Tax Liability Definition

At the end of each year you go through several painful hours of calculating how much tax you owe Uncle Sam and the state (and maybe county and city) you live in. At the end of the process you have a figure before you. You might call this your "income taxes due", but the fancy word for it is your "tax liability" (go ahead, use the fancy word and impress your spouse).

Similarly, when you purchase a soda pop at the store the cash register will helpfully calculated your sales tax due-that’d be another tax liability, albeit much smaller than your income tax liability. Of course if you ask the convenience store attendant what the projected tax liability of your purchase might be, they probably won’t know what you’re talking about!