Federal, state, county and city governments collect taxes in order to provide services. These services include education, police, fire, medical emergency services, viable roads and more. Sales taxes, mandated at a state level, can include additional tax add-ons for special districts, county or city requirements. Retailers charge and collect sales tax on all retail transactions on behalf of the government jurisdiction. Retailers, in turn pay these taxes to the state. Property tax applies to real and personal property and incurs charges once a year, collected by the local jurisdiction.
Sales taxes apply to items sold at a retail level and vary from state to state. Some states may not charge taxes on raw materials used for production, or charge the wholesaler who purchases those goods for resale, but taxes do accrue at the retail level, when the product is sold to the consumer. All but five states collect sales taxes in the U.S. The five states that don't collect sales tax include Oregon, New Hampshire, Montana, Delaware and Alaska, according to "Kiplinger," a newsletter service for business people. Delaware, however, does collect a gross receipts tax, which can total 2.07 percent. States with single rate fees include West Virginia, Connecticut, District of Columbia, Rhode Island, Mississippi, Indiana, Kentucky, Maryland, Massachusetts and Maine. The single-rate tax refers to no add-ons for city, special districts and county services.
Sales Tax Applications
What sales tax applies to also varies state to state. Some states don't allow any taxes on food at all, while some allow restaurant or take-out meals taxation. In the state of California, for example, all tangible personal property sold in the state is subject to sales tax at the retail level. This includes such items as clothing, toys, antiques, used goods, furniture and all retail purchases. Labor and service changes that relate to the creation of the products are also subject to sales tax. Items not applicable to sales tax vary by state but may include human food products, sales to the U.S. government and prescription medicine sales.
Property taxes provide the largest amount of funding to state, county and city governments, representing approximately 32 percent nationwide, according to "Money-Zine." Money collected pay for public safety, social programs and education. Property tax calculates based upon the value of the property itself, depending on individual state laws. Real estate property taxes in the state of California, as an example, administered and collected by each of its 58 counties, occur semi-annually. Homeowners may choose to pay their property taxes once a year, twice a year, or elect their mortgage company to accrue these charges monthly and pay them directly to the appropriate agency.
Personal Property Tax
Depending on the state in which you live, personal property may be subject to taxes as well. The kinds of items subject to the personal property tax include portable machinery and equipment, farm equipment, leasehold improvements, off-road and racing vehicles, tools and supplies used in businesses, computers and office furniture and vehicles such as boats and airplanes. Generally household items and effects are not considered personal property subject to taxation.