It works the same way it works in Europe between countries in the EU. The laws are similar enough that it isn’t a problem in most cases. There are also efforts that states do to harmonize parts of the law. It keeps the peace because states have different ideas on how to govern themselves.

That then plays out to taxes, as some states have a far more active government than others. So, the states, counties, and municipalities have their own ways to generate revenue to provide the services their communities want.