What is the difference between sales tax and value-added tax?
August 26, 2022 | 30,00 EUR | answered by Felix Schönecker
Dear tax advisor,
My name is Marie Weiss and I am a self-employed entrepreneur. In my business, I specialize in selling handmade jewelry. Lately, I have experienced some confusion about the exact difference between turnover tax and value added tax. I am aware that both taxes are levied on the sales I make, but I am unsure if there is actually a difference between the two and if I need to pay both taxes.
Currently, I regularly submit turnover tax returns and pay the corresponding amounts to the tax office. However, I am not sure if I also need to pay value added tax and if it may have implications for my business.
My concerns are that I do not fully understand how the two taxes differ from each other and if I may be making errors in calculating or paying the taxes. Additionally, I fear that I may incur additional costs if I have to pay value added tax.
Could you please explain to me the exact difference between turnover tax and value added tax and tell me if as an entrepreneur I need to pay both taxes? Are there any solutions to ensure that I calculate and pay the taxes correctly without incurring additional costs?
Thank you in advance for your help and support.
Kind regards,
Marie Weiss
Dear Mrs. Weiss,
Thank you for your inquiry regarding the difference between turnover tax and value-added tax. I understand your confusion and will gladly explain in detail what these two types of taxes entail.
Essentially, it is important to understand that turnover tax and value-added tax are essentially the same thing - they both refer to the tax levied on a company's turnover. However, the main difference lies in how they are levied. Turnover tax is the term for the tax levied in Germany, while value-added tax is the corresponding tax in other European countries.
As a business owner in Germany, you are therefore required to pay turnover tax. This tax is calculated on the turnover you generate and must be paid to the tax office typically on a quarterly basis. In contrast, value-added tax is not separately payable in Germany, as it is already included in the turnover tax.
Therefore, as a business owner in Germany, you only need to calculate and pay the turnover tax. There are no additional costs for value-added tax. It is important to calculate the turnover tax correctly to avoid errors and potential fines.
To ensure that you calculate and pay the taxes correctly, I recommend seeking the advice of a tax consultant. A tax consultant can help you calculate the turnover tax correctly, keep you informed about relevant changes in the law, and assist you in preparing and submitting the turnover tax returns.
I hope that this explanation has been helpful to you. If you have any further questions or need assistance, please do not hesitate to contact me.
Kind regards,
Felix Schönecker
