Kentucky County Occupational Tax Rates by County: 87 of 120 Counties Levy a Payroll Fee, Median 1.00%, Range 0.50% to 2.5%

If you plan to hire in Kentucky, one local tax belongs in your startup budget before your first payroll run: the county occupational license tax. Unlike the statewide 6% sales tax, this tax is set locally, so the rate you pay depends on where your business operates. This guide lists the county rates reported in the Kentucky Association of Counties (KACo) data brief from June 2026. Those rates are as of January 2026.

How the County Occupational Tax Works

Kentucky has no statewide general business license and no franchise tax. Local governments fill part of that gap. Cities, counties and school districts can levy occupational license taxes on payroll, net profits or gross receipts. Filing your LLC or corporation with the Secretary of State is a filing, not a license, and it does not satisfy any local tax obligation.

Of the 120 Kentucky counties, 87 levy an occupational fee. All 87 apply it to payroll, and 70 of them also apply it to net profits. The other 17 tax payroll only. The remaining 33 counties levy no county occupational fee.

The county is only one layer. Kentucky has about 420 cities, and many of them levy their own occupational license tax. Each city and county runs its own forms and revenue office. Treat the county rate in this guide as your starting point, not the final number for your business.

County Rates at a Glance

Among the 87 counties that levy a fee, rates run from 0.50% to 2.50%, with a median of 1.00%. Daviess and McCracken counties both levy 1.00% on payroll, which sits at the median. The table below groups counties by rate.

Rate	Counties	Notes
2.50%	Grant	Highest county rate in the dataset
2.25%	Fayette	Includes Lexington
2.00%	Bath, Breathitt, Estill, Garrard, Martin, Montgomery	Six counties at this rate
1.50%	Clark	Above 1% because of a grandfathered fee (see below)
1.25%	Jefferson	County share only; Louisville Metro charges 2.2% in total for residents
1.00%	Daviess, McCracken (payroll)	Matches the median rate
0.50%	Adair, Grayson, Hopkins, Johnson, Nelson, Union	Lowest rate among counties that levy a fee
No county fee	33 counties, including Bullitt, Oldham, Christian, Barren and Calloway	City rates may still apply

These figures are as reported by KACo for January 2026. Confirm each one with the county fiscal court before you set up payroll.

The Highest and Lowest Rates

Grant County carries the highest county rate in the dataset at 2.50%. Fayette County, which includes Lexington, comes in at 2.25%. Six counties levy 2.00%: Bath, Breathitt, Estill, Garrard, Martin and Montgomery. At the other end, Adair, Grayson, Hopkins, Johnson, Nelson and Union each levy 0.50%.

The spread matters when you compare locations. Assume $500,000 in annual taxable payroll for illustration only. At 2.50%, the county tax would be $12,500 per year. At 0.50%, it would be $2,500. Those figures exclude any city tax, and you should confirm with the county whether the full payroll is taxable, since the base can differ from total wages.

Jefferson and Fayette: Setting the Pattern

KACo reports that counties other than Fayette and Jefferson collected $430.7 million in FY2024. That figure equals 45.8% of tax revenue. Fayette and Jefferson are excluded from that total.

Jefferson County is listed at 1.25%, which is the county share. Louisville Metro charges 2.2% in total for residents. If your business is in Louisville, ask Louisville Metro whether the 2.2% total applies to your situation, especially if your owners or employees live outside the city.

Why Rates Differ: Population Caps and Grandfathering

State law limits how high a county can go, and the cap depends on population. Counties of 30,000 or more may charge up to 1% (KRS 68.197). Counties of 300,000 or more may charge up to 1.25% (KRS 68.180).

Fees enacted before a county reached those thresholds are grandfathered. That is why some mid-size counties charge more than 1%. Clark County, at 1.50%, is one example. A grandfathered rate is specific to each county and its history, so you cannot derive it from population alone. Confirm the current rate and its basis with the county fiscal court.

Counties With No County Fee

Thirty-three counties levy no county occupational fee, including Bullitt, Oldham, Christian, Barren and Calloway. That result applies to the county portion only. If your business sits inside a city limit in one of these counties, the city may still levy an occupational license tax. Confirm with the city's revenue office before you assume a zero rate.

Where Sources Can Disagree

The Secretary of State's business directory does not always match the county figures in KACo's data. The directory lists Daviess County net profits at 0.35%, while KACo reports Daviess at 1.00% on payroll. The directory also shows no rate for McCracken County, which KACo lists at 1.00% on payroll.

When sources conflict, treat the county fiscal court as the authority. Get the answer in writing before you register for payroll or file a return.

How to Confirm Your County Rate

1. Identify the county and city where the business is located. Note any other offices or jurisdictions where employees work.
2. Contact the county fiscal court and ask for the current payroll rate, the net profits rate if one applies, and the filing and payment schedule.
3. Check the occupational license tax district for each city where you operate. Each city runs its own forms and revenue office.
4. Register your state tax account with the Kentucky Department of Revenue using Form 10A100 through MyTaxes.ky.gov. This state registration is separate from the local occupational tax.
5. Recheck rates every year, since local ordinances can change. Put a January review on your compliance calendar.

Other Kentucky Costs to Budget Alongside

The occupational tax is one of several recurring costs. These items apply on top of it:

• Limited Liability Entity Tax (LLET): LLCs and corporations owe the LLET. The minimum is $175 when Kentucky gross receipts or gross profits are $3 million or less. Between $3 million and $6 million, a sliding scale applies. Above $6 million, the tax is the lesser of 0.095% of Kentucky gross receipts or 0.75% of Kentucky gross profits.
• Annual report: $15, due June 30 every year. The filing window opens January 1. A domestic entity that misses June 30 can be administratively dissolved if it does not correct the problem within 60 days of the Secretary of State's notice.
• State sales tax: 6% statewide, with no local sales tax on top of it. The tax reaches about 50 services.
• Income tax on LLC profits: LLC income passes through to the members and is taxed at the 3.5% flat individual rate for 2026.

Licensing Is Separate From Tax

Kentucky has no statewide general business license. Licensing happens by agency or trade. For example, electricians, plumbers and HVAC contractors are licensed through the Department of Housing, Buildings and Construction. There is no statewide general contractor license. Cities and counties may add their own licenses, so check locally as well as with the state agency for your trade.

Next Steps

Before you hire, pull the county and city rates for your exact location, add the LLET and annual report to your calendar, and confirm the payroll rate in writing with the county fiscal court. The Kentucky Small Business Development Center can help you work through setup questions before you commit to a location or payroll plan.

Disclaimer: This guide is informational content, not legal or tax advice. Rates reflect the KACo data brief from June 2026, with figures as of January 2026, and they can change by local ordinance. For payroll setup, multi-city operations, or entity structure, consult a qualified CPA or attorney.

Sources

• Kentucky Association of Counties, county occupational fee data brief (June 2026)
• Kentucky Department of Revenue
• Kentucky Secretary of State, Division of Business Filings
• Kentucky Secretary of State business search