A turnover tax is similar to a sales tax

Sales tax

A sales tax is a tax, usually paid by the consumer at the point of purchase, itemized separately from the base price, for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale....

 or a VAT

Vat

Vat or VAT may refer to:* A type of container such as a barrel, storage tank, or tub, often constructed of welded sheet stainless steel, and used for holding, storing, and processing liquids such as milk, wine, and beer...

, with the difference that it taxes intermediate and possibly capital goods. It is an indirect tax

Indirect tax

The term indirect tax has more than one meaning.In the colloquial sense, an indirect tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax...

, typically on an ad valorem basis, applicable to a production process or stage. For example, when manufacturing activity is completed, a tax may be charged on some companies. Sales tax occurs when merchandise has been sold.

In South Africa

South Africa

The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...

, the turnover tax is a simple tax on the gross income of small businesses. Businesses who elect to pay the turnover tax are exempt from VAT

Vat

Vat or VAT may refer to:* A type of container such as a barrel, storage tank, or tub, often constructed of welded sheet stainless steel, and used for holding, storing, and processing liquids such as milk, wine, and beer...

. Turnover tax is at a very low rate compared to most taxes, but it is calculated on gross income without any deductions.