Earlier quoted context omitted.
The percentage doesn't matter, but the example is clearly misleading on the relative tax revenue collected under the example. How does it provide a vertical integration incentive? Sales tax is only applied at the final step (or rebates if applied before that). The main integration incentive is the ability to reduce margin at each step (if needed) and have tighter supply chain control.
Did we read the same article? Let’s be explicit and instead of talking about sales tax which the article claims sometimes acts like VAT and sometimes like a gross receipts tax and instead use those terms explicitly. In the gross receipts tax regime, tax is applied at every boundary between businesses and so having fewer of these boundaries (ie being vertically integrated) gives a lower final price with workers receiv…
The gross receipts structure is used instead of business income tax in some areas and is a separate thing from sales tax. Conflating the two doesn't help anything.
The author's link to support the structure that collects sales tax at every step is really gross receipts. Perhaps there's a better site with a good example and a link to a sales tax structure that exists as they depict it in this article. Even if it did work that way, the primary drivers for vertical integration would be the option to shrink the margins at each step and supply chain control (quality, moating, etc).
Is there an article discussing the differences in policies and rates of vertical integration between counties and the effects of it? It might be better to show that, rather than this article.