Lexington, KY Local Taxes & Fees: Business Tax Classification (2026)

Sec. 13-4 of the Code of Ordinances requires 'every person or business entity engaged in any business for profit', and anyone required to file with the IRS or the Kentucky Revenue Cabinet, to file and pay an occupational license tax to the urban county government. 25) percent,' applied two ways: to all wages and compensation paid for work performed within the urban county by resident and nonresident employees, and to the net profit of businesses conducted here by resident or nonresident entities. For multistate or multi-district businesses, net profit isn't simply taxed in full, it's apportioned using a payroll factor and a sales factor, each a fraction of in-county activity over total activity, averaged together, or based on the sales factor alone for businesses with no in-county payroll.

Passthrough entities, partnerships, S corporations and similar structures, are taxed at the entity level before income passes through to owners. Sec. 13-5 layers on a separate licensing requirement: every business must obtain an initial occupational license before starting operations and renew annually, with a distinct license required for each physical place of business. Returns for the preceding tax year are due April 15, or the fifteenth day of the fourth month after a fiscal year closes, and each return must include a copy of the business's federal income tax return.