VAT

I was wondering how others have setup VAT integration with their installations. The default seems to add the VAT to the total (or sell price.) Personally I just get the client to add their prices excl.vat and have drupal add it on. But then the store is advertinsing everything excl.vat, which is fine for wholesaling, but what about selling to the public?

During Drupalcon Szeged, we spent a lot of time talking about how to handle VAT. Unfortunately I have only a slightly better idea of VAT today as I did before I left for DrupalCon. I would like some input from people in the community who work with VAT on a daily basis.

I'd like to try and answer the following.

1. What is VAT
2. How does it work
3. How should VAT be handled by ecommerce companies inside and outside Europe

Using this information we should be able to support VAT with Drupals commerce systems.