What entities collect taxes in the U.S.?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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The IRS collects federal taxes, states collect their own sets of taxes, and even local governments (such as counties or cities) collect taxes. Taxes can be called different things in different parts of the country, and sometimes even have different names for the same type of taxes.

How a Tax Entity’s Role Can Vary

Both state and local government agencies are involved in property taxes, but their roles with assessment, collection and compliance can differ. In a few states, a single state agency is primarily responsible for overall appraisal, assessment, and collection. Almost all states (except for six) have income taxes, collected from a state agency; property taxes, however, are usually collected locally through an office in the county government (though California requires state collection).

For the most part, the responsibilities for the various phases of property tax (levy, appraisal, collection) rests almost entirely upon the taxing units of local government. A “taxing unit,” such as a county, city, town, hospital, garbage, education, or special district, is a legal part of the government with elected or appointed officers, who serve a distinct geographic area.

Negotiating Tax Rates

Because major corporations can also bring jobs, along with costs for new services or roads and lights, governments often negotiate how much they will charge for a company to move into a community. Obviously, the results of such negotiations can play a big part in where a business decides to operate. If exceptions to the tax rules prove necessary, new and special rules are passed by local or state governments, allowing the elected officials to make these taxing decisions.

Voters are often asked to approve special “levies,” which are types of taxes, to be collected from the local tax assessor’s office. The purpose of levies can range from school operations to library bonds. There are also specific sets of rules for certain types of businesses. For example, state agencies’ tax rates typically determine some or even all of the operating properties of railroads and utilities.

Variations on Tax Names and Standards

Sometimes, local tax entities may use other names for taxes, such as “fees,” “assessments,” or “licenses.” Entertainers who are nationally known, such as pro athletes, can sometimes receive special treatment in some of the states where they play, such that on days they are “working” in another state, they pay much higher tax rates than normally. In cities such as New York City and Los Angeles, virtually whole tax divisions are dedicated to tracking the work (and worth) of these out-of-state taxpayers.

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