaps, but more in the enjoyment of making it.

If you are looking for actual value added, I guess I'd have to say that BCD added more specific value - taking "rawer" (is that a word? well, it is NOW! LOL) materials and honing them to fit various parts into a whole.

The bottom line of any "pricing" is obviously whatever the market will bear...and that will vary from minute to minute in some cases...as it's often in the eye of the beholder...
 
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skiprat

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Leroy, one of these days, one of your 'Value' or 'Quality' topic threads is going to bring on Godwins Rule......:biggrin:
But as Eagle was so fond of saying.......WGAS?:wink:
 

Smitty37

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I think that the "typical" turner adds a lot to the finished product, regardless of what it is, not in actual product itself perhaps, but more in the enjoyment of making it.

If you are looking for actual value added, I guess I'd have to say that BCD added more specific value - taking "rawer" (is that a word? well, it is NOW! LOL) materials and honing them to fit various parts into a whole.

The bottom line of any "pricing" is obviously whatever the market will bear...and that will vary from minute to minute in some cases...as it's often in the eye of the beholder...

Pricing is not part of the question.
 

Smitty37

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I see this debate is still going on. Defining the word value seems to be the key. To me Value is a nondescript word or an intangible that has no monetary number attached to it. Every time you make a pen using a pen as the example again, you are including cost or price not value. Someone makes the same pen and adds a segmented blank, he or she did not add value they added cost. Weather a person sand with the grain or uses epoxy instead of CA does not add value, it adds cost. Now you get done making this expensive pen, where is the value??? How much is the value??? It comes with a selling price and to get that price you took all materials, and labor costs to arrive at it.

To me what I see as "added on value" is again that intangible. Take that pen and give it to the President and he signs some Bill with it. You now added value to it. Same pen nothing added. How much value or what is the number is indeterminable because it will be the person who buys it that determines it for the time being. Sell that pen again in a year and the value will change again.

Another example. Take that same pen and sell at a craft show now sell it in Tiffany's and it now has "added on value" just because of the name.

To me that is what I am reading into this. We will have to just agree to disagree.
John, I gave you the definition of value added I am asking about. I am not asking about selling price. Forget selling the finished pen that involves a lot of things not related to the value added by assembling the pen.

Think more like this and make it for just part of a completed pen...there is a pen blank of common acrylic sized for common single bbl pens that was purchased for $1.75 and a similarily sized pen tube that was purchased for $1.00. The parts are worth $2.75.

Now prepare that blank for use making a pen, drill it, insert the tube, square it, turn it. polish it and finish it - now it is ready to use as a pen bbl. What is the blank worth?

If it is now worth $7.75 the value added is $5.00.

That is not directly related to the market value which depends on many many other and unrelated factors. Venue, advertising, packaging, shipping. service after the sale, and warranty work to name just a few.

I don't believe this can be answered. My time may be worth more or less than your time and it's not up to you to assign that dollar amount. Your jump from parts = $2.75 to $7.75 is a completely made up number.

At best we can apply a formula based on what your feel your time is worth.

If my time is worth $40/hour (picking a round number for this example) and it takes me 1 hour to mark, cut, drill, paint, glue, square, turn, sand, buff, assemble then the value is $42.75 without any further adjustment.

If it only takes me 30 minutes, then the value is $22.75.

So given that relatively simplistic example, what is it you're actually fishing for as this is pretty basic parts plus labor cost.
The value is NOT determined by your time or mine. I might complete the operations in one hour, or I might take two...the item is not worth more because I worked slower one day because I felt lazy or had a head ache because I stayed up too late the night before. The asking price (if offered for sale) might differ because of differing estimates of the worth of labor, but not the value.
 

Smitty37

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Again, the value is subjective and everyone will have a different value of the same thing. I think pretty much everyone agrees with that....no matter how it is phrased or asked.
By your useage Value of anything is always completely subjective. Which while it is accurate enough to say that....try telling that to the Tax Man and give what he thinks is to low a number, in countries with a Value Added Tax
 
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This may have nothing to do with Smitty's question, but I believe that we are not selling a pen, or in my case a bowl, peppermill, wood stemmed wine glasses, etc.., but we are selling the artistry in making those items... without the artistry my bowl is just a piece of wood that's been hollowed and shaped, but it's still just a piece of wood. Same with a pen, it's just a piece of wood or plastic that has a few components in it...

You are absolutely correct this, while it might be perfectly true, has nothing to do with my question.

In retrospect, this is the perfect answer to your question. In taking ordinary components, a pen blank, a pen kit, (regardless of the cost of either) and adding the artistry in making them into a pen that has now be made more desirable than the components, you have added value to the items. How much value added can and will depend on the level of the artistry applied and the level that the desirability has been raised to.
 

Smitty37

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This may have nothing to do with Smitty's question, but I believe that we are not selling a pen, or in my case a bowl, peppermill, wood stemmed wine glasses, etc.., but we are selling the artistry in making those items... without the artistry my bowl is just a piece of wood that's been hollowed and shaped, but it's still just a piece of wood. Same with a pen, it's just a piece of wood or plastic that has a few components in it...

You are absolutely correct this, while it might be perfectly true, has nothing to do with my question.

In retrospect, this is the perfect answer to your question. In taking ordinary components, a pen blank, a pen kit, (regardless of the cost of either) and adding the artistry in making them into a pen that has now be made more desirable than the components, you have added value to the items. How much value added can and will depend on the level of the artistry applied and the level that the desirability has been raised to.
A pen turner might make their own special blanks and if they do the value added would indeed reflect that. That is about the only way a turner can claim artistry making a pen from a kit. A Blank with say a Celtic Knot might have a value several times the value of the inputs. But - the value added is not determined by the selling price. The item might never be sold.
 

Arbetlam

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Don't forget not everyone can do what we do. We as turners have the ability to see in a piece of wood what other people can't. We have the skill ( at different levels) to make what we see come to life. I believe we can say we are artists. But with all art the person who has the say on the value is the beholder.
 

designer

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Go to your library and pick up a macroeconomics book. Your questions will be answered. Your question has been answered from many different directions here. Maybe reading from a text book will be easier to understand than our explanations so you understand the concept better. Not just one small aspect of the whole thing.
 

Smitty37

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Go to your library and pick up a macroeconomics book. Your questions will be answered. Your question has been answered from many different directions here. Maybe reading from a text book will be easier to understand than our explanations so you understand the concept better. Not just one small aspect of the whole thing.
Kindly do not talk down to me Allen. I don't know what your education is but I have a 4 year BS Degree in Liberal Arts, with 148 semester hours on my transscript and another 12 semester hours in accounting taken just for my own edification. Additionally I have about 520 advanced college level clock hours of education provided by the company I worked for - they considered that I had equivalent of a Masters Degree in Engineering.

I have a pretty good understanding of both macro and micro economics.

I don't think one penturner doing the operations required to change parts found in a pen kit into a finished pen one pen at a time qualifies as a macroeconomic question. Maybe you could explain that to me withing the definition of macroeconomics.

Just as a note of interest I was an Advisory Test Engineer/manager at IBM as my career job...which is pretty close to what your job title says you are.
 

Smitty37

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I suspect that the purpose is not the answer so much as the inner workings of the questioner... ;) LOL
You are absolutely spot on...I occasionally like to ask rhetorical questions just to see what kind of answers I get and to "disagree" with most of them. It is possible to ask a question on here and get 20 answers -- all of which do not address the question asked.:biggrin::biggrin:
 

Smitty37

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Well apparently we're all just too dumb to answer your question to your expectations. So on that note, I'm out to go spend some time in my shop as just a turner with no smarts.
I never said anyone was "dumb" Carl for all I know you are all members of Mensa International.:):)
 

Smitty37

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in economics keep one thing in mind...
There ain't but 3 things in this world that's worth a solitary dime --- that's old dogs
and children
and Watermellon wine.
 

Smitty37

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Pricing is not part of the question.

I can answer this assertion with a quote from a very wise man ...

try telling that to the Tax Man and give what he thinks is to low a number, in countries with a Value Added Tax

Believe me, as far as the Tax Man is concerned, pricing is the only thing that matters.
Oh, have you lived where a VAT is in place? I don't know of any state in the USA that levies one.

Actually the tax man is interested in the difference between the price and the cost....with the exception of the common consumption tax in the Various states in the USA where you are absolutely correct. That's why so many people on the internet buy from sellers who live where their states sales tax is not collected.
 

duncsuss

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Pricing is not part of the question.

I can answer this assertion with a quote from a very wise man ...

try telling that to the Tax Man and give what he thinks is to low a number, in countries with a Value Added Tax

Believe me, as far as the Tax Man is concerned, pricing is the only thing that matters.
Oh, have you lived where a VAT is in place? I don't know of any state in the USA that levies one.

Actually the tax man is interested in the difference between the price and the cost....with the exception of the common consumption tax in the Various states in the USA where you are absolutely correct. That's why so many people on the internet buy from sellers who live where their states sales tax is not collected.

I lived in England and in Norway before moving to USA. Both those countries operate a VAT system.

It's really very simple: the purchaser pays VAT on what they buy -- it is (Price x TaxRate).

The only difference between this and a Sales Tax is that if you sell on what you bought (as part of a larger item, or processed in some fashion), you can reclaim the VAT you paid to your suppliers by deducting it from the VAT you collect from your customer.

In this way, only the final purchaser (the consumer, if you will) actually pays the VAT, everyone else in the supply chain passes the bill along to their customer.
 

Smitty37

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Pricing is not part of the question.

I can answer this assertion with a quote from a very wise man ...

try telling that to the Tax Man and give what he thinks is to low a number, in countries with a Value Added Tax

Believe me, as far as the Tax Man is concerned, pricing is the only thing that matters.
Oh, have you lived where a VAT is in place? I don't know of any state in the USA that levies one.

Actually the tax man is interested in the difference between the price and the cost....with the exception of the common consumption tax in the Various states in the USA where you are absolutely correct. That's why so many people on the internet buy from sellers who live where their states sales tax is not collected.

I lived in England and in Norway before moving to USA. Both those countries operate a VAT system.

It's really very simple: the purchaser pays VAT on what they buy -- it is (Price x TaxRate).

The only difference between this and a Sales Tax is that if you sell on what you bought (as part of a larger item, or processed in some fashion), you can reclaim the VAT you paid to your suppliers by deducting it from the VAT you collect from your customer.

In this way, only the final purchaser (the consumer, if you will) actually pays the VAT, everyone else in the supply chain passes the bill along to their customer.
Thank you...I have read that VAT does not get stated separately to the consumer as sales tax does.
 

TonyL

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It doesn't have to be separately stated in all states. It can be separately stated/presented or; it can be buried in the final invoice amount as "Sales Tax Included" (without separate statement).
 

Smitty37

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It doesn't have to be separately stated in all states. It can be separately stated/presented or; it can be buried in the final invoice amount as "Sales Tax Included" (without separate statement).
It's had to be separately stated wherever I've encountered it. That's in quite a few states but mostly in restaurants where I've never seen it included in menu prices. Bars are usually allowed to include it in the stated price of drinks it's treated there like a gross receipts tax.
 
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