County Business License (Occupational Tax)

General Information

Local governments require that all businesses, trades, professions, or occupations within their jurisdiction obtain a business license. Such a license serves as a tax on wages and net profits of the business to thereby provide a major source of revenue for the local government. Such fees are used for the administration of local government and in some cases to fund other local government programs and benefits such as the school board or the mass transit system.

The business license is not an allowance to conduct particular business activities so much as it is a means to impose a tax upon it. However, some businesses, based on the nature of the business activity, are required to pay fees in addition to the general tax on wages and net profits that closer approximate what is thought of as a “license,” presumably to cover the added regulatory costs involved. The Code of Ordinances for the relevant county/metro area specifies the tax rates for each particular business, filing requirements, penalties, etc.

While the ordinances for each county/metro area are similar, there are some important distinctions, though this page addresses only those ordinances for Lexington/Fayette County and Louisville/Jefferson County.

Purpose/Necessity

All business owners would prefer to avoid an additional local tax but unless the business meets one of the few exceptions, registering for a business license is mandatory. The county/metro revenue boards communicate with the state taxing entities so it will not be possible to hide wages paid or net profits earned at the local level. Like other taxes, penalties will be levied for the failure to register, pay at all, pay too little, pay too late, etc.

Lexington/Fayette County
Under Section 13-3 of the Lexington-Fayette Code of Ordinances, it is unlawful to operate a business in Fayette County without a business license. Section 13-5(a) of the same code specifies that “every person and business entity engaged in any business” must obtain an initial occupational license issued by the Lexington-Fayette Urban County Government “before the commencement of business.” The Division of Revenue will impose a $25 penalty for engaging in business in Fayette County without a current occupational license. Section 13-9. Additionally, the business will be liable for all sums owed under the business license tax and will have to pay a 5% penalty on late payments. Sec. 13-12(a)

Louisville/Jefferson County
Section 6.1 of the Jefferson County’s Code of Ordinances requires that a license is obtained “prior to engaging in the business, trade, profession, or occupation licensed.” Section 1.5 indicates that a license is required for all resident employees, non-resident employees, corporations, partnerships, or other business associations, sole proprietors, or independent contractors within the City of Louisville or the Jefferson County area. Section 6.10 states that “Any person who shall engage within the City/County in any business, profession, occupation or other activity subject to the license fee and who shall fail to apply for an occupational license fee reporting number and to complete the questionnaire as required by… the County Ordinance shall be subject to a fine of not more than $100.00.” Additionally, the business will be liable for all sums owed under the business license tax and will have to pay a 5% penalty on late payments. Section 6.4

Frequently Asked Questions

  • Who is required to pay the tax?
    • All people who work for a non-exempt business pay the tax in one way or another because the earned income will qualify either as wages to one person or net profit to another. It is known as a business tax because business owners and operators are actually responsible for registering with the local revenue board (through applying for a license) and paying the taxes for the business and withholding and paying for the employees.

  • How is the tax under the business license measured?
    • Lexington/Fayette County
        • 2.25% of the net profits of business activities conducted within Fayette County. Sec. 13-4(a)
        • 2.25% of each individual’s gross wages, salaries, commission, and other compensation paid to employees earned within Fayette County. Sec. 13-4(a)

      Louisville/Jefferson County
        • 2.2% of the net profits of business activities conducted within Metro Louisville. Section 1.5
        • 2.2% of each individual’s gross wages, salaries, commission, and other compensation paid to employees earned within Metro Louisville. Section 1.5

  • What if the business is located in multiple counties, or employees work outside a single county?
    • Lexington/Fayette County
        • A separate license is required at each place of business. Sec. 13-5(b)
        • Net profits – the 2.25% tax is imposed on the business activities conducted within Lexington-Fayette County. Sec. 13-4(a)
        • Wages – the tax is apportioned based on the percentage of the work performed or services rendered within Lexington-Fayette County. Sec. 13-4(c)(5)

      Louisville/Jefferson County
        • A separate license is required for each legal entity. Section 6.1
        • Net profits – the full 2.2% tax is imposed on a business that has a “sufficient nexus” within Metro Louisville (usually, a physical location). Section 3.2
        • Wages – the tax is apportioned based on the percentage of the work performed or services rendered within Metro Louisville. Section 2.6

  • How is tax liability determined?
    • Taxable net profits are calculated similarly as they are by the IRS and the Kentucky Department of Revenue. The local revenue board will provide pre-printed forms with tax liability to the business address on file. An accountant may be necessary to file returns or challenge the tax liability indicated that is owed.

  • What if the business information changes?
    • Licensees must notify the revenue board of changes in address, the cessation of business, or any other significant changes so proper tax liability may be assessed.

  • Do I need a business license for my type of business?
    • Sole proprietors, independent contractors, corporations, partnerships, limited liability companies, and non-profits must apply for a business license. In certain cases, there will be little or no taxes owed (such as for a non-profit), but the revenue board still requires the business to obtain a license.

Legal Services Offered and Cost

Obtain Fayette County Business License
Legal fees: $100 flat fee
Filing fees and other costs: $100. Note: this amount will be credited to the occupational license fee the Division of Revenue later determines the business owes
This includes:

  1. Review of client’s information to ensure legal requirements are fulfilled
  2. Review to determine any exemption and ensure no additional license fee required based on business activities
  3. Instructions as to unique tax liability if relevant
  4. Completion of Business License Application
  5. Submission of form and filing fee with the Lexington-Fayette Division of Revenue
  6. All postage and mailing charges
  7. Email confirmation of business license registration

If you are ready to get started, please CLICK HERE to enter basic information using our secure online form.

 

Obtain Jefferson County Business License
Legal fees: $100 flat fee
Filing fees and other costs: none

This includes:

  1. Review of client’s information to ensure legal requirements are fulfilled
  2. Review to ensure no additional license fee required based on business activities and instructions as to unique tax liability if relevant
  3. Completion of Business License Application
  4. Submission of form with the Louisville Metro Revenue Commission
  5. All postage and mailing charges
  6. Email confirmation of business license registration

If you are ready to get started, please CLICK HERE to enter basic information using our secure online form.

 

Obtain Business License (other Kentucky county)
Legal fees: $150 flat fee
Filing fees and other costs: varies

This includes:

  1. Review of client’s information to ensure legal requirements are fulfilled
  2. Determine licensing requirements for particular Kentucky county
  3. Review to ensure no additional license fee required based on business activities and instructions as to unique tax liability if relevant
  4. Completion of business license application
  5. Submission of form with the appropriate county revenue board
  6. All postage and mailing charges
  7. Email confirmation of business license registration

If you are ready to get started, please CLICK HERE to enter basic information using our secure online form.