Tags in TW can be whatever you want them to be. It is probably most common to use them for hierarcies and categories but it can really be arbitrary keywords. A cool aspect, which I guess we see in many other tools as well these days, is that tags can also be tiddlers, i.e the tag name can be a tiddler title.
To use them for ToC's then, yeah, I guess they have to be hierarchical, at least the way the core ToC macros are implemented.
If you are more convenient with having the tags above the title, to imply "higher order", you can reorder the tiddlers ViewTemplates (and the EditTemplates). Incidentally, this is most easily done via tags(!) i.e by opening the ViewTemplate tag and drag the tags template to where you want it positioned relative to the other parts of the tiddler.
How do you find the ViewTemplate tag, you ask. Either you locate a tiddler tagged such or you create a tag and use it, like so
<<tag "$:/tags/ViewTemplate">>
<:-)