From Wikipedia
Without any sales tax
A widget manufacturer spends $1 on raw materials to make a widget.
The widget is sold wholesale to a widget retailer for $1.20, making a profit of $0.20.
The widget retailer then sells the widget to a widget consumer for $1.50, making a profit of $0.30.
With a VAT
Adding on a 10% VAT:
The manufacturer pays $1.10 for the raw materials, and the seller of the raw materials pays the government $0.10.
The manufacturer charges the retailer $1.32 and pays the government $0.02 ($0.12 minus $0.10), leaving the same profit of $0.20.
The retailer charges the consumer $1.65 and pays the government $0.03 ($0.15 minus $0.12), leaving the same profit of $0.30.
So the consumer has paid 10% ($0.15) extra. The businesses have not lost anything directly to the tax, but they do have the extra paperwork to do so that they correctly pass on to the government the difference between what they collect in VAT (output VAT, an 11th of their income) and what they spend in VAT (input VAT, an 11th of their expenditure).