Income vs Sales Tax Explained – Stop Overpaying Thousands in Texas!

Hi, my name is Loma, and I teach entrepreneurs business and money management skills. I'm going to go over the difference between income tax and sales tax and who needs to pay it. Google shows that the income tax is the amount you pay on your total income from your business, and you pay that to the federal and state government. Sales tax is the percentage of the amount of your sales that customers have to pay when they purchase product from your business. So a person who works, who has a job, who has a business, or even a side hustle, has to pay income tax. And depending on what state that they live in, they might actually have to pay the federal government, which is the IRS, as well as the state that they live in, the state government. Now everyone has to file their income tax with the IRS regardless of what state that they live in. However, not every state requires you to file a state income tax return. Here are 3 categories that your state might fall into. There's the states that don't charge any income tax at all, and for me, I'm in Texas, so they don't charge any income tax at all here in Texas, as you see in column 1. In column 2, those are the states that charge a flat income tax rate. And so it doesn't matter how much money you make, little, a lot, doesn't matter. They've got a flat rate for those states that are in that second column. And in that third column, which is the longest, those are the states that have a tiered, graduated rate of income tax that they charge in each of those individual states. So California, New York, you know, all these states in this list here on the third column, they actually charge based on how much you make. If you live in Texas, then you know that there's no income tax, but you do know that we— that Texas charges a sales tax, and that's how they make their money. So hopefully by now you understand the difference between income tax, which is the tax that you'll pay based on the money that you earn, versus sales tax, which is the tax that's paid by the customer for the product that they buy.