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tax

tax definition - legal

A charge assessed on an individual or on property for the purpose of supporting the functioning of the government. Such charges may be imposed on sale of property or goods, imports, exports, wages and income, privileges, and just about anything else that one can think of. Although usually thought of as being monetary in nature, it is not necessarily so.

The act of imposing a charge upon individuals or property by a government or other taxing authority; to strain or place weight upon.Â

abatement of taxes

See abate.

ad valorem tax. Latin.

In proportion to its value; a proportional tax imposed upon somethingÂ’s value, rather than on its quantity (especially on real property).

alternative minimum tax

A flat tax originally imposed upon corporations or individuals with high incomes in the event that they wrote off all their income through use of deductions, credits, and contributions. It was enacted to make sure that these parties paid at least some income tax, but it also can affect middle-income families.

capital gains tax

See gain.

estate tax

A tax imposed on the property of a decedent that diminishes the value of the total estate to the inheritor. See also inheritance tax.

estimated tax

A quarterly amount paid by persons whose income is not subject to witholding tax, in anticipation of what that personÂ’s income tax liability will be come April 15 of the following year.

flat tax

A tax that remains a constant percentage regardless of the size of the amount being taxed. Most state sales taxes are flat taxes.

inheritance tax

A tax imposed upon the inheritor of property, sometimes known as a succession tax. There is no federal inheritance tax, but many states have statutes imposing such taxes. See also estate tax.

poll tax

. See poll tax.

progressive tax

See progressive tax.

property tax

An ad valorem tax upon (usually) real property, usually imposed by states and municipalities in order to support local and state services, such as schooling and policing.

regressive tax

A tax that creates a greater burden on those less well off than on those with a higher income. The structure of most sales taxes make them regressive in nature. See also progressive tax.

sales tax

A tax on the selling price of goods and some services levied by some states and some municipalities. Those goods and services taxed varies from state to state, as does the rate of taxation. The tax is usually a fixed percentage of the price and is tacked onto that price. See also flat tax.

surtax

An amount tacked onto an already taxed article, or onto the tax itself; a surcharge. See also surcharge.

transfer tax

Same as an estate tax.

unified estate and gift tax

A federal law that imposes a tax on the net worth of an estate and on gifts of and above a certain amount. Both estates and lifetime gifts are treated the same way, with the transferror being responsible for the payment of the tax, but with the responsibility passing to the transferee in the event that the former fails to pay it. Also known as the unified transfer tax.

use tax

A tax imposed by some jurisdictions on goods bought outside that jurisdiction, and so not subject to that jurisdictionÂ’s sales tax. It is usally set at the same rate as the sales tax and is meant to discourage shopping outside the jurisdiction. See also sales tax.

value added tax

A tax imposed at each step in the production or construction of a manufactured good based upon the difference between the cost of producing the item and its selling price. Abbreviated V.A.T.

witholding tax

The amount of income tax that is witheld from the paychecks of employees and sent directly to the government by the employer. It is counted as a credit toward that individualÂ’s tax liability when tax returns are filed.