# How to calculate VAT in this case?

A manufacturer X sells a TV to a wholesaler Y for 10,500. Wholesaler Y sells it to a retailer Z at a profit of 600 and the retailer Z sells it to a customer at a profit of 4000. If the VAT rate is 4% , find:

• The amount of tax received by the government on the sale of the tv.
• the amount that the customer pays for the TV
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This is just simple calculation ... Do it. Unless you do not know what VAT means? –  Calvin Lin Jan 3 '13 at 8:04
@ Calvin Lin No, I don't understand the concept really well –  Ghost Jan 3 '13 at 8:10
Do you know what VAT stands for? –  Calvin Lin Jan 3 '13 at 8:13
Yes I do, what I know is that it's payment in the form of tax at each stage of the transaction. It's calculated by the difference of the VAT on the sale and the VAT on the cost of the item at one stage. But what I dont understand is why it's the difference of these two. –  Ghost Jan 3 '13 at 8:18
Because it is a Value Added Tax, as opposed to an outright sales tax. Because Y sells it for 600 more than he bought it for, he 'created' an additional value of 600. –  Calvin Lin Jan 3 '13 at 8:23