What type of tax is typically paid at every stage of production or distribution?

The value added tax (VAT) is a type of tax that is levied at each stage of production and distribution of goods and services. This means that whenever a product undergoes a transformation—whether it's raw material being processed into finished goods or those goods being sold to retail—value added at each stage is taxed. The unique aspect of VAT is that businesses can also recover the tax they pay on their own purchases, which helps to avoid the issue of tax-on-tax (cascading tax effects) that can occur with other taxes such as sales tax.

In contrast, sales tax is typically charged only at the final sale to the consumer, meaning it does not accumulate and is not applied during previous stages of the production chain. Income tax is based on the earnings of individuals or corporations and does not relate specifically to the production process. Property tax applies to real estate and does not directly involve the stages of product distribution or production, making VAT the most appropriate choice for this question regarding taxation at multiple points in the production and distribution chain.