State and Local Taxes Payable in Louisville, Kentucky

Kentucky Corporation Income Tax

The Kentucky taxable income of a multi-state corporation is determined by applying the state apportionment formula to the total corporation's net income. Kentucky's apportionment formula is computed from the portion of the company's property, payrolls, and sales by destination (or revenues) in Kentucky. The sales or revenue factor receives 50% weight in the formula, and the property and payroll factors each receive 25%.

Tax Rate Schedule

Taxable Net Income	Tax Rate (Per Taxable Income Level)
$0 – $50,000	4.0%
$50,001– $100,000	5.0%
$100,001(Plus)	6.0%

State and Local Property Taxes

Taxable property is assessed at 100% of the fair cash value of the property held on January 1. Following are the rates per $100 of assessed valuation in 2008:

Selected Classes of Property	Kentucky	Jefferson County	Louisville	Jefferson Co. Public Schools	Total
Real estate	$0.1220	$0.1250	$0.3666	$0.6460	$1.2596
Manufacturing equipment	0.1500	None	None	None	0.1500
Pollution control equipment	0.1500	None	None	None	0.1500
Inventories: Raw materials	0.0500	None	None	None	0.0500
Goods in process	0.0500	None	None	None	0.0500
Finished goods	0.0500	0.1660	0.566	0.5920	1.3740
Motor vehicles	0.4500	0.1660	None	0.5850	1.2010
Other tangible personal property	0.4500	0.1660	0.5660	0.5920	1.7740
Intangibles (accounts receivable, money on hand)*	0.2500	None	None	None	0.2500

*Accounts receivable are taxed at 85% of face value, for an effective rate of $0.2125 per $100.

State Sales and Use Tax

A 6% state sales and use tax is levied on the purchase or lease price of taxable goods and on services. Local sales taxes are not levied in Kentucky.

Exemptions include items purchased for resale, motor fuels, interstate telecommunications services and customized computer programs tailored for the user. Major exemptions to manufacturers also include raw materials and industrial supplies, machinery for new and expanded manufacturing, pollution control equipment, containers and packaging materials used in manufacturing, and energy and fuels that exceed 3% of the cost of production in manufacturing.

State Unemployment Insurance Tax

Kentucky employers pay unemployment insurance contributions on the first $8,000 of wages for each employee, including officers of the corporation. A new employer pays at least 2.3% of covered wages during the first three years of operation. Thereafter, the employer's contribution rate is determined by its experience rating.

Local Occupational License Tax

The net profit of all businesses is subject to a license fee of 2.2% of the portion of the net profit earned from activities conducted only in Metro Louisville. The portion of the business' net profit is determined as follows:

Determine the percentage of total gross receipts from sales or services rendered within Louisville/Jefferson County.
Determine what percentage of total wages for the period covered by the report was for services performed or rendered within Louisville/Jefferson County.
Average the two figures and multiply by the total pretax profits to obtain the business apportionment percentage.

Source: Kentucky Revenue Cabinet