The United States does not have a Value-Added Tax (VAT). Instead, the U.S. utilizes a decentralized system of sales tax at the state and local levels. Unlike a VAT, which is collected at every stage of production, the U.S. sales tax is only applied to the final sale to the end consumer.
Do US citizens pay VAT? U.S. citizens only pay VAT when in Europe or another country with a value-added tax. The U.S. does not operate a VAT system. Instead, it applies sales tax at the final point of sale, which is collected by the seller and remitted to the appropriate state or local authority.
VAT (Value Added Tax) and GST (Goods and Services Tax) are fundamentally the same type of consumption tax, levied on goods and services at each stage of the supply chain, but the terms are used in different countries and can have structural differences, with GST often being a unified, simpler system replacing multiple taxes (like VAT, sales tax, excise duty) into one, as seen in India and Canada. Both ensure the final consumer pays the tax, while businesses get credits for tax paid on inputs, but specific implementation, rates, and administration vary by country (e.g., EU uses VAT, India uses GST).
The U.S. is one of the few countries that does not charge VAT or GST. Instead, the U.S. uses state sales tax as its method of taxation.
The United States does not operate a national VAT system, and therefore the US government does not issue VAT numbers. Instead, businesses must navigate a complex framework of state and local Sales Tax.
VAT rates vary by EU country, typically set above a minimum of 15%, and can include reduced rates for certain goods and services. Implications for U.S. Consumers and Businesses: American travelers pay VAT included in listed prices in Europe but can reclaim it on certain purchases when leaving the EU.
The majority of goods exported to the US can be zero-rated for VAT. In other words, you don't need to charge VAT on the exported goods or extra charges such as shipping and delivery.
GST stands for Goods and Services Tax, a broad consumption tax levied on most goods and services sold for domestic consumption, collected by businesses from consumers and remitted to the government, effectively acting as an indirect tax. It's a unified tax system in many countries, replacing multiple older taxes, and is applied at each stage of production and distribution, with the final burden falling on the end consumer.
The only major economy without VAT is the United States. This is because each state in the U.S. has its own sales tax regime, with some cities or counties additionally levying a sales tax, rather than a federal sales tax.
VAT Tax by Country 2026
There is no VAT in the British Virgin Islands. There is no VAT in Brunei. The standard VAT rate is 20%. There is no VAT in the Cayman Islands.
To figure out the total price with VAT, simply multiply the original price by 1.12. To figure out how much VAT you'll be charging, simply multiply the original price by 0.12.
GST - Goods and Services Tax.
(You are considered an exporting tourist when you purchase goods and take them with you home, therefore becoming eligible for a refund of the VAT that you paid during the purchase.)
Value-added tax (VAT) is an indirect tax. It is categorized as such because it is collected and remitted by the seller rather than being directly paid by the consumer to the federal government.
In contrast, the USA does not have a VAT system for federal tax reporting and compliance. Instead, it employs a Tax Identification Number (TIN), such as: Employer Identification Number (EIN) Social Security Number (SSN)
The United States does not have a Value Added Tax (VAT) at either the federal or the state level. Sales and use taxation in the US is operated independently by each of the 50 states and the District of Columbia. Sales taxes are administered by every state except Alaska, Delaware, Montana, New Hampshire, and Oregon.
Examples of VAT exempt goods and services
VAT is levied on goods, and GST is levied on both goods and services. Even though GST requires less compliance, it can still be complicated, especially for laymen. You can get expert help for GST-related services like GST registration and GST filing.
You must register for GST if: your business has a GST turnover of $75,000 or more. your non-profit organisation has a GST turnover of $150,000 or more. you provide taxi or limousine travel (including ride-sourcing services like Uber or DiDi) regardless of your GST turnover.
The standard VAT rate in Australia is a goods and services tax (GST) of 10%. It applies to most goods and services with a few exemptions.
Who Can Claim a VAT Refund? In the USA, the opportunity to claim a VAT refund is generally reserved for foreign businesses and tourists who have incurred VAT on eligible expenses within VAT-imposing countries. US businesses may also seek VAT refunds from their business expenses in these countries.
To calculate VAT when you have the tax base:
Products that shouldn't be taxed are considered to be exempt from VAT. Businesses, charities, and other types of organisations can also be considered to be exempt from VAT. A business is VAT-exempt if they only sell VAT-exempt products, or if they're not involved with taxable 'business activities'.