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a. Net Profits: The following income is specifically determined to be subject to the occupational license fee:
1. Income of the sales of stocks, bonds and other securities or any interest therein by brokers, business entities and persons engaged in conducting such business as investment firms, lending institutions and similar such businesses;
2. Income from the operation of warehouses, apartments, hotels, motels, hotel buildings, office buildings and similar structures;
3. A trust estate engaged in business which produces income. In the case of a real estate investment trust (REIT), the total deduction for dividends paid and the Internal Revenue Code (I.R.C.) Section 857 (b)(2)(E) of the IRS deduction are included when determining the investment trusts taxable income;
4. Income of fiduciaries, defined to mean a person who holds in trust property, monies or properties to which another has a beneficial trust or interest, or who receives or controls income for another person where such a fiduciary is regularly engaged in such a business or profession; and,
5. Income earned, derived or received on the sales, rental or leasing of personal and real property, as well as losses attributable to the sale of real and personal property classified as capital losses by the Internal Revenue Service which shall be included as income.
b. Employee Withholdings: The following income has been specifically defined as taxable wages, commission or salary and is subject to the occupational license fee:
1. Wages, salaries, other compensation, including but not limited to deferred compensation and any and all income derived from approved leave, including but not limited to vacation pay, sick leave, employer provided and paid disability payments, military leave, personal days, holidays, annual leave and other approved leave;
2. Early retirement and similar inducement payments, including but not limited to Supplemental Income Protection Program (SIPP) payments made in consideration for early retirement, or other inducements paid by employers to employees arising from the employee’s service to the employer;
3. Separation payments, regardless of residency at time of payment, including (a) payments made by an employer to an employee at the time of retirement if such benefits would be subject to the withholdings license fee if paid to an active employee; (b) other benefits accrued pursuant to any employment contract or arrangement between the employer and employee; and (c) payments which are made in lieu of any payment which the employer is obligated to make to or on behalf of the employee arising from the employment to the extent that such payments would be subject to the withholdings license fee if paid to an active employee; and,
4. Life insurance premiums for coverage in excess of fifty thousand ($50,000) dollars paid by the employer.
(Ord. BG2020-23, 9/1/2020; Ord. BG2022-49, 11/15/2022)
a. The occupational license fees imposed in this Subchapter shall not apply to the following persons, business entities or specified income:
1. Any bank, trust company, combined bank and trust company, or trust, banking and title insurance company organized and doing business in Kentucky, any savings and loan association whether state or federally chartered;
2. Any compensation received by members of the Kentucky National Guard for active duty training, unit training assemblies and annual field training;
3. Any compensation received by precinct workers for election training or work at election booths in state, county, and local primary, regular or special elections;
4. Public Service Corporations that pay an ad valorem tax on property valued and assessed by the Kentucky Department of Revenue pursuant to the provisions of KRS 136.120. However, licensees whose businesses are predominantly non-public service who are also engaged in public service activity are required to pay a net profit license fee on their net profit derived from the non-public service activities apportioned to the City;
5. Persons or business entities that have been issued a license under KRS Chapter 243 to engage in manufacturing or trafficking in alcoholic beverages. Persons engaged in the business of manufacturing or trafficking in alcoholic beverages are required to file a return, but may exclude the allocated portion of their net profits derived from the manufacturing or trafficking in alcoholic beverages;
6. Life insurance companies incorporated under the laws of and doing business in the Commonwealth of Kentucky;
7. Any profits, earnings, distributions of an investment fund which would qualify under KRS 154.20-250 to 154.20-284 to the extent any profits, earnings or distributions would not be taxable to an individual investor;
8. Where persons pay a 2.0% withholdings license fee on gross salaries or withdrawals paid to them by their business or partnership, such amounts paid by such business or partnership shall be deducted from such business or partnership’s gross earnings before arriving at the net profit of such business or partnership;
9. Where persons are required to pay a 2.0% withholdings license fee on gross salaries or wages paid to them by a corporation, such amounts paid by such corporation as wages or salaries shall be deducted from such corporation’s gross earnings before arriving at the net profits for such corporation;
10. Income from pensions, non-business interest and dividends not specifically defined as includable;
11. Trust estates are not subject to the net profit license fee imposed by this Chapter upon the income of such trust estate, except where such trust operates a business which is subject to a net profit license fee for doing business within the City. The remainder of such trust estate is hereby exempt from any payment of net profit license fees;
12. Entities, such as Self-Directed Roth IRA or other similar retirement programs, filing a Federal Exempt Organization Business Income Tax Return as a tax exempt organization shall be required to file with the City a net profit license fee return, but the City’s occupational license fees shall be waived only where no part of the unrelated trade or business income inures to the benefit of any private person. However, if the net income on the Federal return exceeds an amount whereby the net profit license fee would be greater than the net profit minimum fee, the net profit return shall be required with the full amount of fees due.
13. A fiduciary who holds in trust property, monies or properties to which another has a beneficial interest or who receives or controls income for another person is not subject to the net profit license fee imposed by this Chapter, except where such fiduciary operates a business which is subject to net profit license fee for doing business within the City. The remainder of such trust is hereby exempt from any payment of net profit license fees;
14. Income of a household worker that resides or works exclusively in a private residence. However, net profit and withholdings license fees shall be required for business entities and their employees conducting such type of household services;
15. Income of self-employed dancers, musicians and entertainers working in an establishment that is subject to the provisions hereinbelow related to establishments where live entertainers are contracted or providing service for a nonprofit corporation. This Section does not alleviate the requirements set out in Chapter 24 (Sexually Explicit Business License Regulations) of the City’s Code of Ordinances or any other applicable City code;
16. Rental income of any person or sole proprietorship renting or leasing real estate consisting of two (2) or less residential units;
17. Pension payments made to persons retired from service after reaching a specified age or a stated period of employment;
18. Payments by an employer to employees under disability, sickness and accident benefit plans that are paid for by the employee;
19. Unemployment compensation payments by the Commonwealth of Kentucky or any other agent;
20. Payments received for personal injuries and property losses;
21. Death benefits payable to the beneficiary of an employee or to his estate, whether payable in single sum or otherwise. This shall not include wages as defined in this Chapter earned prior to death;
22. Benefits arising under the Workers’ Compensation Act as compensation for disabilities sustained during the course of employment, together with any amount of damages received by suit or agreement on account of such disability; or,
23. Income from the sale of real and personal property classified as capital gains by the Internal Revenue Service.
(Ord. BG2020-23, 9/1/2020; Ord. BG2022-49, 11/15/2022; Ord. BG2023-6, 5/2/2023)
Editor's Note: Any business subject to Subchapter 18-2 shall pay a net profit license fee of 1.85% until the end of its current fiscal year, and thereafter the 2.0% net profit license fee shall be in effect for all fiscal years beginning on or after January 1, 2024. All Employee Wage Withholding fees shall be 2% effective January 1, 2024.
a. Where salaries, wages, commissions, licensing and royalty income, and other trade compensations are paid for any business, trade, occupation, profession or other activity in the City or net profits earned within the City, such net profit license fee shall be computed by obtaining the percentage which the compensation or net profit bears to the total compensation or net profit.
b. Except as provided in Subsection f. of this Section, net profits shall be apportioned as follows:
1. For business entities with both payroll and sales revenue in more than one (1) tax district, by multiplying the net profit by a fraction, the numerator of which is the payroll factor, described in Subsection c. of this Section, plus the sales factor, described in Subsection d. of this Section, and the denominator of which is two (2); and,
2. For business entities with sales revenue in more than one (1) tax district, by multiplying the net profit by the sales factor as set forth in Subsection d. of this Section.
c. The payroll factor is a fraction, the numerator of which is the total amount paid or payable in the City during the tax period by the person or business entity for compensation and the denominator of which is the total compensation paid or payable by the person or business entity everywhere during the tax period. Compensation is paid or payable in the City based on the time the individual's service is performed within the City.
d. The sales factor is a fraction, the numerator of which is the total sales revenue of the person or business entity in the City during the tax period and the denominator of which is the total sales revenue of the person or business entity everywhere during the tax period.
1. The sale, lease or rental of tangible personal property is in the City if:
(a) The property is delivered or shipped to a purchaser, other than the United States government, or to the designee of the purchaser within the City regardless of the free on board (f.o.b.) point or other conditions of the sale; or,
(b) The property is shipped from an office, store, warehouse, factory or other place of storage in the City and the purchaser is the United States government.
2. Sales revenues, other than revenues from the sale, lease or rental of tangible personal property or the lease or rental of real property, are apportioned to the City based upon a fraction, the numerator of which is the time spent in performing such income-producing activity within the City and the denominator of which is the total time spent performing that income-producing activity.
3. Sales revenue from the sale, lease or rental of real property is allocated to the tax district where the property is located.
e. All partnerships, S corporations and all other entities where income is “passed through” to the owners are subject to the provisions of this Subchapter. The occupational license fee imposed in this Subchapter is assessed against income before it is “passed through” these entities to the owners.
f. If the apportionment provisions of this Section do not fairly represent the extent of the person’s or business entity's activity in the City, the person or business entity may petition the City or the City may require, in respect to all or any part of the person’s or business entity's business activity, if reasonable:
1. Separate accounting;
2. The exclusion of any one (1) or more of the factors;
3. The inclusion of one (1) or more additional factors which will fairly represent the person’s or business entity's business activity in the City; or,
4. The employment of any other method to effectuate an equitable allocation and apportionment of net profits.
(Ord. BG2020-23, 9/1/2020)
a. Every employer making payment of compensation to an employee shall deduct and withhold from the compensation a withholdings license fee consisting of 2.0% of gross wages calculated under the provisions of this Subchapter.
b. When compensation is paid or payable for work done or services performed or rendered by an employee, both within and without the City, the withholdings license fee shall be measured by that part of the compensation paid or payable as a result of work done or service performed or rendered within the City. In order for the City to verify the accuracy of a taxpayer’s reported wages under this Subsection, the responsible person or business entity shall maintain adequate records.
c. Every employer required to deduct and withhold the occupational license fee under this Section shall report the wages or compensation from which employee withholdings fees have been withheld and submit payment for quarterly periods ending March 31, June 30, September 30 and December 31 of each year on or before the last day of the month following the end of each quarter, unless the employer is required at the sole discretion of the City to report and make monthly payments. All monthly payers shall make payment by the 15th of the month following the period end.
d. Employers with employees in Special Taxing Districts as defined in Chapter 11 (Finance, Taxation and Economic Development) of the City’s Code of Ordinances shall report separate wage and tax information on those employees.
e. Every employer who fails to withhold or pay to the City any sums required by this Subchapter to be withheld and paid shall be personally and individually liable to the City for any sum or sums withheld or required to be withheld in accordance with the provisions of this Subchapter.
f. Every employer required to deduct and withhold a fee under this Section shall annually on or before February 28 of each year complete and file on a form furnished or approved by the City a reconciliation of the withholdings license fee withheld where compensation is paid or payable to employees. Either copies of federal forms W-2 and W-3, transmittal of wage and tax statements or a detailed employee listing with the required equivalent information, as determined by the City, shall be submitted.
g. Every employer shall furnish each employee a statement (W-2) on or before January 31 of each year showing the amount of compensation and withholdings license fee deducted by the employer from the compensation paid to the employee for payment to the City during the preceding calendar year.
h. An employer shall be liable for the payment of the fee required to be deducted and withheld under this Section. The employer shall also be liable for any shortfall in payment following completion of the annual reconciliation.
i. Notwithstanding the provisions of this Section, every employee receiving compensation in the City subject to the fee imposed under this Subchapter shall be personally liable for any amount due should the employer fail to withhold. In all cases where the employer does not withhold the fee levied under this Subchapter from the employee, such employee or employees shall be responsible for filing with the City each quarter in the same manner as if they were the employer.
j. The City shall have a lien upon all the property of any employer who fails to withhold or pay over to the City sums required to be withheld under this Section. If the employer withholds, but fails to pay the amounts withheld to the City, the lien shall commence as on the date the amounts withheld were required to be paid to the City. If the employer fails to withhold, the lien shall commence at the time the liability of the employer is assessed by the City.
(Ord. BG2020-23, 9/1/2020; Ord. BG2023-6, 5/2/2023)
Editor's Note: Any business subject to Subchapter 18-2 shall pay a net profit license fee of 1.85% until the end of its current fiscal year, and thereafter the 2.0% net profit license fee shall be in effect for all fiscal years beginning on or after January 1, 2024. All Employee Wage Withholding fees shall be 2% effective January 1, 2024.
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