Categories, Sub-categories, sub-subcategories, etc.

Hello! I'm creating a travel directory and want to be able to create the following categories, subcategories,sub-subcategories and sub-sub-subcategories:

Main category: States
Subcategory: Towns/Cities
Sub-subcategories: Accommodation/Things To Do/Restaurant/Etc
Sub-Subcategories: Types of accommodation (Hotel/Guesthouse/etc.)/Types of things to do (Cinemas/Fishing/Safari/etc)/Types of Restaurants (African Cuisine/Italian/etc.)

Like this:
* State1
* City1
* Accommodation
* Hotels
* POSTS
* Guesthouses
* POSTS
* Lodges
* POSTS
* Restaurants
* African Cuisine
* POSTS
* Italian
* POSTS
* Things To Do
* Cinemas
* POSTS
* Fishing
* POSTS
* City 2
THEN AGAIN THE SAME AS ABOVE
* State 2
THEN AGAIN THE SAME AS ABOVE and so on.

Is this clear? Now:
How do I setup these categories and subcategories so that viewers will be able to filter their search to view hotels only in Pretoria, or all accommodation in Cape Town AND that listers can list their establishments under the right category?

Please help urgently. Thank you, I appreciate it!