The way taxes work are that we pay them on the federal and the state level. Rates differ from state to state, but taxes generally work all the same. Every year, we are forced to pay federal and state income tax, property tax, estate tax, sin tax, and sales tax. On the federal level, taxes are collected by the IRS every year before the April 15th deadline. The taxes collected on the state level are obviously collected by the state government in which you reside in. The state is a separate entity than that of the federal government, so they are responsible for the state tax they collect. There are currently 7 states that do not impose a state income tax: Texas, Florida, Alaska, Nevada, South Dakota, Wyoming, and Washington.