Direct taxes are often income taxes, which are paid annually. Direct taxes are paid by both businesses and individuals. Payments go directly to a government entity, such as the IRS, Treasury, state agency, or local municipality.
To understand direct taxes, let’s look at their mirror opposites - indirect taxes. An indirect tax is paid by consumers on goods and services. For example, taxes are paid on groceries but instead of paying a government entity, the consumer pays those taxes to the grocery store. The grocery store must then submit those taxes to the proper government entity. Additionally, a grocery store tax is a flat tax, whereas income taxes are a progressive tax.