VAT vs GST vs Sales Tax
Mechanically, VAT and GST are near-identical: collected at each stage of the supply chain with input tax reclaimable by registered businesses. US sales tax is a single-stage tax on the final sale and is generally not reclaimable by the buyer. The arithmetic in the Tax Calculator is the same for all three — but the rules for when you charge, what you register for, and how you file are completely different.
Last reviewed 17 Sep 2026.
The mechanical difference in one table
| Feature | VAT (Value Added Tax) | GST (Goods & Services Tax) | Sales Tax (US) |
|---|---|---|---|
| Collection points | Every stage (manufacturer → wholesaler → retailer → consumer) | Every stage (same as VAT) | Final sale only (retailer → consumer) |
| Input tax reclaim | Yes — registered businesses deduct VAT paid on purchases | Yes — registered businesses claim input tax credits | No — generally not reclaimable (resale certificates exist but differ) |
| Invoice requirement | Tax invoice mandatory for B2B | Tax invoice mandatory for B2B | No federal mandate; state rules vary |
| Cross-border B2B services | Reverse charge (buyer accounts for tax) | Reverse charge / import GST rules | Generally no tax if no nexus; complex state-by-state |
| Exports | Zero-rated (0% VAT, input credits retained) | Zero-rated or GST-free | Generally exempt (destination principle) |
| Filing frequency | Monthly/quarterly (varies by country) | Monthly/quarterly (varies by country) | Monthly/quarterly/annual (varies by state) |
| Registration threshold | Country-specific (e.g., UK £90k, Germany €22k) | Country-specific (e.g., AU $75k, IN ₹20L/₹40L) | State-specific economic nexus (often $100k/200 transactions) |
What this means for your invoices
The Tax Calculator does the same arithmetic for all three because the maths is identical: a percentage applied to a base. But the label you put on the invoice and the registration number you show depend entirely on the system:
- VAT: Label
VAT
. Show your VAT number (e.g., GB123456789). Client needs their VAT number for reverse charge. - GST: Label
GST
. Show your GSTIN/ABN/GST number. Client needs theirs for input credits. - Sales Tax: Label
Sales Tax
orTax
. Show your state permit number if required. No client number needed.
Common freelancer scenarios
UK freelancer → UK client
Charge UK VAT (20% standard) if you are VAT-registered. If not registered, charge no VAT. Invoice shows VAT
label and your VAT number.
UK freelancer → EU business client
Usually reverse charge: you do not charge VAT. Invoice shows Reverse charge: VAT accounted for by recipient
(or similar wording per EU directive), your VAT number, and client's VAT number. Use the Tax Calculator in exclusive mode with 0% rate.
UK freelancer → US client
Export of services: typically zero-rated (0% VAT). No VAT charged. Invoice shows VAT
label at 0% or Zero-rated export
. Keep evidence of the client's location.
Australian freelancer → Australian client
Charge GST (10%) if registered. Invoice titled Tax Invoice
, shows your ABN, client's ABN (if B2B), GST amount or GST included
.
Indian freelancer → Indian client
Charge GST at applicable slab (5%, 12%, 18%, 28%). Invoice shows GSTIN of both parties, HSN/SAC code, CGST/SGST (intra-state) or IGST (inter-state).
US freelancer → US client
Sales tax applies only if you have nexus in the client's state (physical presence or economic nexus). Rates vary by state, county, and city. Use the Tax Calculator in Custom
mode with the combined rate.
US freelancer → non-US client
Generally no US sales tax on export of services. But check the client's country rules — they may have VAT/GST obligations on imported services (e.g., EU VAT on digital services, Australian GST on low-value imports).
The label dropdown in the Invoice Generator
The generator's Tax label
dropdown offers: Sales Tax, VAT, GST, Service Tax, Tax. Pick the one that matches your jurisdiction's legal terminology. The arithmetic is identical; only the printed label changes.
How each regime decides you are chargeable
This is the part that actually differs, and the part that stays true. Before you are on a register, each system asks the same question in a different shape, and the shape is what catches people out.
| System | The trigger | Counted over | Watches for |
|---|---|---|---|
| UK VAT | Taxable turnover, excluding VAT itself, certain zero-rated sales and some exempt income | A rolling 12-month period | Voluntary registration below the threshold can still be worthwhile — check the breakeven against your own costs |
| German VAT | Turnover of the previous calendar year | A calendar year, not rolling | Cross the line in December and you are registered for the whole following year — a very different cash-flow shape from the UK |
| Australian GST | Taxable turnover for connected transactions | A rolling basis, with a GST turnover calculation that is not simply your bank deposits | Running a business before registering is taxable, so back-payment can be owed |
| Indian GST | Taxable turnover, with a lower threshold for services than for goods, and lower again in some states for special categories | A financial year, and the rate is specified in lakhs and crores, not millions | Composition and regular registration are different regimes with very different filing obligations |
| Canadian GST/HST | Taxable supplies, and a small-supplier level below which most obligations do not apply | Four consecutive quarters | Resgistering is usually optional, but once you have been registered for four consecutive quarters you generally cannot leave again by choice |
| Singapore GST | Taxable turnover, with a much higher threshold than most other systems | Rolling, and assessed at each year end rather than continuously | Voluntary registration below the threshold is widely used, because the local input costs are high |
| UAE VAT | Taxable supplies, with voluntary registration available below the mandatory level | A rolling 12-month period | Free-zone supplies are treated separately, and the rules there are not the same as mainland supplies |
| US sales tax | Economic nexus: sales into the state, counted separately in every state where you are registered | Rolling 12 months, per state, on different thresholds | There is no US threshold. A hundred thousand dollars is a figure that appears in many state rules and in none of them universally |
Why there is no table of registration thresholds here. The numbers exist and they matter, but they are also the single fastest-changing fact in this entire guide: several of the figures above have moved within the last few years, some more than once, and at least one widely-published threshold has been changed twice in under five years. A static page that quotes them is right until the day it is quietly wrong, and “you were wrong about the VAT threshold” is an expensive sentence to write. Look up the current threshold on your own tax authority’s site — that page takes two minutes, is authoritative, and is never out of date. The table above is the part that will not change: what gets counted, over what period, and what the regime is watching for.
This guide explains mechanical differences between tax systems. It is not tax advice. Registration obligations, place-of-supply rules, reverse-charge applicability, and filing requirements vary by jurisdiction and change over time. Verify with a qualified tax professional.
Run the numbers
Sales Tax, VAT & GST Calculator - works both ways round, and shows the arithmetic it used underneath.
Open Sales Tax, VAT & GST CalculatorRead next
- Tax Exclusive vs Tax InclusiveThe division mistake almost everyone makes, and the correct way round both calculations.
- Charging Tax to Overseas ClientsPlace of supply, reverse charge, and when the honest answer is to charge nothing at all.
- What an Invoice Must ContainThe mandatory fields, the tax numbers, and the payment terms that belong on the page.
Guidance only, not accounting, tax or legal advice. Requirements and thresholds change — check anything that costs you money with a qualified professional in your jurisdiction.