Occupational License Forms/Business License
Paducah's Business License Tax Structure
The Business License Tax (also called the Occupational License Tax) is projected to generate approximately $4.5 million for Fiscal Year 2019. The funds are placed in the General Fund, the City's main operating fund. The City of Paducah works on a gross receipts system. However, instead of charging one flat rate, the City places businesses into one of five classifications (see A through E below) with a rate based on profitability. The structure of the Paducah's Business License Tax is unique and has been called a modified net profits system.
A 0.00045
B 0.00075
C 0.00150
D 0.00300
E 0.00450
The following document outlines the Business License Tax as approved by City ordinance. Business License Ordinance >>
There are two basic systems for calculating business tax: gross receipts and net profit. More than 30 cities in Kentucky operate on a gross receipts system. The City of Paducah is unique with its five rates. The other cities in Kentucky operate with one rate. Some of the benefits and advantages of the City of Paducah's system include
- Best of both worlds. Paducah has the simplicity of the gross receipts structure. Plus, Paducah has five rates that address the profitability of a business.
- Simple to administer. The Business Tax form is two pages.
- Not Easy to Manipulate. With a net profit system, it is easier for a company to manipulate the "bottom line". For example, a large company with offices outside of Paducah could apportion their profits to an office in another city.
- Similar structure to payroll tax. The payroll tax of 2.0% is based on gross receipts. You are taxed on your income before your deductions.
Click Business License Tax Presentation for a slide presentation from the March 9, 2010 Commission Meeting. The presentation follows a year-long study of how businesses would be affected if the City of Paducah changed from its current gross receipts collection system to a net profits system.
The Four Rivers Business Journal contained an article written by attorney Tom Keuler explaining Paducah's tax structure. Click Paducah's Revised Tax Code to read a copy of the May 2009 article.
If you have a question, contact the Finance Department at 270-444-8513.
