Answer: The Internal Revenue Service (IRS) and state and local municipalities collect taxes by different means.
1.Federal payroll taxes are deducted from employee's paychecks through withholdings by their employer's. This system is called direct withholdings and is collected by employers on behalf of the IRS.
2.Businesses and corporations also collect taxes on sales and services and submit the tax revenue to the state.
3.Taxes are also collected on the sale or transfer of real estate, car and trucks, boats, private planes, and other taxable properties and forwarded to city, county, and other local municipalities.