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 Returns required
110.07 Extensions
110.08 Refunds
110.09 Federal audit provisions
110.10 Administrative provisions
110.11 Information to remain confidential
110.12 Use of occupational license tax
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, corporations, 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 shareholder 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.
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 Section 401(a), 401(k), 402(e), 403(a), 403(b), 408, 414(h), or 457 of the Internal Revenue Code; 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 Sections 125 and 132 of the Internal Revenue Code.
COUNTY. Franklin County, including the city of Frankfort and any other community whether incorporated or not.
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.
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.
EMPLOYER. The person for whom an individual performs or performed any service, of whatever nature, as the employee of such person, except that:
(1) If the person for whom the individual performs or performed the services does not have control of the payment of the wages for such services, EMPLOYER means the person having control of the payment of such wages; and
(2) In the case of a person paying wages on behalf of a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in trade or business within the United States, the term EMPLOYER means such person;
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. Defined in Section 7701(a)(24) of the Internal Revenue Code.
INTERNAL REVENUE CODE. The Internal Revenue Code as defined in KRS Chapter 67.
NET PROFIT. Gross income as defined in Section 61 of the Internal Revenue Code minus all the deductions from gross income allowed by Chapter 1 of the Internal Revenue Code, 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 Section 172 of the Internal Revenue Code;
(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.
OCCUPATIONAL TAX COLLECTOR. The official collector of the occupational tax, to be appointed by the County Fiscal Court.
PERSON. Every natural person, whether a resident or non-resident of the county. Whenever 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.
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 county.
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.
(1) In case of a business entity having payroll or sales revenue only within the county means net profit as defined in NET PROFIT; and
(2) In case of a business entity having payroll or sales revenue both within and without the county means net profit as defined in NET PROFIT, 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.
(Ord. 14-2007, passed 1-1-2008; Ord. 4-2016, passed 7-1-2016)
Every person or business entity engaged in any trade, occupation, or profession, or other activity for profit or anyone required to file a return under this chapter shall be required to complete and execute the questionnaire prescribed by the Occupational Tax Office, before the commencement of such business, the fee for which shall be $40. Each person shall be required to complete a separate questionnaire 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 that render inaccurate the information supplied in the completed questionnaire.
(Ord. 14-2007, passed 1-1-2008; Ord. 4-2016, passed 7-1-2016) Penalty, see § 110.99
(A) Except as provided in divisions (B) and (E) of this section, 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 county an occupational license tax for the privilege of engaging in such activities within the county. The occupational license tax shall be measured by 1% of:
(1) All wages and compensation paid or payable in the county for work done or services performed or rendered in the county by every resident and nonresident who is an employee; and
(2) The net profit from business conducted in the county by a resident or nonresident business entity is imposed an annual license fee being the greater of $40 or 1% of the net profits of the occupation, trade, professional or other business activity conducted in or derived from activity within the unincorporated area of the county.
(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) Every person listed as a contractor or subcontractor on an application for a building permit shall have a business license. No building permit shall be issued until all contractors or subcontractors have a business license.
(D) No business license for businesses physically located in the county shall be issued until the application is approved by the Department of Planning, Zoning and Building Codes Enforcement for compliance with Chapter 155 of this code of ordinances.
(E) If any business entity dissolves, ceases to operate, or withdraws from the county 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 the 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 county.
(F) If a business entity makes, or is required to make, a federal income tax return, the occupational license tax shall be computed for the purposes of this chapter on the basis 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.
(G) 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 commonwealth, 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. Licensees whose businesses are predominantly 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 between the city of Frankfort and the county;
(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 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 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 profits, earnings, or distributions would not be taxable to an individual investor;
(8) Compensation received by ministers taxable for federal income tax purposes pursuant to the Internal Revenue Code is exempt from the license fee on wages imposed by the county. Compensation received by ministers not taxable for federal income tax purposed pursuant to the Internal Revenue Code is not subject to any license fee imposed by the county. For the purposes of this chapter, a MINISTER is defined as a natural person who is ordained in accordance with the ceremonial ritual or discipline of a recognized church, religious sect, or other religious organization, to teach and preach its doctrine or to administer rites in public worship, and who regularly performs one or more of these duties, provided that no such person is exempt from the payment of an employee license on compensation earned in activities not connected with the regular functions of a religious organization. Thus, compensation earned by ordained persons employed as chaplains, teachers, administrators, musicians, or counselors whose employment is connected with the regular functions of a religious organization is exempt. Compensation earned by persons who are not ordained is not exempt regardless of the religious nature of such individual’s work;
(9) Compensation received by domestic servants is exempt from the license fee on wages imposed by the county. For purposes of this chapter, a DOMESTIC SERVANT is defined as an individual employed to drive his or her employer as a chauffeur or employed on the grounds or in the home of his or her employer, to cook, clean, wash, garden, transport, or otherwise care for or wait upon the employer, the employer’s family and guests or to care for the person, home grounds, and/or vehicles of the employer, the employer’s family and guests, including but not limited to maids, butlers, nurses, nursemaids, gardeners, cooks, launderers, and chauffeurs engaged to service the employer, the employer’s family, and guests, but not including such individuals who are employed by a cleaning service, personal nursing service, chauffeuring service, or other entity which offers the services of its employees to the public;
(10) All state, county, city, and district officers directly named and designated in the text of the constitution to the extent of their salaries, wages, or other compensation received for work or services rendered in the performance of the duties and obligations of their respective offices;
(11) The legally blind shall be exempt from the provisions of the County Fiscal Court occupational license tax, and no license fee shall be due from them to the extent of their net annual salaries, wages or other compensation. LEGALLY BLIND shall mean that the individual claiming exception has:
(a) Central visual acuity of not better then 20/200 in the better eye with corrective lenses, or
(b) Such individual’s visual acuity is accompanied by a limitation in the fields of vision such that the widest diameter of the visual field subtends to an angle no greater than 20 degrees; and
(12) Rental income:
(a) A structure or mobile home located within the corporate limits of the county, which is regularly offered for occupancy, either wholly or in part in return for the payment of rent;
(b) Corporations and associations, as defined herein, which receive income from rental real estate located within the county are presumed to be in the business of renting real estate and therefore subject to the license fee imposed by this section on net profits derived therefrom and the other provisions of this section; and
(c) Individuals and fiduciaries who receive income from real estate located in the county is rebuttably presumed to be in the business of renting real estate and therefore subject to the license fee imposed on net profits derived therefrom and the other provisions of this section if they receive more than $50,000 net profits annually from the rental of real estate located in the county.
(Ord. 14-2007, passed 1-1-2008; Ord. 4-2016, passed 7-1-2016) Penalty, see § 110.99
(A) Except as provided in division (D) of this section, net profit shall be apportioned as follows:
(1) For business entities with both payroll and sales revenue 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) of this section, plus the sales factor, described in division (c), 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 subsection (3) of this section; and
(3) For the purposes of divisions (A) through (D)of this section, 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 county 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 county based on the time the individual’s service is performed within the county.
(C) The sales factor is a fraction, the numerator of which is the total sales revenue of the business entity in the county 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 county 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 county regardless of the Free on Board point (FOB 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 county 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 county based upon a fraction, the numerator of which is the time spent in performing such income-producing activity within the county 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 county the business entity may petition the county or the county 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 county; or
(4) The employment of any other method to effectuate an equitable allocation and apportionment of net profit.
(E) When compensation is paid or payable for work done or services performed or rendered by an employee, both within and without the county, 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 within the county. The license tax shall be computed by obtaining the percentage, which the compensation for work performed or services rendered within the county bears to the total wages and compensation paid or payable. In order for the county to verify the accuracy of a taxpayer’s reported percentages under this subsection, the taxpayer shall maintain adequate records.
(Ord. 14-2007, passed 1-1-2008; Ord. 4-2016, passed 7-1-2016) Penalty, see § 110.99
(A) Every employer making payment of compensation to an employee shall deduct and withhold upon the payment of the compensation any tax imposed against the compensation by the county. Amounts withheld shall be paid to the county in accordance § 110.03 of this chapter.
(B) Every employer required to deduct and withhold tax under this section shall, for the quarter ending after January 1 and for each quarter ending thereafter, on or before the end of the month following the close of each quarter, make a return and report to the county, and pay to the county, the tax required to be withheld under this section, unless the employer is permitted or required to report within a reasonable time after some other period as determined by the county.
(C) Every employer who fails to withhold or pay to the county any sums required by this chapter to be withheld and paid shall be personally and individually liable to the county or for any sum or sums withheld or required to be withheld in accordance with the provisions of this section.
(D) The county shall have a lien upon all the property of any employer who fails to withhold or pay over to the county sums required to be withheld under this section. If the employer withholds, but fails to pay the amounts withheld to the county, the lien shall commence as of the date the amounts withheld were required to be paid to the county. If the employer fails to withhold, the lien shall commence at the time the liability of the employer is assessed by the county.
(E) Every employer required to deduct and withhold tax under this section shall annually on or before February 28 of each year complete and file on a form furnished or approved by the county a reconciliation of the occupational license tax 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 county, shall be submitted.
(F) Every employer shall furnish each employee a statement on or before January 31 of each year showing the amount of compensation and occupational license tax deducted by the employer from the compensation paid to the employee for payment to the county during the preceding calendar year.
(G) An employer shall be liable for the payment of the tax required to be deducted and withheld under this section.
(H) The president, vice president, secretary, treasurer or any other person holding an equivalent corporate office of any business entity subject to this chapter shall be personally and individually liable, both jointly and severally, for any tax required to be withheld from compensation paid to one or more employees of any business entity, and neither the corporate dissolution or withdrawal of the business entity from the county, nor the cessation of holding any corporate office, shall discharge that liability of any person; provided that the personal and individual liability shall apply to each or every person holding the corporate office at the time the tax becomes or became obligated. No person shall be personally and individually liable under this division (H) who had no authority to collect, truthfully account for, or pay over any tax imposed by this chapter at the time that the taxes imposed by this chapter become or became due.
(I) Every employee receiving compensation in the county subject to the tax imposed under § 110.03 of this chapter shall be personally liable for the tax notwithstanding the provisions of divisions (G) and (H). In all cases where the employer does not withhold the tax levied under this chapter from the employee, such employee or employees shall be responsible for filing with the county each quarter in the same manner as if they were the employer. If an employer fails to or is not required to withhold, report, or pay the license fee it shall become the duty of the employee to file with the county. The only employer that is not required to withhold, report, and pay the occupational license tax is the federal government including the United States Postal Service. The payment required to be made by an employee, can be made quarterly, for the periods ending March 31, June 30, September 30, and December 31 of each year, or at any time the employee wishes to make an estimated payment for the year in which wages are earned. All license fees must be received by February 28 for the preceding calendar year, together with a copy of the employee’s W-2 form. Employers not required to withhold, report, or pay the license fee must annually during the month of January of each year, make a return to the Occupational Tax Administrator, in which is set forth the name and social security number of each employee of the employer during the preceding calendar year, giving the amount of salaries, wages, commissions or other compensation earned during such preceding year by each such employee. This list shall include all current full-time employees, part-time employees, temporary employees, and terminated employees whether it be voluntary or involuntary.
(Ord. 14-2007, passed 1-1-2008; Ord. 4-2016, passed 7-1-2016) Penalty, see § 110.99
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