VAT - (Value Added Tax, or Sales Tax), is a tax on purchases. It is charged on top of the sale price of a product, and must be returned to the relevant authority i.e. the governing body at the buyers location. VAT must be collected on digital products sold to consumers within the EU, on certain inter-state US transactions, and in a growing number of other countries.
Paddle handles all VAT requirements for products sold through its platform; how we do this is explained here.