Kentucky Basic Business Taxes | Area Development Online

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Kentucky Basic Business Taxes

Area Development Online Research Desk (Feb/Mar 09)

Corporate income tax:
Corporations are taxed on net taxable income apportioned to the state at rates from 4 percent to 6 percent, depending on income. Double weight is given to the sales factor in the property, payroll, and sales apportionment formula.

Sales and use taxes:
A tax rate of 6 percent is based on the gross receipts from retail sales, leases, rentals, and admissions. Local sales taxes cannot be levied.

Property tax:
State and local property taxes are levied on real and tangible personal property, unless expressly exempted. The following items are exempt from local property taxes: manufacturing machinery; raw materials and work in process held by manufacturers; equipment for broadcasting; leasehold interests held by private businesses in facilities owned and financed by tax-exempt government units; and pollution-control facilities.

Goods in transit:
Personal property placed in a warehouse or distribution center for subsequent distribution to an out-of-state location within six months is exempt from state, city, county, and school district personal property taxes. Finished goods at the end of the manufacturing process that are placed in a warehouse or distribution area for subsequent shipment out of state may qualify for the in-transit goods property tax rate. Fire districts and special taxing districts may exempt property placed in a warehouse or distribution center for subsequent distribution to an out-of-state location at their option.

Pollution-control equipment:
Certified water, noise, and air pollution-control facilities are exempt from sales and use taxation. Certified pollution-control facilities are exempt from local property taxes and are subject only to state taxation at the rate of $0.15 per $100.

Industrial machinery and equipment:
An exemption from sales and use taxation is allowed for machinery used in new or expanding industries, railroad locomotives, rolling stock, and aircraft used in interstate commerce, and commercial vessels and ships transporting persons or property. Manufacturing machinery is exempt from local property taxation and is subject only to state taxation at the rate of $0.15 per $100 of assessed valuation.

Industrial fuels and raw materials:
Coal used to generate electricity; industrial energy and fuel in excess of 3 percent of production costs; industrial raw materials and supplies; and containers, packaging, and wrapping materials are exempt from sales and use taxation.

Kentucky State Contact:
Kentucky Cabinet for Economic Development
Old Capitol Annex
300 West Broadway
Frankfort, KY 40601
(800) 626-2930
Fax: (502) 564-3256

Incentive and tax information is provided to Area Development by each state’s economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.