CHAPTER 115: OCCUPATIONAL LICENSE FEES
Section
   115.01   Definitions
   115.02   License application required
   115.03   Occupational license tax payment required
   115.04   Apportionment
   115.05   Employers to withhold
   115.06   Returns required
   115.07   Extensions
   115.08   Refunds
   115.09   Federal audit provisions
   115.10   Administrative provisions
   115.11   Information to remain confidential
   115.12   Use of occupational license tax
   115.13   Minimum liability
   115.14   Construction contractors
 
   115.99   Interest and penalty
§ 115.01 DEFINITIONS.
   For the purposes of this chapter, the following definitions shall apply unless the context clearly indicates or requires a different meaning.
   ARTIST. A person who makes, produces or creates a substantially handmade object or product that is both an original and creative work brought into existence by the exercise of its creator's imagination and which cannot be mass produced.
   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 boards 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.
   CITY. 
      (1)   The City of Pikeville, Kentucky. Where the context requires, CITY shall also mean the city’s authorized agent for billing and collection of the occupational license tax and enforcement of this chapter.
      (2)   Any city of the first to fifth class with the authority to levy net profits, or occupational license taxes.
   COMPENSATION. Wages, salaries, commissions, or an 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.
   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.
   DOMESTIC SERVANT. 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.
   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 (1) 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, 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 Section 7701(a)(24) of the Internal Revenue Code.
   GRATUITIES. Payments such as “tips” paid by someone other than the person’s employer.
   INDEPENDENT CONTRACTOR. A person who provides services who is not subject to the control and direction of another except as to the final result of his or her work, and not as to means, and who is therefore not an employee, as further defined by Treas. Reg. § 31.3401(c)-1, as amended.
   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 otherwise would terminate.
   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.
   PERSON. Every natural person, whether a resident or non-resident of the city. 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.
   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.
   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.
   STUDENT. A person who is enrolled in a qualifying institution of post secondary education on at least a half-time basis.
   TAXABLE NET PROFIT. 
      (1)   In case of a business entity having payroll or sales revenue only within the city means net profit as defined above in this section.
      (2)   In case of a business entity having payroll or sales revenue both within and without the city means net profit as defined above in this section, and as apportioned under § 115.04.
   TAXABLE YEAR. The calendar year or fiscal year ending during the calendar year, upon the basis of which net profit is computed.
(Ord. 0-2008-002, passed 1-14-08; Am. Ord. 0-2015-008, passed 6-22-15)
§ 115.02 LICENSE APPLICATION REQUIRED.
   (A)   Every person and 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 City of Pikeville shall be required to complete and execute the questionnaire prescribed by the Occupational Tax 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 change of status, other than change of address. Licensees are required to notify the Occupational Tax Office of changes in address or the cessation of business, and of other changes which render inaccurate the information supplied in the completed questionnaire.
   (B)   It shall be unlawful for any person to engage in any occupation, trade, profession or other activity in the city without first having completed the occupational license questionnaire herein required.
(Ord. 0-2008-002, passed 1-14-08) Penalty, see § 115.99
§ 115.03 OCCUPATIONAL LICENSE TAX PAYMENT REQUIRED.
   (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 city an occupational license tax for the privilege of engaging in such activities within the city. The occupational license tax shall be measured by two percent (2%) 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 nonresident 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 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.
   (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, or trust, banking and title insurance company 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 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 tax 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 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 profits, earnings, or distributions would not be taxable to an individual investor;
      (8)   Entities exempt pursuant to federal law or the laws of the Commonwealth of Kentucky;
      (9)   Coal mine employees who enter a mine portal or mine entrance that is located within the corporate city boundaries but whose workplace within the mine is outside of the corporate boundaries shall not be subject to the license fee although some incidental part of their work may occur within the city such as travel through a portion of the mine located within the city; performing routine maintenance or repairs to a portion of the mine within the city; loading, unloading or the staging of supplies or equipment at the mine portal within the city where the coal mining occurs outside the city.
   (F)   The occupational license tax imposed in this section shall not apply to the following;
      (1)   Periodic payments, commonly recognized as “old age” or “retirement pensions,” made to persons retired from service after reaching a specified age or after a stated period of employment.
      (2)   Unemployment compensation payments by the Commonwealth of Kentucky, or any other agency.
      (3)   Death benefits payable by an employer to the beneficiary of an employee or to his or her estate, whether payable in a single sum or otherwise.
      (4)   Amounts received by employees under the Worker’s Compensation Act as compensation for a disability sustained during the course of employment, together with any amount of damages received by suit or agreement on account of such disability.
      (5)   Disability payments. Payments made to an employee under a disability insurance plan which meet one or more of the following criteria:
         (a)   The payments are made by a third-party payer, which bears an insurance risk as determined by Treas. Reg. § 31.3401(a)-1(b).
         (b)   The payments are for “permanent and total disability” as defined by IRC § 22(e)(3).
         (c)   The payments are for the loss of limb or disfigurement of an employee as set forth in IRC § 105(c)(1) and the payments are made without regard to the amount of time an employee is absent from work.
      (6)   Allowances and reimbursements for expenses. Sums allowed and paid by an employer to an employee for expenses necessarily and actually incurred by the employee in the direct performance of his or her services, including meal and lodging allowances, if the employee is not required to include such receipts as income on his or her federal income tax return.
      (7)   Fringe benefits not taxable for federal income tax purposes. Non-cash fringe benefits which pursuant to IRC § 132 qualify as (a) no additional cost services, (b) qualified employee discounts, (c) working condition fringes, and (d) de minimus fringes and are therefore not taxable for federal income tax purposes.
      (8)   Employer contributions to qualified retirement, profit sharing and deferred compensation plans except as expressly provided in another section of this chapter.
      (9)   Amounts paid from qualified and non-qualified retirement, profit sharing and deferred compensation plans. Amounts paid from retirement plans, profit sharing plans and deferred compensation plans, whether or not such plans are “qualified” plans pursuant to the Internal Revenue Code.
      (10)   Students. Payments received by students as described in § 115.01 in the form of stipends, honorariums, grants and other payments made to students to the extent that such payments are conditioned upon the recipient’s pursuit of studies and/or participation in athletic or other intercollegiate competition, and scholarships and other non-cash fringe benefits received by duly registered students from the post secondary school, college or university in which they are enrolled.
      (11)   Compensation received for domestic services rendered by those persons classified as domestic servants by § 115.01.
      (12)   Gratuities. Compensation received by employees described under § 115.01.
      (13)   Federal Donor Leave Program. Leave time is donated by fellow employees to persons who are on leave (medical/disability). The recipients must have used all leave they had personally available. The amount paid under this program is exempt.
      (14)   Wages, salaries or other compensation received while:
         (a)   Performing live entertainment, acts, shows, concerts or performances performed before a live audience or the employees of that act, show or concert or performer while setting up or assisting in the performance. Concession vendors, maintenance or service contractors are not subject to this exemption.
         (b)   Filing, acting, directing or producing a statewide or nationally distributed:
            1.   Film or motion picture produced for distribution in theaters or via digital format, including but not limited to DVD, internet, or mobile electronic device program (but excluding the filming or production of obscene materials as defined by KRS 531.010);
            2.   Television program (but excluding the filming or production of obscene materials as defined by KRS 531.010 or television coverage of news, local events or athletic events primarily distributed regionally); or
            3.   Documentary of the history, heritage, event or tourism of Pikeville or Pike County (but excluding television coverage of news, local events or athletic events primarily distributed regionally.)
      (15)   Wages, salaries, income or other compensation:
         (a)   Received by an artist, as defined in § 115.01 , who works out of a non-profit community artisan center.
         (b)   Art gallery dedicated to developing artistic talent, enriching lives and educating future artisans by turning peoples’ passion for art into an entrepreneurial opportunity or displays or sells art out of such an artisan center.
         (c)   Artist as defined in § 115.01 , participating in a festival sponsored by the City of Pikeville or its agencies or approved by the City Manager.
      (16)   Wages, salaries, income or other compensation received by membership farmers, value-added vendors (canned goods or baked goods), and artists/crafters (producers of soap, wooden items, jewelry, stained glass, and the like) of an established, Kentucky Department of Agriculture registered farmers’ market or employees of the same while working at a farmers’ market or producing qualified exempted goods sold at a farmers’ market. To qualify for this exemption, farmers’ market member farmers must:
         (a)   Be good agricultural practices (GAP) certified;
         (b)   Accept SNAP benefits;
         (c)   All value-added vendors must have home processing and/or micro-processing certifications;
         (d)   All artists/crafters must be approved by the farmers’ market membership by a majority vote;
         (e)   At all times comply with the rules and regulations contained in the “Kentucky Farmers’ Market Manual and Resources Guide” published by the Kentucky Department of Agriculture, which are adopted herein by reference, as the same may change from time to time.
      (17)   Wages, salaries, income or other compensation of a minor (under 18 years of age) while operating a small business solely owned and operated by the minor on an occasional basis without any employees. It is the minor's responsibility to establish by clear and convincing proof that the minor meets the qualification for this exemption. This exemption shall not apply to minors working for another business regardless of whether the minor is classified as an independent contractor, contract labor or employee or working under the direction and control of another business operation.
      (18)   (a)   Any person, firm, business entity, nonprofit organization or corporation engaging in the business of promoting, operating, or otherwise conducting a temporary event such as a flea market, trade show, expo, consumer show, or sporting activity which primarily engages in leasing, renting, or providing the use of temporary booths, tent space or other like spaces to two (2) or more individuals, persons, firms, business entities, nonprofit organizations, corporations or combination thereof on a day-to-day basis shall be required to obtain a permit for the temporary event and pay a minimum license fee of five dollars ($5.00) per booth leased, rented or otherwise provided in lieu of the merchant, participant or booth space renter/leasee paying a separate minimum license fee under § 115.13 , and such temporary permit shall be valid for a period not to exceed seven (7) days and shall be valid only for operations at the permitted location.
         (b)   Any person, firm, business entity, nonprofit organization or corporation required under subsection (18)(a) to pay the required temporary event permit fee to the city shall, prior to engaging in such activity, be required to place a deposit with the city in an amount equal to the number of booths or spaces available to be rented, leased or otherwise provided, multiplied by the temporary event minimum license fee of five dollars ($5.00) per booth or space. The temporary event minimum license fee deposit shall be forfeited in full, unless within twenty (20) days following the scheduled date of the event, the permittee requests and applies for a reconciliation of the actual permit fee due the city, in which case the amount of additional fees or the amount of refund due shall be determined and paid.
         (c)   This required minimum license fee is in addition to any other occupational license or minimum occupational license fee that any person, firm, business entity, nonprofit organization, corporation, or participant leasing, renting, or being provided the use of temporary booths, tent space or other like spaces at the temporary event may already possess or otherwise be required to possess due to its operation outside of the permitted period and temporary event location.
         (d)   Any person, firm, business entity, nonprofit organization, corporation, or participant leasing, renting, or being provided the use of temporary booths, tent spaces or other like spaces under subsection (18)(a) and their employees shall be exempt from the requirement of this chapter but only to the extent of operation or employment for the permitted event. This provision is not intended to exempt any person, firm, business entity, nonprofit organization, corporation, or participant leasing, renting, or being provided the use of temporary booths, tent space or other like spaces under subsection (18)(a) or their employees from any other requirement under this chapter due to its/their operation(s) outside of the permitted period and location.
(Ord. 0-2008-002, passed 1-14-08; Am. Ord. 0-2015-008, passed 6-22-15; Am. Ord. 0-2016-007, passed 5-20-16; Am. Ord. 0-2018-01, passed 1-22-18; Am. Ord. O-2021-11, passed 4-26-21; Am. Ord. O-2021-12, passed 5-10-21; Am. Ord. O-2021-22, passed 10-11-21) Penalty, see § 115.99
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