VAT = Value Added Tax. Tax should be paid whenever there was value added to a product/service, and it was sold.

The manufacturer has paid VAT, and will get back the paid VAT from the tax authorities. It then adds value (value added tax). It has to charge VAT of the full amount. So, the company in the chain pays VAT over the profit of that product/service. For example (assume 20% VAT):

Company 1 creates something with 0 cost, and sells for 100. Needs to add VAT (20) and pay that to the tax authority. 20 has been collected.

Company 2 buys it for the 120, packages and labels it, then sells it for 180 but needs to add 36 VAT. The company will file a tax return of 20-36, so will effectively have to pay 16 to the tax authority. Another 16 has been collected.

Consumer buys it for 216 and doesn't get any VAT back.

Effectively, 20 + 16 = 36 VAT has been collected over time. The tax return can only be done by companies with a VAT registration. In some cases the VAT burden can be inverted in b2b transactions and within the EU. This is there so companies don't have to do cross-border tax returns.