Do I Pay City and County Occupational Tax in Kentucky? How City, County and School District Fees Stack, Credit or Replace Each Other

If you have employees, a payroll, or net profits from work done inside a Kentucky city or county, there is a good chance you owe a local occupational license tax. The short answer depends on three things: exactly where the work is performed, which taxing bodies levy in that spot, and whether a credit rule links them. Kentucky does not have one answer that fits every business, so this guide walks through how to check your own situation.

This article is informational content, not legal or tax advice. Local rules change, and some of the figures below come from local notices and older letters. Confirm every rate with the taxing office before you file. If you have locations or employees in several jurisdictions, talk with a qualified CPA or attorney.

Start with the basics: Kentucky has no statewide business license

Kentucky has no statewide general business license. Registering an LLC, corporation or assumed name with the Secretary of State is a filing, not a license. Licensing in Kentucky happens by agency or trade. The Department of Housing, Buildings and Construction licenses electricians, plumbers and HVAC contractors. The Real Estate Authority handles real estate, the Boards of Cosmetology and Barbering handle those trades, and the Cabinet for Health and Family Services covers child care and home health. ABC regulates alcohol and tobacco, and local health departments issue food permits. There is no statewide general contractor license.

Local governments fill part of the gap. Kentucky has 120 counties and about 420 cities, and many of them, along with school districts, levy an occupational license tax. This tax is local, not a state tax. It is usually based on one of three things: payroll (wages paid), net profits, or gross receipts. Kentucky has no local sales tax. The state sales tax is a flat 6%, and it reaches about 50 services, but that is a separate question from occupational tax.

Keep the three Kentucky charges separate

Many owners lump every Kentucky charge together when they budget. Separate them:

• Occupational license tax: local, levied by a city, county or school district on payroll, net profits or gross receipts.
• Limited Liability Entity Tax (LLET): a state tax on LLCs, corporations and other limited liability entities. The minimum is $175 if Kentucky gross receipts or gross profits are $3 million or less. Kentucky has no franchise tax, but the LLET applies at higher levels above that threshold.
• Income tax: LLC income passes through to the members and is taxed at the 3.5% flat individual rate for 2026. Corporations pay a 5% flat corporate income tax.

The occupational tax does not replace the LLET or the income tax, and neither of those state charges tells you what a city or county will collect. You need a separate answer for each.

Three questions that decide what you owe

1. Where is the work performed? Boundaries matter. Franklin County's 1% applies only in the unincorporated area, so a business inside a city limit in that county follows a different path than one outside it. A mailing address with a city name does not always mean the business sits inside city limits. Confirm the boundary with the taxing office.
2. Which bodies levy in that spot? In many places the answer is a city plus a county, and sometimes a school district as well. Some areas levy only the county, and some levy only the city.
3. Is there a credit between them? This is the question most people miss, and it changes the total bill more than almost anything else.

How the credit rule works

Under KRS 68.197(7), when a county of 30,000 or more and a city inside it both levy, the city fee is credited against the county fee. The city payment reduces what the county can collect from the same base, so a business inside that city does not simply pay the full city rate and the full county rate on the same income.

That credit is what separates a stack from a replacement. Where a credit applies, the city fee works more like a substitute for part of the county fee. Where no credit applies, the two fees add together. Neither outcome is the default for all of Kentucky, which is why you should never assume the answer from a neighboring town.

Two situations keep the credit from being a universal rule:

• Voter-approved fees. Under KRS 68.197(10), a fee approved by public question gets no credit unless the city and county agree.
• Louisville Metro. KRS 68.180 has no credit rule. For Louisville, Jeffersontown, St. Matthews and other Jefferson County cities, check the treatment with the city tax office and the Louisville Metro Revenue Commission.

Some counties have their own credit terms by letter or local action. Pike County, for example, gave full credit for a city rate of 1% or more under a 2015 letter. That is an old document, so confirm that it still governs before you rely on it.

Observed stacks from 2024 to 2026

The examples below come from local notices and tables published between 2024 and 2026. They show how the rules play out in practice. They are not a substitute for the current ordinance, and rates change.

Area	What the local notice shows
Warren County, outside Bowling Green	County rate of 1% applies, plus Warren County Public Schools at 0.5% on top
Bowling Green	City rate of 2.0% or the county rate, not both
Franklin County	1% applies only in the unincorporated area
Boyle County and Danville	Both apply. Danville is 1.75% on net profits and 1.90% on wages. The county rate is 1.25%
Jessamine County and Nicholasville	Both apply
Pike County	Full credit for a city rate of 1% or more, per a 2015 letter
Campbell County	$75 flat county license. County payroll rates of 0.90%, plus 0.10% for mental health and 0.05% for senior services (2024 table), plus the city rate

Read the table as a warning, not a guide to your own bill. The Boyle and Danville entry shows both fees applying, even though the county credit rule exists in the statute. Warren County shows a city and a county that cannot both be collected on the same spot. Campbell shows how a single county can layer several payroll rates on top of a city rate. Each result depends on local action and the specific jurisdiction.

Multi-district apportionment

If you operate in more than one taxing district, you usually cannot assign all of your payroll or profit to a single place. Under KRS 67.753, apportionment averages the payroll and sales factors. The averaged result sets the share of your base that each district can tax. This matters for businesses with a main office in one city and sales or employees in others.

Ask the local office which factors it uses, how it defines a sale or a payroll dollar, and which form it expects you to file. Keep records that support each factor, because the apportionment you report is the one you may need to defend later.

Step by step: check your own situation

1. List every location. Include offices, job sites, warehouses, and any place your employees regularly work. Note whether each one is inside city limits.
2. Identify the bodies at each location. For each address, find the city, the county and the school district. Confirm your registered office on the Secretary of State business search at sosbes.sos.ky.gov.
3. Call or write the taxing office. Give the exact address and ask whether a credit applies, whether any fee was approved by public question, and which base applies (payroll, net profit or gross receipts).
4. Get the current rate in writing. Use the ordinance or the office's written answer. Do not rely on a rate from a neighbor, an old forum post or a 2015 letter.
5. Register your tax accounts. Businesses register with the Department of Revenue using Form 10A100 through MyTaxes.ky.gov.
6. Calendar your state filings. LLCs and corporations file an annual report for $15 each year. It is due June 30, and the filing window opens January 1. Domestic entities that miss June 30 are administratively dissolved.

Where to confirm each rule

Use the official source for each piece. Contact information for local offices varies by city and county, so search the official website of the jurisdiction where the business operates.

• City occupational tax office: the authority for the city where the business is located.
• County occupational tax office: the authority for the county where the business is located.
• Louisville Metro Revenue Commission: for Louisville Metro and, with the city tax office, for Jefferson County cities.
• School district tax office: for the school district levy that applies to the address.
• Kentucky Secretary of State, Division of Business Filings: https://www.sos.ky.gov/bus/business-filings/Pages/default.aspx
• Kentucky Department of Revenue: https://revenue.ky.gov/
• Kentucky Small Business Development Center: https://kentuckysbdc.com/. Ask what planning help they offer for multi-location setups.

Common mistakes

• Assuming one rule fits all. Two neighboring cities can produce opposite results, and a credit in one county may not exist in the next.
• Assuming a credit exists. Some stacks have none. The Boyle and Danville notice shows both fees applying.
• Using an old rate. Rates change, and older letters may no longer govern.
• Forgetting the school district. Warren County Public Schools shows that a third body can apply on top of the city and county.
• Treating the occupational tax as a license. It is a tax on payroll, profit or receipts. Registering your entity with the Secretary of State is a separate filing.
• Overlooking the annual report. The $15 annual report is due June 30, and missing it can lead to administrative dissolution.

Bottom line

You may owe city, county and school district occupational tax in Kentucky. Whether you owe more than one, and whether a credit reduces the total, depends on the exact address, the bodies that levy there, and any voter-approved or local credit terms. Confirm the boundary, the current rate and the credit with the local office before you file. If your business spans several jurisdictions or has employees in more than one place, bring the results to a qualified CPA or attorney.

Reminder: this guide is informational only and is not legal or tax advice.