Section
110.01 Definitions
110.02 Occupational license application required
110.03 Occupational license tax payment required
110.04 Apportionment
110.05 Employers to withhold
110.06 Return required
110.07 Extensions
110.08 Refunds
110.09 Federal audit provisions
110.10 Administrative provisions
110.11 Information to remain confidential
110.12 Penalties and failures
110.13 Duties of Finance Director
110.14 Minimum and maximum liability
110.99 Penalty
For the purpose of this chapter, the following definitions shall apply unless the context clearly indicates or requires a different meaning.
BUSINESS. Any enterprise, activity, trade, occupation, profession or undertaking of any nature conducted for gain or profit. BUSINESS shall not include a board of trade, chambers of commerce, trade associations or unions, or other associations performing services usually performed by trade associations or unions as recognized by the Internal Revenue Service. BUSINESS shall not include funds, foundations, corporation or associations organized and operated for the exclusive and sole purpose of religious, charitable, scientific, literary, educational, civic or fraternal purposes, where no part of the earnings, incomes or receipts of such unit, group or association, inures to the benefit of any private shareholders or other person.
BUSINESS ENTITY. Each separate corporation, limited liability company, business development corporation, partnership, limited partnership, registered limited liability partnership, sole proprietorship, association, joint stock company, receivership, trust, professional service organization or other legal entity through which business is conducted.
CITY. The City of Elizabethtown, Kentucky.
COMPENSATION. Wages, salaries, commissions or any other form of remuneration paid or payable by an employer for services performed by an employee, which are required to be reported for federal income tax purposes and adjusted as follows:
(1) Include any amounts contributed by an employee to any retirement, profit sharing or deferred compensation plan, which are deferred for federal income tax purposes under a salary reduction agreement or similar arrangement, including, but not limited to, salary reduction arrangements under I.R.C. §§ 401(a), 401(k), 402(e), 403(a), 403(b), 408, 414(h) or 457; and
(2) Include any amounts contributed by an employee to any welfare benefit, fringe benefit or other benefit plan made by salary reduction or other payment method which permits employees to elect to reduce federal taxable compensation under the Internal Revenue Code, including, but not limited to, I.R.C. §§ 125 and 132.
CONCLUSION OF THE FEDERAL AUDIT. The date that the adjustments made by the Internal Revenue Service to net income as reported on the business entity’s federal income tax return become final and unappealable.
FINAL DETERMINATION OF THE FEDERAL AUDIT. The revenue agent’s report or other documents reflecting the final and unappealable adjustments made by the Internal Revenue Service.
FISCAL YEAR. As defined in I.R.C. § 7701(a)(24).
EMPLOYEE. Any person who renders services to another person or any business entity for compensation, including an officer of a corporation and any officer, employee or elected official of the United States, a state or any political subdivision of a state, or any agency of instrumentality of any one or more of the above. A person classified as an independent contractor under the Internal Revenue Code shall not be considered an EMPLOYEE.
INTERNAL REVENUE CODE. The Internal Revenue Code, as defined in KRS 67.750(7) and also being Title 26 of the U.S. Code.
MOBILE FOOD VENDOR. Any individual or entity that only operates a food establishment which is on wheels and mobile in which both prepared and pre-packaged food is sold (examples are food truck, trailer or cart). A mobile food unit that is associated with a restaurant, as defined in this chapter, is not considered a MOBILE FOOD VENDOR under the definition of this chapter and all food sales from such units shall be reported with the overall sales of the restaurant and pay all applicable taxes as required by KRS 91A.400.
NET PROFIT. Gross income as defined in I.R.C. § 61, minus all the deductions from gross income allowed by I.R.C. Ch. 1, and adjusted as follows:
(1) Include any amount claimed as a deduction for state tax or local tax which is computed, in whole or in part, by reference to gross or net income and which is paid or accrued to any state of the United States, local taxing authority in a state, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or any foreign country or political subdivision thereof;
(2) Include any amount claimed as a deduction that directly or indirectly is allocable to income which is either exempt from taxation or otherwise not taxed;
(3) Include any amount claimed as a net operating loss carryback or carryforward allowed under I.R.C. § 172;
(4) Include any amount of income and expenses passed through separately as required by the Internal Revenue Code to an owner of a business entity that is a pass-through entity for federal tax purposes; and
(5) Exclude any amount of income that is exempt from state taxation by the Kentucky Constitution or the Constitution and statutory laws of the United States.
PERSON. Every natural person, whether a resident or non-resident of the city. Whenever the word PERSON is used in a clause prescribing and imposing a penalty in the nature of a fine or imprisonment, the word, as applied to a partnership or other form of unincorporated enterprise, shall mean the partners or members thereof, and as applied to corporations, shall mean the officers and directors thereof.
RESTAURANT. Any fixed commercial establishment with a permanent physical location that engages in the preparation and serving of ready-to-eat foods in portions to the consumer, including, but not limited to: restaurants; coffee shops; cafeterias; short-order cafés; luncheonettes; grilles; tea rooms; sandwich shops; soda fountains; roadside stands; catering kitchens; delicatessen; or similar places in which food is prepared for sale for consumption on the premises or elsewhere. Not included in the definition of a RESTAURANT for purposes of this chapter are school cafeterias which are operated by the school system, food vending machines, hospital cafeterias owned by a governmental entity and cafeterias that are located inside industrial factories in which services are limited to employees only.
RETURN or REPORT. Any properly completed and, if required, signed form, statement, certification, declaration or any other document permitted or required to be submitted or filed with the city.
SALES REVENUE. Receipts from the sale, lease or rental of goods services or property.
TAX DISTRICT. Any county or city with the authority to levy net profits or occupational license taxes.
TAXABLE NET PROFIT. In case of a business entity having payroll or sales revenue only with the city means net profit, as defined herein.
TAXABLE NET PROFIT. In case of a business entity having payroll or sales revenue both within and without the city means net profit, as defined herein, and as apportioned under § 110.04 of this chapter.
TAXABLE YEAR. The calendar year or fiscal year ending during the calendar year, upon the basis of which net income is computed.
(Prior Code, § 110.01) (Ord. 09-2006, passed 5-8-2006; Ord. 25-2019, passed 11-4-2019)
(A) Every person or business entity engaged in any trader, occupation or profession, or other activity for profit or anyone required to file a return under this chapter in the city shall be required to complete and execute the application prescribed by the Occupational Tax Office. Each person shall be required to complete a separate application for each separate business before the commencement of business or in the event of a status change, other than change of address. Licensees are required to notify the Occupational Tax Office of changes of address, or the cessation of business activity, and of other changes which render inaccurate the information supplied in the completed application.
(B) (1) Effective 1-1-2020, all mobile food vendors are required to pay on a calendar year basis, an annual business license fee of $250. The mobile food vendor will not be required to file a monthly restaurant tax return as required by Ord. 22-2007. All licenses expire December 31 each year. Mobile food vendors are exempt from filing a return as required by § 110.06 of this chapter.
(2) This license fee does not apply to any restaurant business that has a permanent physical location inside the city limits and also operates a mobile food unit. Any such business shall be required to file monthly restaurant tax returns, obtain an annual business license, remit any occupational withholdings due, and file an annual net profits license fee return as required by this chapter and Ord. 22-2007.
(Prior Code, § 110.02) (Ord. 09-2006, passed 5-8-2006; Ord. 25-2019, passed 11-4-2019)
(A) Except as provided in divisions (B) and (E) below, every person or business entity engaged in any business for profit and any person or business entity that is required to make a filing with the Internal Revenue Service or the Kentucky Revenue Cabinet shall be required to file and pay to the city an occupational license tax for the privilege of engaging in such activities with the city. The occupational license tax shall be measured by 1.95% of:
(1) All wages and compensation paid or payable in the city for work done or services performed or rendered in the city by every resident and nonresident who is an employee; and
(2) The net profit from business conducted in the city by a resident or non-resident business entity.
(B) All partnerships, S corporations and all other entities where income is “passed through” to the owners are subject to this chapter. The occupational license tax imposed in this chapter is assessed against income before it is “passed through” these entities to the owners.
(C) If any business entity dissolves, ceases to operate or withdraws from the city during any taxable year, or if any business entity in any manner surrenders or loses its charter during any taxable year, the dissolution, cessation of business, withdrawal or loss or surrender of charter shall not defeat the filing of returns and the assessment and collection of any occupational license tax for the period of that taxable year during which the business entity had business activity in the city.
(D) If a business entity makes, or required to make, a federal income tax return, the occupational license tax shall be computed for the purposes of this chapter on the bases of the same calendar or fiscal year required by the federal government, and shall employ the same methods of accounting required for federal income tax purposes.
(E) The occupational license tax imposed in this section shall not apply to the following persons or business entities:
(1) Any bank, trust company, combined bank and trust company, combined trust, banking and title business organized and doing business in this state, any savings and loan association whether state or federally chartered pursuant to the provisions of KRS 92.300;
(2) Any compensation received by members of the Kentucky National Guard for active duty training, unit training assemblies and annual field training pursuant to the provisions of KRS 92.300;
(3) Any compensation received by precinct workers for election training or work at election booths in state, city or local primary, regular or special elections pursuant to the provisions of KRS 92.300;
(4) Public service corporations that pay an ad valorem tax on property valued and assessed by the commonwealth’s Department of Revenue pursuant to the provisions of KRS 136.120. Licensees whose businesses are predominately non-public service who are also engaged in public service activity are required to pay a 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 Ch. 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 portion of their net profits derived from the manufacturing or trafficking in alcoholic beverages;
(6) Insurance companies incorporated under the laws of and doing business in the Commonwealth of Kentucky except as provided in KRS 91A.080;
(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 profit, earnings or distributions would not be taxable to an individual investor;
(8) All rental income of any type or source is fully taxable for all forms of ownership, except for an individual or single-member LLC who owns four or less residential rental housing units; they are exempt from the requirements of this chapter. A housing unit is defined as a single living quarters (duplex = two, apartment unit = one). With ownership of five or more residential rental units inside the city limits, an individual or single-member LLC is presumed to be operating a business and is subject to this chapter and all net profits are fully taxable.
(9) The sale of agricultural products by the owner of locally homegrown agriculture products. This does not include the resale of produce from a distributor;
(10) Private domestic labor is excepted, net included are commercially marketed services provided for the home;
(11) Vendors who only participate in festivals or fairs sponsored by non-profit organizations where said events do not exceed three days may be exempt; and
(12) Any mobile food vendor that only participates in city sponsored events or festivals shall be exempted from obtaining a city occupational license, however, they shall be required to pay the applicable vendor set-up fee associated with each city event or festival.
(Prior Code, § 110.03) (Ord. 09-2006, passed 5-8-2006; Ord. 10-2012, passed 8-20-2012; Ord. 25- 2019, passed 11-4-2019; Ord. 13-2023, passed 6-26-2023)
(A) Except as provided in division (D) below, net profit shall be apportioned as follows:
(1) For business entities with both payroll and sales revenues in more than one tax district, by multiplying the net profit by a fraction, the numerator of which is the payroll factor, described in division (B) below, plus the sales factor, described in division (C) below, and the denominator of which is two;
(2) For business entities with sales revenue in more than one tax district, by multiplying the net profit by the sales factor as set forth in division (C) below; and
(3) For the purposes of divisions (A) through (D) below, the business entity shall file an apportionment form provided by the Occupational Tax Office.
(B) 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 business entity for compensation, and the denominator of which is the total compensation paid or payable by the 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.
(C) The sales factor is a fraction, the numerator of which is the total sales revenue of the business entity in the city during the tax period, and the denominator of which is the total sales revenue of the business entity everywhere during the tax period:
(1) The sales, 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 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 revenue 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; and
(3) Sales revenue from the sale, lease or rental of real property is allocated to the tax district where the property is located.
(D) If the apportionment provisions of this section do not fairly represent the extent of the business entity’s activity in the city, the business entity may petition the city or the city may require, in respect to all or any part of the business entity’s business activity, if reasonable:
(1) Separate accounting;
(2) The exclusion of any one or more of the factors;
(3) The inclusion of one or more additional factors which will fairly represent the 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.
(E) When compensation is paid or payable for work done or services performed or rendered by an employee, both within and without the city, the license tax shall be measured by that part of the compensation paid or payable as a result of work done or service performed or rendered with the city. The license tax shall be computed by obtaining the percentage which the compensation for work performed or services rendered within the city bears to the total wages and compensation paid or payable. In order for the city to verify the accuracy of the taxpayer’s reported percentage under this section, the taxpayer shall maintain adequate records.
(Prior Code, § 110.04) (Ord. 09-2006, passed 5-8-2006)
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