Guide to Kentucky Business and Personal Income Taxes

Kentucky Tax FAQs

What kind of taxes are you going to face as a business in Kentucky? In Kentucky, most counties charge a business tax. Richmond, Madison County urban government calls this a license.

There are a lot of counties that don’t charge a tax as well.

The following is a tutorial on how to start a business in Madison, and the State of Kentucky in general, and how you will be taxed.

• If you are forming an LLC or corporation in Kentucky, you will file that initially with the Kentucky Secretary of State. You will receive one filed stamped copy back, which you need to file at the county level of where you are doing business. Some counties charge a tax, some don’t.
• Doing business in Madison will require you to get a annual Business/Occupational License, which is a nice way of giving a tax a fancy title.
• There are two parts of the license tax:
  • Quarterly: on all wages and compensation paid or payable in the county for work or services conducted in the county.
  • Yearly: on the net profit from business conducted within the county.
• To make things even more complicated, there are three tax jurisdictions in Madison county: Madison County, the City of Richmond, and the City of Berea.
• The tax rate for business done in the county but outside the cities of Richmond and Berea is 1%.
• The tax rate for business done inside the cities of Richmond or Berea is 2%.
• Taxes must be paid to the appropriate jurisdiction. You are not required to pay more than one jurisdiction for the same work/service (you would not, for example, pay a tax to Richmond and a tax to Madison County for the same work/service).
• Quarterly taxes must be filed, even if you have not conducted any business during that period.
• When filing your annual Net Profit License Fee Return, the information you report must match up with your federal tax return. The NPLF Return is due on or before April 15 (for the calendar year) or within 105 days of the end of your fiscal year.
• You must send your taxes to the proper jurisdiction (the jurisdiction where the work/service occurred). The addresses for each are as follows:
  

  Madison County Jurisdiction:
  Madison County Office
  101 W Main Street
  Richmond, KY 40475

  City of Richmond Jurisdiction:
  City of Richmond
  Finance Department
  PO Box 1268
  Richmond, KY 40476-1268

  City of Berea Jurisdiction:
  City of Berea
  Finance Department
  City Hall
  212 Chestnut Street
  Berea, Ky 40403

• Here are links for the form for each jurisdiction:
  • Madison County
  • City of Richmond
  • City of Berea
• Kentucky has a State sales tax of 6%. There are no different rates if you work in different counties.
• The city ordinances and code that regulates business licensure and tax:
  Chapter 13, 1, 2, 3, 4, and 5
  http://www.municode.com/resources/gateway.asp?pid=11163&sid=17
• You only have to file in Lexington if you are doing business in Lexington.
• You will also have to pay the State of Kentucky tax on your business.
• Here’s the basic rundown of taxes in Kentucky.
  

  Corporations that do not pull the profits down to the personal level will pay:
  4% of taxable income for first $50,000
  5% of taxable income for next $50,000
  6% of taxable income for rest of income above $100,000

• LLC’s and corps that let the income fall on their personal owners are called LLET’s. This is for pass through entities.
• Pass through entities get hosed as well. There is still a minimum $175 tax each year. Pass through entities, not only pay personal income tax on what they pull down, but they will also pay .095% of the Gross reciepts or .075% of the gross profits, whichever is less.
• Small businesses that have a gross profit of less than 3 million can be exempt from this, BUT still owe the $175 minimum.
• I guess you can always say we have low sales tax……