> By my understanding VAT doesn't work that way. Once a user pays VAT and starts using something, that's it. The taxes are done with, and VAT doesn't pass on to later users.

VAT works something like this: when you buy X, you pay VAT on X. If you then sell X, you reclaim the VAT on X from the government. The last "user", the one that didn't sell X to anyone else (or integrate it into a larger product that they sell to anyone else) is the only one that effectively pays any tax once you draw the line.

I'm making a distinction between "user" in scare quotes and actual user.

If you did nothing but buy it, hold it, and sell it on, you didn't use the product. If you integrated it and sold it on, you didn't use the product.

Once you start actually using it, once it becomes a 'used product', selling it has no VAT and you cannot reclaim VAT. At least that's what google results told me. Were they wrong?

The whole point of VAT is that there is no such definition of "used product" or "end user". If you buy a book from a store, and have a receipt showing that you paid 1$ + 10 cents VAT, then you later sell the book to someone else for 2$, you owe the government 20 cents VAT on your sale - 10 cents which was already paid, so a total of 10 cents.

The exact law may be more complicated (you may have to pay the full 20 cents now and file for a 10 cents tax rebate; you may not be eligible for this if you are an individual and not a registered organization, etc.) but that shouldn't affect the basic principle.

For example, if you buy a computer for 100$+10$ VAT, and you then use that computer in you back office to keep your accounting, and you sell 1000$+100$ VAT worth of haircuts in the month where you bought the computer, you only owe the government 90$ of VAT even though you are an end user of the computer by any reasonable definition.

If you later sell the computer on to a refurbisher for 50$+5$VAT, and the refurbisher sells it on for 75$+7.5$ VAT, they will only owe the government 2.5$ VAT.

Oh, I think this explains why I was being lied to: "There is VAT on second-hand goods if the seller is VAT registered. Generally, businesses are required to register for VAT with HMRC once their taxable turnover reaches a certain threshold, which for the tax year 2021/2022 is £85,000"

So normal people don't have to pay VAT when selling used things, but larger entities do.

the VAT reference is that businesses don't pay VAT, only end consumers do. If you buy something and then integrate it into another product, then re-sell it you are exempt from VAT (details are more complicated, but it's _not_ like sales tax)

if you resell items, then you don't pay sales tax on them, so that part fits your description

VAT is not a sales tax because it's an income tax. That's what value added means, profit, income, the measure of the value you've added. Wether it gets hidden in the price or tacked on to a fake price makes little difference.

My understanding (based off a French accounting class from many many years ago) is that VAT also can be deducted for things like factory equipment or, say, desks for your office workers. It's not purely a "if it's for resale you don't pay sales tax" thing, but a "if this is used for business then you can get a deduction for your VAT" (with some exceptions).

I would not really describe VAT as an income tax. It's not a tax on an income, it's a tax on the value add. Income tax means something specific, and perhaps VAT is one degree away from that, but money is fungible! On a long enough time scale everything is inheritence tax and income tax I guess!

EDIT: rereading my original post at the start of this thread I now feel a bit silly saying the explanation is "VAT-like". Metaphors and similes are bad!