When the tax base is $40,000, the tax liability is $4,000. When the tax base is $400,000, the tax liability is $40,000. This tax has a rate structure that is:
c. Ad valorem
Tax liability pertains to the ta owed by company to its government. This can be any type of tax but the most common type of tax required to every company is the income tax. Income tax is a tax imposed on the company's net income, or the income earned from its operations.
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fromChapter 3 / Lesson 5
Learn what income tax liability is. Find out what taxable and adjusted gross income are, discover how to calculate tax liability, and examine common deductions.