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New Annual Minimum Occupational and License Tax Imposed on Entities Doing Business in Lexington-Fayette Urban County

02.24.2009

The Lexington-Fayette Urban County Government (“LFUCG”) recently revised Chapter 13 of the Code of Ordinance (“Ordinance”) to provide for a new annual minimum occupational license and license tax.

The Ordinance now provides that every entity doing business in the LFUCG must obtain an occupational license each year and that a separate license must be obtained for each additional location. For retail or manufacturing businesses, a separate license is required for each physical location from which business is conducted. For service-type businesses, a separate license is required for each office location within the LFUCG. The business license must be posted in a prominent manner and in an area that is viewable by the public. For home-based businesses, this may be inside the home (i.e., in an office area).

The Ordinance requires payment of an annual minimum license tax of one hundred dollars ($100) for the first business location and twenty-five dollars ($25) for each additional location. However, the annual minimum license tax may be used as a credit against the business’ occupational license tax liability. The LFUCG occupational license tax is imposed at the rate of 2.25 percent of:

  1. All wages of compensation paid or payable in the LFUCG for work done or services performed or rendered in the LFUCG by every resident and nonresident who is an employee; and
  2. The net profit from business conducted in the urban county government by a resident or nonresident business entity.

Every business entity is required to pay the $100 annual minimum license tax, even if there is no physical location in LFUCG. This $100 annual minimum license tax is designed to require “everyone [to] contribute a minimum amount to the general fund [and] assist in the enforcement programs [that] ensure everyone [has paid] their fair share,” according to information provided by LFUCG’s Department of Revenue (“Department”). The Department has also indicated that under the previous version of the Ordinance, only 15,000 of the 27,000 licensed businesses in LFUCG paid occupational license taxes.

Business entities doing business in the LFUCG should complete Form 09BML, Business Minimum License Fee. Failure to obtain and pay for a license may result in penalties and possible enforcement action.

If you have questions about this topic or any other legal issue, please contact any member of the firm's State and Local Tax Team.

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