Section
111.01 Definitions
111.02 License application required
111.03 Occupational license fee payment required
111.04 Apportionment
111.05 Employers to withhold
111.06 Returns required
111.07 Extensions
111.08 Refunds
111.09 Federal audit provisions
111.10 Administrative provisions
111.11 Information to remain confidential
111.99 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 the usual activities of board of trade, chambers of commerce, trade associations or unions, or other associations performing services usually performed by trade associations or unions. 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 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.
COUNTY. The county of Lincoln County, Kentucky.
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, the term employer. 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. Fiscal year as defined in I.R.C. § 7701(a)(24).
INTERNAL REVENUE CODE. The Internal Revenue Code in effect on December 31 of the year in which the tax is due, exclusive of any amendments made subsequent to that date, other than amendments that extend provisions in effect on December 31, of the year in which the tax is due, that would otherwise terminate.
NET PROFIT. Gross income as defined in I.R.C. § 61, minus all the deductions from gross income allowed by I.R.C. Chapter 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 taxed;
(3) Include any amount claimed as a net operating loss carry back or carry forward 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 nonresident of the county. 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.
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 with the authority to levy net profits or occupational.
TAXABLE NET PROFIT. In case of a business entity having payroll or sales revenue only within the county, means net profit as defined herein.
TAXABLE NET PROFIT. In case of a business entity having payroll or sale revenue both within and without the county, means net profit as defined herein, and as apportioned under § 111.04.
TAXABLE YEAR. The calendar year or fiscal year ending during the calendar year, upon the basis of which net income is computed.
RENTAL UNIT. Any room or rooms connected or other structure or portion thereof constituting a separate, independent establishment of premises for rent, lease or sublease to the occupant thereof.
(Ord. 2-02-08-05, passed 2-8-2005)
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 in the county shall be required to complete and execute the questionnaire prescribed by the occupational fee office. 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 fee office of changes of address, or the cessation of business activity, and of other changes which render inaccurate the information supplied in the completed questionnaire.
(Ord. 2-02-08-05, passed 2-8-2005)
(A) Except as provided in division (B) 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 State Revenue Cabinet shall be required to file and pay to the county an occupational license fee for the privilege of engaging in such activities within the county. The occupational license that 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.
(a) If the amount to be remitted is less than $25, the entity shall instead remit the sum of $25 for the calendar year.
(b) That any entity that submits a net profit return which reflects zero net profit, or a loss shall still be required to submit the minimum sum as set forth herein.
(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 fee 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 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 charter shall not defeat the filing of returns and the assessment and collection of any occupational license fee for the period of that taxable year during which the business entity had business activity in the county.
(D) If a business entity makes, or is required to make, a federal income tax return, the occupational license fee 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.
(E) The occupational license fee 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;
(2) Any compensation received by members of the State 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 State Department of Revenue pursuant to the provisions of KRS 136.20. 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 to 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 alcoholic beverages;
(6) 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 profits, earnings or distributions would not be taxable to an individual investor; and
(8) Compensation received for the renting or leasing of only one residential rental unit shall be exempt from the occupational license fee.
(Ord. 2-02-08-05, passed 2-8-2005; Ord. 9.22.20.2, passed 9-22-2020)
(A) Except as provided in division (D) below, 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) 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 sale factor as set forth in division (C) below; and
(3) The purpose of this section business entities shall file an appropriate form provided by the occupational license fee administration.
(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 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 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.
(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 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 county.
(1) The license fee 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 percentage under this subsection, the taxpayer shall maintain adequate records to establish apportionment.
(2) For the purposes of this division (E), businesses shall file an appropriate form provided by the occupational license fee office.
(Ord. 2-02-08-05, passed 2-8-2005)
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