A water tax was a form of taxation imposed on the moisture farmers on Tatooine, a desert world in the Outer Rim Territories, by the crime lord Jabba the Hutt. Jabba's enforcers collected water from the farmers, sometimes by force, on behalf of their master. According to rumors, Jabba used the water to be constantly bathed, but those rumors were false; according to Jedi Master Obi-Wan Kenobi, Jabba never bathed.
Jabba was eventually killed by Princess Leia Organa. However, in a vision of an alternate life granted to an elderly Jedi Master Luke Skywalker through the Force, Jabba remained alive. In this life, Skywalker had never left Tatooine and had instead married his childhood friend Camie Marstrap. Jabba continued to charge his water tax and the two were careful to always pay it, so as to not be in debt to the dangerous gangster.