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Comment by gws | Hacker News Reader

US sales tax and VAT are not the same type of tax, main difference is that sales tax is paid only at the retail level (by the consumer) while VAT is paid at every stage: a company would pay VAT to acquire raw materials, retailers VAT to acquire the packaged goods and consumers VAT on the final purchase. As far as I know no US state applies sales tax on legal bills so for US VCs there is no tax issue on this

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> so for US VCs there is no tax issue on this

Indeed. But since in this thread all VCs are considered equal it would be worthwhile to point out that particular difference lest this leads to EU venture capital companies being branded as cartel operating vultures.

As an aside, the whole thing strikes me as a PR move rather than one with real effect, it's a zero sum game, lawyers will get paid one way or the other and there is only so much money to be divided.

Regarding VAT, what you write is misleading in that VAT is also reclaimed at every step (or more usually, offset against VAT due).

The net effect is pretty much the same as a sales tax, except the tax revenue becomes due proportionally at the step in the chain where the value is added rather than all at once at the retail level.

Indeed. The effect is the same in the end if the sales tax is paid and not avoided (e.g., no receipt). With VAT at least the taxes on the intermediate steps of production will have been paid even if the retailer and consumer are cheating at the final step.

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