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Dr. Ecommerce

I am doing research on VAT and e-commerce for an international tax law class. I have found information in law journals but these articles assume I have an understanding of VAT. Can you tell me where to find general information about VAT?
I appreciate any help.

thank you,

Monica

Dear Monica:

VAT is in fact quite simple in principle. It is a tax, on virtually all goods and services, that is applied at both the wholesale and retail stages.

Imagine you own a factory. You purchase raw materials for which you pay VAT. You use those materials to manufacture products which you then sell to retail outlets who pay you for the product + VAT. The retail outlets then sell these goods to consumers who also pay VAT.

However, this is clearly too much VAT being paid. So, at regular intervals (quarterly, for example, in Belgium where I live), you must submit your invoices (received and submitted) to the tax office. If you collect more tax than you receive, you must pay the excess tax to the tax office. If you collect less tax than you receive, then you can get compensated for the excess you have paid. This occurs at every level of the manufacturing and distribution chain, until it reaches the consumer. The consumer does not get VAT refunded. This is, of course, super-simplified, but it should demonstrate how VAT works. My colleagues in the Taxation and Customs Union Directorate General have a page full of tax links which provide more information than you probably want on tax. It's at http://europa.eu.int/comm/taxation_customs/
taxation/taxationlinks.htm.

All the best,

Dr. Ecommerce