By FinanceBuddy Staff Writer
Many factors dictate and influence the amount of taxes homeowners and shoppers pay in any particular city or state. The tax rates can vary greatly from state to state and city to city. For example, when you ask yourself why your city's sales tax is different from another city, you will need to take into consideration what factors are used to determine the tax rate in your city. To begin, every city has unique financial needs and fiscal requirements. Cities differ greatly in their financial situations. Some cities have many employees, schools and public institutions, such as libraries, hospitals, recreation centers and museums. Other cities provide just the basic services. If your city has more amenities and expenditures, then it will also have a larger budget and greater financial need. To meet those needs, the city must levy taxes of various kinds. The most common types of taxes are property taxes and sales taxes. Property taxes are based on the value of the property owned. Therefore, a city with a lot of valuable real estate will have a lot of income from property taxes. Property taxes come from property of all types, including residential, commercial and industrial. However, cities with low real estate values, or without much industrial or commercial real estate taxes, will need to rely on other types of taxes, such as sales tax. If your city has a large budget, which means a large financial need, and has low tax income from property taxes, then the sales taxes will need to be higher to meet the cities needs. But if you live in a city with a smaller budget then the city's tax needs will not be as demanding, so they will have a lower sales tax rate. Also, if your city has a lot of income from industrial or commercial property taxes, then the city will need less sales tax revenue to fulfill their budget requirements.