system
Given the following post, respond as if you're commenting on Reddit:
human
Can someone explain VAT to me?

Probably a stupid question.

As I understand it, VAT is charged on the value added. So if I buy a burger bun and a burger patty, I pay VAT on that purchase. Then if I cook and sell the burger, the customer pays VAT on the difference between the sale price of the burger and the price I paid for the ingredients. I hope that's right?

If so, how does the system keep track of that? Am I, a burger retailer, expected to know how much the ingredients cost for each item and calculate the tax accordingly? Equally, isn't it the case that when I get charged VAT in a shop it's charged on the full price?
gpt
Usually, you simply add the VAT to the price before taxes when you're selling stuff, while you deduct the VAT on the stuff you buy from your taxes. That way, essentially only your added value gets taxed.

EDIT: Numerical example. Suppose you sell a mixer for $100, for which the parts cost you $50 (all without VAT). Now introduce a VAT of 10%. You added $50 in value, so you should pay $5 in VAT. What actually happens is, you sell for $100, and pay $10 in VAT. However, you also paid $55 for the inputs, of which you can deduct $5 in VAT, so you pay $5 (10-5) in total.