"Sales Taxes" and VAT

Dec 05 2005

There are no sales taxes in the European Union and since VAT has been charged it is assumed that the supply of the goods took place in the UK. It is likely that the goods were purchased by the supplier in a country which imposes sales taxes. Often such taxes are relieved where the goods are exported. The sales taxes here might just be costs incurred by the supplier. Whether the supplier can pass them on by way of an addition to the agreed price will depend on the terms of the contract. There is a rule in UK legislation relating to the consideration for a supply of goods or services. Where the contract (whether written or oral) is silent on VAT the consideration is deemed to include VAT. Usually contracts say that the price for the supply is £x plus any VAT that may be applicable. In that case VAT will be added to the contractual price. If the price is just £x it is deemed to be VAT inclusive. This provision does not extend to sales taxes.

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