GST, VAT, and sales tax all add a charge on top of the price of goods and services — but they work differently. Understanding which one applies to you determines how you display tax on your invoices.

Sales Tax

Used in: United States (most states), some other countries

Sales tax is a single-stage tax charged only at the final point of sale to the end consumer. Businesses do not charge sales tax on B2B transactions if the buyer has a resale certificate.

  • Collected by the seller at the register or on the invoice
  • Remitted to the state and/or local government
  • Rates vary by state, county, and city (e.g., 0% in Oregon, ~10% in parts of Louisiana)
  • Only the final seller collects it — no credit mechanism along the supply chain

On your invoice: Show the tax rate and amount as a separate line (e.g., "Sales Tax (8.25%): $41.25").

VAT (Value-Added Tax)

Used in: European Union, UK, most of Asia, Africa, and South America

VAT is a multi-stage tax collected at every step of the supply chain. Each business charges VAT on its sales and claims back the VAT it paid on its purchases (input tax credits). Only the end consumer ultimately bears the full cost.

  • Standard rates range from 5% (some Gulf states) to 27% (Hungary)
  • Businesses must register for VAT above a revenue threshold
  • Requires a VAT number on every invoice
  • VAT-registered buyers can reclaim the VAT they pay

On your invoice: Show your VAT number, the net amount, the VAT rate and amount, and the gross total.

GST (Goods and Services Tax)

Used in: Australia, India, Canada, New Zealand, Singapore, Malaysia

GST is structurally similar to VAT — it is a multi-stage tax with input tax credits. The main difference is branding and local rules. Some countries (like Canada and India) layer GST with additional regional taxes.

  • Australia: 10% GST
  • India: Multiple GST rates (5%, 12%, 18%, 28%) plus state-level SGST
  • Canada: 5% federal GST; some provinces add HST or PST
  • New Zealand: 15% GST
  • Singapore: 9% GST

On your invoice: Show your GST registration number (ABN, GSTIN, etc.), the taxable amount, the GST amount, and the total.

Quick Comparison

| | Sales Tax | VAT | GST | |---|---|---|---| | Stages taxed | Final sale only | Every stage | Every stage | | Input credits | No | Yes | Yes | | Typical regions | USA | EU, UK | Australia, India, Canada | | Registration number | Sometimes | Always (above threshold) | Always (above threshold) | | On invoice | Rate + amount | Net + VAT + gross | Subtotal + GST + total |

Example

Selling a $1,000 service in three different countries:

US (8% sales tax):

  • Service: $1,000 → Sales Tax: $80 → Total: $1,080

UK (20% VAT):

  • Net: $1,000 → VAT: $200 → Gross: $1,200 (buyer can reclaim VAT if VAT-registered)

Australia (10% GST):

  • Subtotal: $1,000 → GST: $100 → Total: $1,100 (buyer can claim GST credit if registered)

Common Mistakes

  • Charging the wrong tax type. If you sell to a customer in the EU, you may need to charge VAT even if your home country uses GST.
  • Not registering when required. Most countries require tax registration once your revenue exceeds a threshold.
  • Mixing tax-inclusive and tax-exclusive pricing. Be consistent — state whether your prices include or exclude tax.
  • Forgetting to show the tax registration number. Without it, the invoice may not be valid for tax purposes.