When Vito kills Don Fanucci in Godfather II, does he have to pay tribute to someone higher in the organization? Or can he just take over Fanucci's neighborhood?
He doesn't actually tell anyone about this. He wasn't even a member of a family at this stage. He surely would have been killed if this event was found out. Vito takes out a guy who was in his way on the road to wealth and thus sets up the beginning of his own crime family.
Don Fanucci made serious mistakes in front of Vito.
- When Vito, Tessio and Clemenza started their robbery business and Fanucci jumped on Vito's car and threatened him to reveal this business to the police if he doesn't get his cut. By doing this, he shows he doesn't have enough connections to deal with this by other means than the police. He doesn't have the enforcement to pressure on Vito's gang by force.
FANUCCI: Give me $200 each, for your own protection. And I'll forget the insult. You young punks have to learn to respect a man like me! Otherwise the cops will come to your house.
- He also shows some weakness in negociation:
FANUCCI: Of course if I'm wrong about how much you stole, I'll take less. ( . . . ) Tell your friends I don't want a lot. Just enough to wet my beak.
- Later, when Vito meets Fanucci and hands him only 100$, instead of the 600$ that Fanucci was waiting for (200$ for each member of Vito's crew). Fanucci accepts these 100$ without much discussing, hence showing another weakness.
Another scene where Vito meets his partners Tessio and Clemenza reveals that not everybody in the neighbourhood pays protection fees to Fanucci. So Vito feels that tough guys don't pay Fanucci, so he's weaker that he seems and he might have no backup at all.
VITO: I know two bookies who don't give anything to Fanucci.
VITO: Joe the Greek on Tessimo Avenue, Frank Pennitanlo, and Tachinko Schrabo. They don't pay Fanucci.
TESSIO: If they don't pay Fanucci, they pay somebody else who collects for Maranzalla!
I think at this moment, Vito doesn't believe that Fanucci is really connected to Maranzalla and concludes that Fanucci is just all bluff.