Taxation in the US: Part 5 Tax administration (Federal + State + History)

Tax administration.

Taxes in the United States are administered by hundreds of tax authorities. At the federal level there are three tax administrations. Most domestic federal taxes are administered by the Internal Revenue Service, which is part of the Department of the Treasury. Alcohol, tobacco, and firearms taxes are administered by the Alcohol and Tobacco Tax and Trade Bureau (TTB). Taxes on imports (customs duties) are administered by U.S. Customs and Border Protection (CBP). TTB is also part of the Department of the Treasury and CBP belongs to the Department of Homeland Security.

Organization of state and local tax administrations varies widely. Every state maintains a tax administration. A few states administer some local taxes in whole or part. Most localities also maintain a tax administration or share one with neighboring localities.

Internal Revenue Service.

The Internal Revenue Service administers all U.S. federal tax laws on domestic activities, except those taxes administered by TTB. IRS functions include:

Processing federal tax returns (except TTB returns), including those for Social Security and other federal payroll taxes.

Providing assistance to taxpayers in completing tax returns.

Collecting all taxes due related to such returns.

Enforcement of tax laws through examination of returns and assessment of penalties.

Providing an appeals mechanism for federal tax disputes.

Referring matters to the Justice Department for prosecution.

Publishing information about U.S. federal taxes, including forms, publications, and other materials.

Providing written guidance in the form of rulings binding on the IRS for the public and for particular taxpayers.

The IRS maintains several Service Centers at which tax returns are processed. Taxpayers generally file most types of tax returns by mail with these Service Centers, or file electronically. The IRS also maintains a National Office in Washington, DC, and numerous local offices providing taxpayer services and administering tax examinations.

State administrations.

Every state in the United States has its own tax administration, subject to the rules of that state's law and regulations. For example, the California Franchise Tax Board. These are referred to in most states as the Department of Revenue or Department of Taxation. The powers of the state taxing authorities vary widely. Most enforce all state level taxes but not most local taxes. However, many states have unified state-level sales tax administration, including for local sales taxes.

State tax returns are filed separately with those tax administrations, not with the federal tax administrations. Each state has its own procedural rules, which vary widely.

Before 1776, the American Colonies were subject to taxation by Great Britain and also imposed local taxes. Property taxes were imposed in the Colonies as early as 1634. In 1673, the English Parliament imposed a tax on exports from the American Colonies, and with it created the first tax administration in what would become the United States. Other tariffs and taxes were imposed by Parliament. Most of the colonies and many localities adopted property taxes.