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Comment by edko | Hacker News Reader

Technically, there is no VAT in the US. There is sales tax, and it can vary from city to city. I guess that is why it is not included in the price by default.

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Yep; sales tax, VAT, GST, they are all pretty much the same thing. And the fact that in the US they vary by location was what I was alluding to.

> I guess that is why it is not included in the price by default

I hear that argument a lot but it does not really make sense to me. The place of purchase knowns what their tax rate is in their current location because the cash register has that information (and I assume this sales tax does not change very frequently?). So why not print out or display the prices with that tax included?

No, they are not the same thing. You pay VAT on the value added at each part of the process. So a retailer pays VAT to their wholesaler, unlike American state sales tax systems.

Yeah, but the retailer then deducts that VAT from the amount charged to the customer, so in the end it's the same, only the final customer pays VAT.

No. VAT is across the supply chain, provided they are all VAT registered. So as a business you only pay The net VAT between sales and purchases.

Er, that's what I said/meant? This is unlike US sales tax, which is only applied at the end, and on the entire value of the sale, not the value added.

Edit: Ok I see, the "you" I had in my post was confusing. VAT is charged on the value added at each point of the chain, again unlike sales/use tax.

Which is why I said 'pretty much'. In this discussion they can be regarded as the same thing.

That's fine for a local store, but what about a regional chain? Or even a national chain? What price to they advertise? Or do they need to do different advertising per tax district? (which could be city, county and/or state)

Do as the rest of the world does and include the tax in the price. Margins will obviously change between stores in different tax districts but arguably that phenomenon is already priced in today's profits: A store on the California to Oregon border has to price in the fact that their customer base could buy the same product with zero sales tax across the border.

McDonald's is offering a 99₵ burger as part of a nation wide promotion. Where I live (Florida) it's $1.06 with tax. In Oregon, it would be 99₵ (no sales tax). In North Carolina, it's $1.03 except Ashville, North Carolina has a 7% tax rate so it would be $1.07 there. What price does McDonald's advertise for their promotion?

99cent.

In Europe they have a 1 euro menu regardless of what country the burger was sold in (countries have different VAT rates). Some advertising is even shared between smaller countries that speak the same languages.

> What price does McDonald's advertise for their promotion?

I really don't care, it's their problem not mine. All I want is for stores, fast food places, etc., to be honest about the price I am to pay.

In Europe, including the UK, it is illegal to advertise only tax-exclusive prices to end customers.

This is a minor annoyance only to foreigners here on vacation. You quickly adjust to not having the tax included and it is something people in the US don't even consider unless they've traveled abroad. The system with the taxes included in the advertised price only really works when you have a national tax with no other taxes involved. No state or city will ever go for that and it really isn't bothering anyone since everyone is used to the system already.

If you want to rail against hidden charges complain about the restaurant welfare system that allows employers to legally under pay and fire employees for not making the majority of their money from tips

Dragging this back towards a HN topic, years back this caused a fight for PC computers stores. They argued that their main customers were businesses and so advertising prices "before tax" was expected by the trade customers. Others argued really most customers were hobbyists and so would pay the VAT price.

Obviously it's beneficial to be able to advertise the lower price, these days assembling your own PC from components must be much less common than it was back then so I imagine even if the decision went in their favour back then that's changed since.

In a world with tax-included prices, obviously they would advertise the local price in local media. In national media, who cares what they do? They could put "$0.99 (prices may vary)" or whatever they choose. The headache of an advertiser should be the least of your concerns when dictating consumer law. (And yes, it is law in many countries. Consumer protection laws say that consumer pricing must include VAT.)

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