Understanding State Taxes

The taxes that a person is obliged to pay to the state are called state taxes. State taxes are based mainly on a taxpayer’s income at the state level. Each state has its own system of taxation which can vary from one place to another. To increase revenue, nearly all states collect income taxes, sales taxes, excise taxes, license taxes, intangible taxes, property taxes, estate taxes and inheritance taxes The combined revenue from income and sales taxes is what makes up the bulk of state taxes.

The majority of states collect income taxes while some do not. Examples of these are the states of Alaska, South Dakota, Texas, Florida, Nevada, Washington and Wyoming. State income taxes are the leading source of educational funds in the majority of states. Local residents also enjoy police and fire protection services because of state income taxes. Be aware though that federal income taxes are completely different from state income taxes. Federal tax rates vary by taxable income while state tax rates vary by jurisdiction.

State sales taxes are taxes levied on the retail sale of a particular property or service. Generally, it is the purchaser who pays for the tax but it is the vendor who transfers it to the local tax authorities. Generally, all states collect sales taxes with a few exceptions: Alaska, New Hampshire, Delaware, Oregon and Montana.

Filing state taxes is very much similar to filing federal taxes. The local people has the alternative of filing their taxes using the old pen and paper method, or just file taxes electronically with the use of E-file supported by a tax software.

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