A direct tax is a tax that a person or organization pays directly to the entity that imposed it. An individual taxpayer, for example, pays direct taxes to the government for various purposes, including income tax, capital gains tax, pay as youn earn, etc.

KEY TAKEAWAYS

• A direct tax is paid by an individual or organization to the entity that levied the tax.
• Direct taxes include income taxes, property taxes, and taxes on assets.
• There are also indirect taxes, such as sales taxes, value added tax (VAT) wherein a tax is levied on the seller but paid by the buyer.