In the UK they have VAT, a sales tax on every transaction. So if you buy a thing for $1000 with 10% VAT, you actually pay the seller $1100. You then sell it for $1200 + 10% Vat = $1320 you collect. You remit the $120 VAT you collected to the government, but you first deduct the $100 VAT you paid as an input tax credit = $20 paid to government. Works out like sales taxes, where intermediate buyers have sales tax exemptions, but it is harder to cheat as there are no VAT exemptions = if you are exempt = Foreign Embassy, you file a VAT refund claim to the government, same if you export to someone outside your VAT area.