A Research report submitted for the partial fulfilment of the requirements for the Bachelor Degree of Social Science in Economics Policy Planning of Mzumbe University.The general objective of the study was to examine possibilities of minimization of transaction costs in tax collection at Kinondoni tax region. The study went through specific objectives such as; to assess the relationship between uncertainty in tax base and tax collection, to examine the transaction frequency among the business operations and its effects in tax collections and to determine the contribution of assets specificity in tax collection among the tax payers. Descriptive research design was adopted for this study. The study used a sample size of 110 who were small and medium enterprise owners and TRA officers and employed questionnaires and structured interview questions as tools of data collection. The study applied a linear model by using Ordinary Least Square (OLS) in the regression analysis of dependent and independent variables. The study observed that, a study involved a large number of male compared to female because male were more involved in small and medium business and were more aggressive and willingly in answering research questions. The study found that, a large number of respondents were in the age group of 29-39 about 38%, that was due to the fact that, a large number of people involved in small and medium enterprises are the youth in the age of 29-39. The study found that, respondents with primary education, secondary education (ordinary and advanced level) about 21%, 23% respectively were more involved in small and medium business compared to respondent attained higher education like tertiary educations, bachelor degree and master’s degree. The study identified business assets owned by tax payers according to the type of business where by assets like rent building, business furnishers, machines, investment capital and business cash were identified. The study concludes that, increase in tax collection was an output of minimization of transaction costs like costs incurred in identification of funding sources, costs incurred in identification of best supplier or business customers, costs for the increase of commodity prices, cost for accessing business information and cost incurred by TRA in accessing tax payers information and provision of tax education.