Do both state and federal taxes apply in Guam?

In Guam, both state and federal taxes apply due to its unique status as an unincorporated territory of the United States. Residents of Guam are subject to federal income tax laws, although there are some differences in how these laws are administered. This means that while the federal tax code is applicable, Guam has its own tax system that is modeled on the federal tax code.

Guam also has its own territorial government, which imposes local taxes in addition to the federal taxes. These local taxes function similarly to state taxes in the mainland U.S., contributing to the funding of local services and infrastructure.

The presence of both sets of tax obligations in Guam exemplifies how territorial law interacts with federal law, making it essential for residents and businesses in Guam to comply with both tax systems. Therefore, the correct option reflects the reality of tax obligations faced by Guam residents, recognizing the coexistence of federal and local taxes.