What is the tax based on the profits of the business known as?

The tax based on the profits of a business is known as income tax. This form of tax is directly assessed on the earnings of individuals or corporations, and it is calculated after expenses and deductions have been accounted for. Essentially, income tax serves as a means for the government to collect revenue based on how much money a business has made, which encourages accountability and record-keeping of financial performance.

In contrast, sales tax is levied on the sale of goods and services to consumers, meaning it is based on transactions rather than profits. Property tax applies to real estate ownership and is based on the assessed value of a property rather than income. Payroll tax, on the other hand, is levied on the wages paid to employees and is not directly related to the business's profits but rather to their employment costs. Therefore, income tax aligns closely with the profits generated by a business, making it the correct choice.