Tax is a charge imposed on a legal entity or on individuals by a state government or equivalent of state (like MCD etc). Taxation is the act of levying tax on the entities or things. There are various ways of taxation like direct or indirect or you can say that tax is directly imposed or indirectly imposed on the things. There are various types of direct and indirect taxes levied on the entities in our country, these are:
(1) Direct Taxes: These taxes are directly collected from the person or the organization, for example income tax is collected directly from the person.
(2) Indirect Taxes: these are indirectly collected from the person who is actually liable to pay the tax. For example the property registration tax is a kind of indirect tax; other indirect taxes are sales tax, VAT (value added tax).
(3) Income Tax: This tax is charged on the person on account of his income; this tax is levied yearly and depends upon the income of the person. When the tax on the income of the company is charged then it is known as corporate tax.
(4) Property Tax: It is the tax imposed on the property of the person. The tax is calculated on the money value of the property. It is also charged annually and it is collected by equivalent body (like Municipal Corporation).
(5) Sales Tax: It is calculated on the total sales of the commodity to the consumer, it is charged at the purchase of the goods and services. It is usually a certain percentage of the total sales; there are various things that are exempted from the sales tax.
(6) Tariffs: It is also known as custom duty, it is charged on import and export of the goods through the political border. The import duty is higher as compared to the export duty; this is the only reason behind the costly products that are being imported from other countries.
(7) Toll: Toll tax is charged on traveling through vehicles, it is charged when you’re cross your state border or passing through bridge, tunnel or through an express highway etc. The toll tax charged is fixed and depends on the size and the type of the vehicle you are having.
(8) Value Added Tax (VAT): This type of tax is levied on the added value during exchange of goods between different processing companies, the basic difference between VAT and sales tax is that the value of VAT depends upon the number of steps it took to reach the consumer from the producer whereas sales tax depends upon the total value of the product after various exchanges.
(9) Wealth Tax: This tax is calculated on the total net worth of the person or the total assets a person is having on his name, this is usually a certain percentage of the total net worth of the person.
Resources:
Peter B. Diaz, CPA – Tax Consulting and Tax Preparation: Income tax return preparation, tax advice & tax planning, IRS audit representation and financial consulting. Businesses & individual taxpayers. Serving San Francisco Bay Area.