Taxes are collected automatically the same as with businesses, you used to have to ride around to each town or village you owned to collect, but they fixed that.

Protecting the town from raids and stopping attacks on caravans and peasants travelling to and from towns increases prosperity. Doing missions for the village elder in a village or the guildmaster in a town will improve their prosperity and their disposition towards you. High town disposition also means a LOT more men will sign up to your party.