TAX

tax, n. A monetary charge imposed by the government on persons, entities, transactions, or property to yield public revenue. • Most broadly, the term embraces all governmental impositions on the person, property, privileges, occupations, and enjoyment of the people, and includes duties, imposts, and excises. Although a tax is often thought of as being pecuniary in nature, it is not necessarily payable in money. [Cases: Internal Revenue 3001; Taxation 1, 856.1, 906.11, 931, 1201. C.J.S. Internal Revenue § 2; Taxation §§ 1–3, 5–6, 1693, 1783–1785, 1792, 1990, 1993.] — tax, vb.

“Taxes are the enforced proportional contributions from persons and property, levied by the state by virtue of its sovereignty for the support of government and for all public needs. This definition of taxes, often referred to as ‘Cooley’s definition,’ has been quoted and indorsed, or approved, expressly or otherwise, by many different courts. While this definition of taxes characterizes them as ‘contributions,’ other definitions refer to them as ‘imposts,’ ‘duty or impost,’ ‘charges,’ ‘burdens,’ or ‘exactions’; but these variations in phraseology are of no practical importance.” 1 Thomas M. Cooley, The Law of Taxation§ 1, at 61–63 (Clark A. Nichols ed., 4th ed. 1924).

accrued tax. A tax that has been incurred but not yet paid or payable.

accumulated-earnings tax. A penalty tax imposed on a corporation that has retained its earnings in an effort to avoid the income-tax liability arising once the earnings are distributed to shareholders as dividends.

— Also termed undistributed-earnings tax. [Cases: Internal Revenue 3843–3845. C.J.S. Internal Revenue §§ 381–382.]

additional tax. See stopgap tax.

admission tax. A tax imposed as part of the price of being admitted to a particular event. [Cases: Theaters and Shows

3. C.J.S. Entertainment and Amusement; Sports§§ 18–19, 22, 25–37.]

ad valorem tax. A tax imposed proportionally on the value of something (esp. real property), rather than on its quantity or some other measure. [Cases: Taxation

1. C.J.S. Taxation §§ 1–3, 5–6.]

“[A]n ad valorem tax is a tax of a fixed proportion of the value of the property with respect to which the tax is assessed, and requires the intervention of assessors or appraisers to estimate the value of such property before the amount due from each taxpayer can be determined.” 71 Am. Jur. 2d State and Local Taxation §§ 20, at 355 (1973).

alternative minimum tax. A tax, often a flat rate, potentially imposed on corporations and higher-income individuals to ensure that those taxpayers do not avoid too much (or all) income-tax liability by legitimately using exclusions, deductions, and credits. — Abbr. AMT.

— Also termed minimum tax. [Cases: Internal Revenue 3550. C.J.S. Internal Revenue §§ 358–361.]

amusement tax. A tax on a ticket to a concert, sporting event, or the like. • The tax is usu. expressed as a percentage of the ticket price. [Cases: Theaters and Shows 3, 3.40, 3.60. C.J.S. Entertainment and Amusement; Sports§§ 18–19, 22, 24–37, 48.]

betterment tax. See BETTERMENT TAX.

capital-gains tax. A tax on income derived from the sale of a capital asset. • The federal income tax on capital gains typically has a more favorable tax rate — for example, 20% for an individual and 34% for a corporation — than the otherwise applicable tax rate on ordinary income. See CAPITAL GAIN. [Cases: Internal Revenue 3230.1–3260. C.J.S. Internal Revenue §§ 127–145, 490–491.]

capital-stock tax.

1. A tax on capital stock in the hands of a stockholder. [Cases: Taxation 119.]

2. A state tax for conducting business in the corporate form, usu. imposed on out-of-state corporations for the privilege of doing business in the state. • The tax is usu. assessed as a percentage of the par or assigned value of a corporation’s capital stock.

capitation tax. See poll tax.

classified tax. A tax system in which different rates are assessed against different types of taxed property.

collateral-inheritance tax. A tax levied on the transfer of property by will or intestate succession to a person other than the spouse, a parent, or a descendant of the decedent. Cf. legacy tax. [Cases: Taxation 856.

1. C.J.S. Taxation §§ 1783–1785, 1792.]

commutation tax.

1. A combination of two or more taxes that is or can be substituted for something else that could be imposed, such as a demand for other taxes or the performance of personal services. • For example, an excise or franchise tax may be combined with a local tax in lieu of all other taxes related to the subject matter.

2. Hist. A tax imposed on shipowners, requiring them to post a bond or remit a payment per foreign passenger. • In the 19th-century, the tax was used to discourage immigration and to raise revenue to defray the costs of supporting indigent immigrants who had remained in the U.S.

3. Hist. A 1784 tax intended to reduce tea-smuggling and increase tax revenue by cutting the tax on tea and raising the tax on windows. • To avoid payment of the tax, many people boarded up their windows.

consumption tax. A tax imposed on sale of goods or services to be consumed. [Cases: Taxation 1201. 1.]

death tax.

1. See estate tax.

2. See inheritance tax.

delinquent tax. A tax not paid when due. [Cases: Internal Revenue 4827; Taxation 526, 903, 906.20, 1096, 1331. C.J.S. Internal Revenue §§ 725–726; Taxation §§ 883–884, 1777–1778, 1976, 1978–1981, 2055.]

direct tax. A tax that is imposed on property, as distinguished from a tax on a right or privilege. • A direct tax is presumed to be borne by the person upon whom it is assessed, and not “passed on” to some other person. Ad valorem and property taxes are direct taxes. [Cases: Internal Revenue 3059–3064; Taxation

1. C.J.S. Internal Revenue § 4; Taxation §§ 1–3, 5–6.]

documentary-stamp transfer tax. See stamp tax.

erroneous tax.

1. A tax levied without statutory authority. [Cases: Taxation 498, 536, 608(2). C.J.S. Social Security and Public Welfare § 208; Taxation§§ 801–804, 915, 1093.]

2. A tax on property not subject to taxation.

3. A tax levied by an officer who lacks authority to levy the tax.

— Also termed illegal tax.

estate tax. A tax imposed on the transfer of property by will or by intestate succession.

— Also termed death tax; death duty. Cf. inheritance tax. [Cases: Internal Revenue 4145; Taxation 856.

1. C.J.S. Internal Revenue §§ 500–502; Taxation §§ 1783–1785, 1792.]

estimated tax. A tax paid quarterly by a taxpayer not subject to withholding (such as a self-employed person) based on either the previous year’s tax liability or an estimate of the current year’s tax liability. [Cases: Internal Revenue 4827, 4832, 5219.40; Taxation 1096. C.J.S. Internal Revenue §§ 725–726, 733, 821; Taxation §§ 1777–1778.]

excess-profits tax. A tax levied on profits that are beyond a business’s normal profits. • This type of tax is usu. imposed only in times of national emergency (such as war) to discourage profiteering. [Cases: Internal Revenue 4130–4136. C.J.S. Internal Revenue § 670.]

excise lieu property tax. A tax on the gross premiums received and collected by designated classes of insurance companies. [Cases: Taxation 140. C.J.S. Taxation §§ 217–218.]

excise tax. See EXCISE.

export tax. A tax levied on merchandise and goods shipped or to be shipped out of a country.

flat tax. A tax whose rate remains fixed regardless of the amount of the tax base. • Most sales taxes are flat taxes.

— Also termed proportional tax. Cf. progressive tax; regressive tax. [Cases: Taxation 1281. C.J.S. Taxation §§ 2035–2036.]

floor tax. A tax imposed on distilled spirits stored in a warehouse. [Cases: Internal Revenue 4314. C.J.S. Internal Revenue § 597.]

franchise tax. A tax imposed on the privilege of carrying on a business (esp. as a corporation), usu. measured by the business’s income. See FRANCHISE. [Cases: Taxation 117. C.J.S. Taxation §§ 177–180, 199.]

general tax.

1. A tax that returns no special benefit to the taxpayer other than the support of governmental programs that benefit all. [Cases: Taxation 1, 22. C.J.S. Taxation §§ 1–3, 5–6.]

2. A property tax or an ad valorem tax that is imposed for no special purpose except to produce public revenue. Cf. special assessment under ASSESSMENT.

generation-skipping tax. A tax on a property transfer that skips a generation. • The tax limits the use of generation-skipping techniques as a means of avoiding estate taxes. [Cases: Internal Revenue 4220. C.J.S. Internal Revenue §§ 576–578.]

generation-skipping transfer tax. A gift or estate tax imposed on a generation-skipping transfer or a generation-skipping trust. — Sometimes shortened to generation-skipping tax; transfer tax. IRC (26 USCA) §§ 2601–2663. See DIRECT SKIP; GENERATION-SKIPPING TRANSFER; generation-skipping trust under TRUST; TAXABLE DISTRIBUTION. [Cases: Internal Revenue 4220–4228. C.J.S. Internal Revenue §§ 576–578.]

gift tax. A tax imposed when property is voluntarily and gratuitously transferred. • Under federal law, the gift tax is imposed on the donor, but some states tax the donee. [Cases: Internal Revenue 4200; Taxation 906.10. C.J.S. Internal Revenue §§ 493–494, 499, 557–565, 573–575; Taxation §§ 1783–1784.]

graduated tax. A tax employing a rate schedule with higher marginal rates for larger taxable bases (income, property, transfer, etc.)

— Also termed progressive tax.

gross-income tax. A tax on gross income, possibly after deduction for costs of goods sold, rather than on net profits; an income tax without allowance for expenses or deductions. See gross income under INCOME. [Cases: Internal Revenue 3110; Taxation 979, 1202.

5. C.J.S. Internal Revenue §§ 59–60; Taxation § 1991.]

gross-receipts tax. A tax on a business’s gross receipts, without a deduction for costs of goods sold, or allowance for expenses or deductions. See GROSS RECEIPTS.

head tax.

1. See poll tax.

2. HEAD MONEY(3).

hidden tax. A tax that is paid, often unknowingly, by someone other than the person or entity on whom it is levied; esp., a tax imposed on a manufacturer or seller (such as a gasoline producer) who passes it on to consumers in the form of higher prices.

highway tax. A tax raised to pay for the construction, repair, and maintenance of highways. [Cases: Highways 123.]

holding-company tax. A federal tax imposed on undistributed personal-holding-company income after allowing deductions for such things as dividends paid. IRC (26 USCA) § 545.

— Also termed personal-holding-company tax. [Cases: Internal Revenue 3850.1–3858. C.J.S. Internal Revenue §§ 383–386.]

illegal tax. A tax that violates the law, esp. the constitution. • For an example, see poll tax. See erroneous tax.

income tax. A tax on an individual’s or entity’s net income. • The federal income tax — set forth in the Internal Revenue Code — is the federal government’s primary source of revenue, and most states also have income taxes. Cf. property tax; EXCISE. [Cases: Internal Revenue 3065–4122; Taxation 931–1104. C.J.S. Indians § 131; Internal Revenue§§ 12–14, 16–492, 501, 638–639, 670–673, 797–800; Taxation §§ 1693–1782.]

indirect tax. A tax on a right or privilege, such as an occupation tax or franchise tax. • An indirect tax is often presumed to be partly or wholly passed on from the nominal taxpayer to another person. [Cases: Licenses

1. C.J.S. Architects § 8; Licenses §§ 2–4.]

inheritance tax.

1. A tax imposed on a person who inherits property from another (unlike an estate tax, which is imposed on the decedent’s estate). • There is no federal inheritance tax, but some states have an inheritance tax (though it is creditable or deductible under the federal estate tax).

— Also termed succession tax; death tax. Cf. estate tax. [Cases: Taxation 856.1–906. C.J.S. Taxation §§ 1783–1989.]

2. Loosely, an estate tax.

in lieu tax. A tax imposed as a substitute for another.

intangible tax. A state tax imposed on the privilege of owning, transferring, devising, or otherwise dealing with intangible property. [Cases: Taxation

1. C.J.S. Taxation §§ 1–3, 5–6.]

interest-equalization tax. A tax imposed on a U.S. citizen’s acquisition of stock issued by a foreign issuer or a debt obligation of a foreign obligor, but only if the obligation did not mature within a year. • This tax was repealed in the mid-1970s. IRC (26 USCA) § 4911.

kiddie tax. Slang. A federal tax imposed on a child’s unearned income (above an exempt amount) at the parents’ tax rate if the parents’ rate is higher and if the child is under 14 years old.

— Also termed child’s income tax.

land tax. See property tax.

legacy tax. A tax on a legacy, often with the provision that the rate increases as the relationship of the legatee becomes more remote from the testator. • In English law, this tax was known as a legacy duty; it was abolished in 1949. Cf. collateral-inheritance tax. [Cases: Taxation 856.

1. C.J.S. Taxation §§ 1783–1785, 1792.]

luxury tax. An excise tax imposed on high-priced items that are not deemed necessities (such as cars costing more than a specified amount). Cf. sin tax. [Cases: Taxation 1201.1–1345. C.J.S. Indians § 131; Steam§ 4; Taxation §§ 1990–2071.]

minimum tax. See alternative minimum tax.

nanny tax. Slang. A federal social-security tax imposed on the employer of a domestic employee if the employer pays that employee more than a specified amount in total wages in a year. • The term, which is not a technical legal phrase, was popularized in the mid-1990s, when several of President Clinton’s nominees were found not to have paid the social-security tax for their nannies.

occupation tax. An excise tax imposed for the privilege of carrying on a business, trade, or profession. • For example, many states require lawyers to pay an occupation tax.

— Also termed occupational tax. [Cases: Licenses

1. C.J.S. Architects § 8; Licenses §§ 2–4.]

payroll tax.

1. A tax payable by an employer based on its payroll (such as a social-security tax or an unemployment tax). [Cases: Internal Revenue 4849; Taxation 1100. C.J.S. Internal Revenue §§ 740–741; Taxation§ 1779.]

2. A tax collected by an employer from its employees’ gross pay (such as an income tax or a social-security tax). See withholding tax.

per capita tax. See poll tax.

personal-holding-company tax. See holding-company tax.

personal-property tax. A tax on personal property (such as jewelry or household furniture) levied by a state or local government. [Cases: Taxation 67. C.J.S. Taxation §§ 114, 120, 122, 125, 129–130.]

pickup tax. Slang. A state death tax levied in an amount equal to the federal death-tax credit.

— Also termed sponge tax.

poll tax. A fixed tax levied on each person within a jurisdiction. • The 24th Amendment prohibits the federal and state governments from imposing poll taxes as a condition for voting.

— Also termed per capita tax; capitation tax; capitation; head tax. [Cases: Elections 83; Taxation 106. C.J.S. Elections § 29; Taxation §§ 1671–1672.]

premium tax. A state tax paid by an insurer on premiums paid by the insured. [Cases: Taxation 140. C.J.S. Taxation §§ 217–218.]

privilege tax. A tax on the privilege of carrying on a business or occupation for which a license or franchise is required. [Cases: Licenses

1. C.J.S. Architects § 8; Licenses §§ 2–4.]

progressive tax. A tax structured so that the effective tax rate increases more than proportionately as the tax base increases, or so that an exemption remains flat or diminishes. • With this type of tax, the percentage of income paid in taxes increases as the taxpayer’s income increases. Most income taxes are progressive, so that higher incomes are taxed at a higher rate. But a tax can be progressive without using graduated rates.

— Also termed graduated tax. Cf. regressive tax; flat tax. [Cases: Internal Revenue 3545–3552; Taxation 1061–1065. C.J.S. Internal Revenue §§ 331–333, 335, 358–361, 797; Taxation § 1698.]

property tax. A tax levied on the owner of property (esp. real property), usu. based on the property’s value. • Local governments often impose property taxes to finance school districts, municipal projects, and the like.

— Also termed (specif.) land tax. Cf. income tax; EXCISE. [Cases: Taxation 57–111. C.J.S. Taxation §§ 4, 79–168, 283, 1671–1672, 1674, 1681–1692.]

proportional tax. See flat tax.

regressive tax. A tax structured so that the effective tax rate decreases as the tax base increases. • With this type of tax, the percentage of income paid in taxes decreases as the taxpayer’s income increases. A flat tax (such as the typical sales tax) is usu. considered regressive — despite its constant rate — because it is more burdensome for low-income taxpayers than high-income taxpayers. A growing tax exemption also produces a regressive tax effect. Cf. progressive tax; flat tax. [Cases: Internal Revenue 3545–3552; Taxation 1061–1065. C.J.S. Internal Revenue §§ 331–333, 335, 358–361, 797; Taxation § 1698.]

repressive tax. See sin tax.

sales tax. A tax imposed on the sale of goods and services, usu. measured as a percentage of their price.

— Also termed retail sales tax. See flat tax. [Cases: Taxation 1201.1–1345. C.J.S. Indians § 131; Steam§ 4; Taxation §§ 1990–2071.]

“While the term ‘sales tax’ encompasses a large variety of levies, the term often refers to the ‘retail sales tax,’ where the tax is separately stated and collected on a transaction-by-transaction basis from the consumer; although the economic burden of the sales tax falls upon the consumer, the seller has the statutory duty to collect the tax for the taxing jurisdiction.” 68 Am. Jur. 2d Sales and Use Tax§ 1, at 11 (1993).

self-employment tax. The social-security tax imposed on the net earnings of a self-employed person. [Cases: Internal Revenue 4381. C.J.S. Internal Revenue §§ 579–580, 582; Social Security and Public Welfare § 33.]

service-occupation tax. A tax imposed on persons who sell services, usu. computed as a percentage of net cost of the tangible personal property (e.g., materials and goods) transferred as an incident to the sale. [Cases: Taxation 1237. C.J.S. Taxation § 2018.]

severance tax. A tax imposed on the value of oil, gas, timber, or other natural resources extracted from the earth. [Cases: Logs and Logging 4; Mines and Minerals 87. C.J.S. Logs and Logging § 26; Mines and Minerals §§ 334, 373–374.]

sinking-fund tax. A tax to be applied to the repayment of a public loan.

sin tax. An excise tax imposed on goods or activities that are considered harmful or immoral (such as cigarettes, liquor, or gambling).

— Also termed repressive tax. Cf. luxury tax.

special tax.

1. A tax levied for a unique purpose.

2. A tax (such as an inheritance tax) that is levied in addition to a general tax. [Cases: Taxation 24. C.J.S. Taxation §§ 22, 25.]

specific tax. A tax imposed as a fixed sum on each article or item of property of a given class or kind without regard to its value.

sponge tax. See pickup tax.

stamp tax. A tax imposed by requiring the purchase of a revenue stamp that must be affixed to a legal document (such as a deed or note) before the document can be recorded.

— Also termed documentary-stamp transfer tax. [Cases: Internal Revenue 4390–4409.]

state tax.

1. A tax — usu. in the form of a sales or income tax — earmarked for state, rather than federal or municipal, purposes. [Cases: Taxation

1. C.J.S. Taxation §§ 1–3, 5–6.]

2. A tax levied under a state law.

stock-transfer tax. A tax levied by the federal government and by some states on the transfer or sale of shares of stock. — Often shortened to transfer tax. [Cases: Internal Revenue 4404; Taxation 105.

5. C.J.S. Taxation §§ 167, 1681–1692.]

“Some state statutes impose special taxes, usually in the form of a stamp tax, upon sales and agreements for sale and other transfers of stock in corporations. Such a tax is in the nature of an excise tax on the transfer. Taxes on the issuance and transfer of corporate stock, commonly known as ‘stock transfer taxes’ and payable by means of stamps, are constitutional, as within the power of state governments.” 71 Am. Jur. 2d State and Local Taxation § 643, at 896 (1973).

stopgap tax. A tax, usu. temporary, levied during the term of a budget to cover an unexpected deficit.

— Also termed additional tax.

succession tax. See inheritance tax (1).

surtax. An additional tax imposed on something being taxed or on the primary tax itself. [Cases: Taxation 1061. C.J.S. Taxation § 1698.]

tonnage tax. See tonnage duty under DUTY(4).

transfer tax.

1. A tax imposed on the transfer of property, esp. by will, inheritance, or gift. [Cases: Internal Revenue 4220–4228; Taxation 856–898. C.J.S. Internal Revenue §§ 576–578; Taxation§§ 1783–1792, 1794–1944, 1948, 1988.]

2. See stock-transfer tax.

3. See generation-skipping transfer tax.

undistributed-earnings tax. See accumulated-earnings tax.

unemployment tax. A tax imposed on an employer by state or federal law to cover the cost of unemployment insurance. • The Federal Unemployment Tax Act (FUTA) provides for a tax based on a percentage of employee earnings but allows a credit for amounts paid in state unemployment taxes. [Cases: Internal Revenue 4305. C.J.S. Internal Revenue §§ 596, 606.]

unified transfer tax. The federal transfer tax imposed equally on property transferred during life or at death. • Until 1977, gift-tax rates were lower than estate taxes.

— Also termed unified estate-and-gift tax.

unitary tax. A tax of income earned locally by a business that transacts business through an affiliated company outside the state or country. See UNITARY BUSINESS. [Cases: Taxation 1005. C.J.S. Taxation § 1719.]

unrelated-business-income tax. A tax levied on a not-for-profit organization’s taxable income, such as advertising revenue from a publication. [Cases: Internal Revenue 4068; Taxation 1018. C.J.S. Internal Revenue §§ 473–474; Taxation § 1706.]

use tax. A tax imposed on the use of certain goods that are bought outside the taxing authority’s jurisdiction. • Use taxes are designed to discourage the purchase of products that are not subject to the sales tax. [Cases: Taxation 1202. C.J.S. Taxation § 1992.]

value-added tax. A tax assessed at each step in the production of a commodity, based on the value added at each step by the difference between the commodity’s production cost and its selling price. • A value-added tax — which is popular in several European countries — effectively acts as a sales tax on the ultimate consumer. — Abbr. VAT. [Cases: Taxation 1201. 1.]

windfall-profits tax. A tax imposed on a business or industry as a result of a sudden increase in profits. • An example is the tax imposed on oil companies in 1980 for profits resulting from the Arab oil embargo of the 1970s. [Cases: Internal Revenue 4338.]

window tax. Hist. English law. A tax imposed on a house containing a certain number of windows (usu. more than six). • It was established under the Taxation Act of 1695 and replaced with a tax on inhabited houses established under the House Tax of 1851. See HOUSE-DUTY.

withholding tax. A portion of income tax that is subtracted from salary, wages, dividends, or other income before the earner receives payment. • The most common example is the income tax and social-security tax withheld by an employer from an employee’s pay. [Cases: Internal Revenue 4849; Taxation 1100. C.J.S. Internal Revenue §§ 740–741; Taxation § 1779.]