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Kentucky Basic Business Taxes 2011

Kentucky's economic development, finance, and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include a corporate income tax, sales and use taxes, and a property tax.

March 2011
Corporate income tax:
Corporations are taxed based on net taxable income apportioned to the state at rates from 4-6 percent. 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 state rate for finished goods inventory is only 5 cents per $100 of assessed value. The following types of property are exempt from local property taxes: manufacturing machinery; pollution control facilities, leasehold interests held by private businesses in facilities owned and financed by tax-exempt government units; personal property operating in an activated Foreign Trade Zone, and Recycling Machinery and Equipment.

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 15 cents 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 15 cents per $100 of assessed valuation.

Industrial fuels and raw materials:
Raw materials are subject only to state taxation at the rate of 5 cents per $100. Coal used to generate electricity; industrial energy and fuel in excess of three percent of production costs; industrial raw materials and supplies; and containers, packaging, and wrapping materials are exempt from state 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.

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