I've had a quest item (the taxes to be paid to Dernholm) vanish on me. The guy in blackroot refused to pay, I've tried to pickpocket, but he doesn't have it on him and its not anywhere in his room.

Is there anyway around this glitch, or am I doomed to leave this quest undone?

I thought that the taxes were in the chest in his room (the item you are looking for is called "Taxes" or something like that. The icon looks like a chest with gold bars if I remember correctly). But maybe I am remembering wrong?

Is it possible you accidentally sold it to a merchant? If that's the case, the item will still be in their inventory. It'll cost you an arm and a leg to buy it back, but at least you'll be able to close the quest.

I had the bit of dialogue where he pays up on the taxes, and I immediately walked to Dernholm. I can tell the king the taxes were paid, and he asks for them, but I have no option to give them to him.

At this point, I checked my inventory and found no tax items, so I traveled back to Black Root. I checked the mayors inventory with pickpocket and the only thing he has is his dagger. I checked the chest in the bedroom, its empty.

You have to talk to the mayor in Black Root: he refuses to pay because Black Root is now allied with Tarant instead of Dernholm. You must convince him to rethink his alliance. The guards of Tarant could not protect him from being robbed of his precious dagger.
Go to the thief camp and speak to D'ak Taan. Either buy or pickpocket the dagger from him or kill him and take the dagger from his body.
Return to the mayor: he will be glad to revise the alliance in order to get the dagger back, and he will pay the taxes.

If the taxes aren't on the blackroot mayor, you are in fact bugged.

It's not a huge deal of a quest. I personally always sell the taxes instead of complete the quest for easy money early on.

This is bugged for me too, annoying. Ah well, on with the game.

I have the same bug. In both of my two games I started. I do all quests, the mayor want to give me taxes, but there is no item. In Dernholm, I have the dialogue options to tell the king, that I collected the taxes, but the option to give them to the king is missing

Just to confirm..still bugged in 2017 :-)

Got to that part a few minutes ago and the taxes are not there, the OCD gamer in me now is going nuts. I'm actually considering stop playing.

I'm curious if this is addressed in the unofficial patch. Are those who are experiencing this bug using the unofficial patch? I used it when I played, and was able to deliver the taxes without incident.

The only thing the UAP Doc notes say is:
[F] Stealing the taxes from the Mayor of Black Root now doesn't trigger the quest if you don't have it in the first place.

So more then possible it is still bugged.

Sounds like it, although it clearly only affects some players. Not sure how to find the cause of it though.

Are you using UAP? I did that quest recently without any issues.

Also please make sure that you had enough space in your inventory, taxes chest is a big item and usually when npc gives you item and it doesn't fit in your inventory, it gets dropped on the ground.

Maybe this issue can also be solved with some sort of save game editor by inserting wanted item into your inventory?

Not such a crazy idea, the inventory part. In my case I might've been maxed out, and I can't remember if stuff can be just left there in the groung for you to pick up later (i.e. after quitting the game and loading it again).

This would still happen to me sometimes, I can almost certainly confirm it is bugged for some setups even after unofficial patching.