Comment: State does not mean what most think

http://www.irs.gov/pub/irs-wd/0634001.pdf

The definition of State, for purposes of section 6103, includes certain municipalities
meeting the criteria set forth in I.R.C. § 6103(b)(5).

"(B) includes assessment, collection, enforcement, litigation, publication, and statistical gathering functions under such laws, statutes, or conventions.
(5) State
(A) In general
The term “State” means—
(i) any of the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands, "

To qualify as a State, a municipality
must (1) have a population of more than 250,000, (2) impose a tax on income or wages,
and (3) sign an agreement with the IRS regarding the use and disclosure of the
information provided. The City of Los Angeles, with a population of close to four million
in 2003, clearly satisfies the population requirement. The crux of the issue is whether
the City’s business registration tax meets the second requirement under I.R.C.
§ 6103(b)(5)(B) that the municipality impose a tax on income or wages.
The City of Los Angeles would have the IRS interpret I.R.C. § 6103(b)(5)(B)(ii) by
looking outside of the Code to 4 U.S.C. § 110(c). Section 110(c) of Title 4 of the U.S.
Code defines income tax broadly to include “any tax levied on, with respect to, or
measured by, net income, gross income, or gross receipts.” Under this broad definition,
the City’s business registration tax, which is calculated on a business’s gross receipts,
satisfies the definition of income tax.
The definition of income tax found in 4 U.S.C. § 110(c) is part of the “Buck Act” (4
U.S.C. §§ 105-110) (the “Act’), enacted in 1940. In the Act, Congress authorized state
and local governments to collect “income taxes” from individuals who work in a Federal
area. 4 U.S.C. § 106(a). A Federal area is defined as “any lands or premises held or
acquired by or for the use of the United States.” 4 U.S.C. § 110(e). The Buck Act was
passed for the limited purpose of “ensuring federal officers and employees who reside
or work within exclusive federal enclaves would be treated equally with those who
reside and work outside such areas.” S. Rep. No. 76-1625, at 3 (1940).

Now revisit 7701

(9) United States
The term “United States” when used in a geographical sense includes only the States and the District of Columbia.
(10) State
The term “State” shall be construed to include the District of Columbia, where such construction is necessary to carry out provisions of this title.

Each "State" is a municipality of the government IE DC