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Gene Howe
04-28-2010, 9:12 AM
....seriously considered what a VAT would do to our businesses/hobbies. Since part of my woodworking hobby is acquiring tools and gadgets, things could get dicey.

Jim Rimmer
04-28-2010, 3:33 PM
I don't have a lot of knowledge about the application of VAT. What is your opinion of how it would affect our hobby? How does it differ from a sales tax?

Mitchell Andrus
04-28-2010, 4:06 PM
Is AZ considering a VAT?
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John Baranowski
04-28-2010, 4:09 PM
To my knowledge, a VAT requires that something change the product, i.e.,
steel + Grizzly(value added) = Jointer.

Sales tax is strictly upon the sale of an item, regardless of an change in the product.
John Inc. buys jointer from manufacturer in China, slaps logo on it, sells to Jim in USA = Sales tax

Depending on how VAT is implemented, it could stack on top of existing sales taxes, further increasing costs to businesses and individuals.

Pat Germain
04-28-2010, 4:15 PM
I've heard rumors of a coming national VAT. Is this what you're speaking of? I can't comment lest I get into politics. But as a woodworker, or any other hobbyist, I wouldn't worry about it. I think it's just rumor.

Gene Howe
04-28-2010, 4:17 PM
No VAT. There is an election scheduled soon to approve/disapprove a 1 cent sales tax increase. It will automatically be repealed after 3 yrs. Supposed to go to public safety and education but, you know how that goes.:(

Belinda Williamson
04-28-2010, 4:48 PM
As I understand things, a VAT isn't so very different from sales tax as we know it. The issue I have is when we pay both.

A VAT is an amount added at each step of the process to manufacture a product from beginning to end. If I build a set of cabinets I charge a tax for converting raw material into tangible personal property. I send those cabinets to Pat, and he adds a tax amount for the finishing process. The cabinets then go to Gene to have hardware installed and he adds another tax amount, and so on. In some VAT plans there is a method of recovery for taxes imposed by the previous vendor.

As an aside, in the past I have argued almost daily with people about the requirement in the state of Georgia to charge sales tax for stone countertops. Many people believe that fabricating countertops should be billed as labor; however, per GA tax code any raw material converted into tangible personal property must be taxed. Also, once those countertops are installed I cannot remove them for nonpayment.

Tom Godley
04-28-2010, 5:12 PM
The Wiki page on it is ...... not bad.

It has a lot of efficiencies - and when properly implemented reduces fraud -- and also loss through the cash economy.


The US system is unbelievably expensive and wasteful.

Zach England
04-28-2010, 5:19 PM
When filling out my state tax return I noticed there is an area where you are supposed to document all purchases from outside my state that are brought into and consumed in my state. I immediately went to my copious documentation of all my online woodworking and other purchases and provided a precise total so the state could recoup any lost potential sales tax revenue. :)

Dan Friedrichs
04-28-2010, 5:54 PM
The US system is unbelievably expensive and wasteful.


(EDITED to retract my earlier statement that was incorrect)

Ken Fitzgerald
04-28-2010, 6:01 PM
This thread is under close scrutiny by the Mods.

I 'll bet it won't be open much longer.

Politics are against the TOSs.

Just a friendly reminder and speculation.

Jim Finn
04-28-2010, 7:00 PM
I saw a VAT tax in europe back in 1983 @ 20% I heard of a person that bought a small retail business in the Netherlands and decided to put on sale some of the, non moving, merchandise that came with the business. Put up a sign for the sale and in a few days was visited by the government saying that reducing prices that much is not allowed. When the VAT tax is 20% the government is realy a partner! And they say niet when they want too. Even transporting and retailing an item adds value to it so may be then taxed.

Brian Elfert
04-28-2010, 7:14 PM
Very true. The IRS spends something like $1 to collect $2.

I haven't combed through the federal budget much, but I very much doubt the IRS budget is 50% of what they collect. That would make their budget hundreds of billions.

Rich Stewart
04-28-2010, 7:34 PM
I guess now that healthcare reform has been passed, VAT won't be far behind. Have to pay for it somehow.

Dan Friedrichs
04-28-2010, 8:15 PM
I haven't combed through the federal budget much, but I very much doubt the IRS budget is 50% of what they collect. That would make their budget hundreds of billions.

You're right Brian - I was incorrect, and have no idea where I got that idea from. I should have done some research before posting...

Tom Godley
04-28-2010, 8:26 PM
Many countries limit discounting as well as having minimums.

France is particularly ridged regarding domestic luxury goods. It is not done for tax revenue ...........rather to maintain domestic exclusive luxury products and jobs.

Mitchell Andrus
04-29-2010, 7:45 AM
You're right Brian - I was incorrect, and have no idea where I got that idea from. I should have done some research before posting...

This might be close to correct if you only consider legal activity towards old tax debts.
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Dennis Peacock
04-29-2010, 8:37 AM
Just to ease into this?

Denmark has a 70% Income Tax rate AND a VAT tax of 25%. I lived in Italy for 4 years and owning a car over there (when I was there) was awakening. Luxury tax because my car had a radio in it, automatic transmission, and power locks. Then I had to pay a Road Tax based on how many kilometers I drove since the last time I registered my vehicle for tag and tax.

Rod Sheridan
04-29-2010, 8:43 AM
In Canada we have a defacto VAT, which is the Federal GST (Goods and Services Tax).

The 5% GST replaced the 13% manufacturing tax, levied at the manufacturing level.

Other taxes such as the PST (Provincial Sales Tax) were then levied on the retail sale, causing cascading of taxes.

A VAT eliminates that, as only the "value added" portion is taxed, not the entire value.

Regards, Rod.

Mitchell Andrus
04-29-2010, 8:46 AM
The Wiki page on it is ...... not bad.

It has a lot of efficiencies - and when properly implemented reduces fraud -- and also loss through the cash economy.


The US system is unbelievably expensive and wasteful.

I own 2 homes and 1 commercial building and have no kids in school. I wouldn't mind if the entire US school system came off of our RE taxes and was instead funded via a national VAT. That would level the entire system and make it possible to create a very simple way to allocate equitable funding.
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