Kentucky offers a vibrant environment for business with over 393,000 small businesses, employing about 42% of the state’s workforce. Whether you’re an established business owner or planning to start a new venture, understanding the tax landscape in Kentucky is crucial. This guide provides an overview of the various taxes small businesses in Kentucky must navigate, including tax rates, filing requirements, and deadlines.
Types of Business Taxes in Kentucky
Business owners in Kentucky may be subject to various taxes depending on their business structure, activities, and revenue. Here’s a breakdown of the main types of taxes:
Corporate Income Tax
Applicable Entities: C corporations and entities taxed as C corps at the federal level
Tax Rate: 5%
Filing Requirements: File Form 720 by the 15th day of the fourth month after the tax year ends.
Estimated Payments: Required if liability exceeds $500. Payments are due quarterly on April 15, June 15, September 15, and December 15.
Pass-Through Entity (PTE) Tax
Applicable Entities: S corporations, partnerships, and LLCs with at least two members
Tax Rate: 4%
Filing Requirements: File Form 740-PTET by the 15th day of the fourth month following the close of the tax year.
Estimated Payments: Required if liability is expected to exceed $500 for an individual shareholder, partner, or member. Payments are due quarterly by April 15, June 15, September 15, and January 15.
Sales and Use Tax
Withholding Tax
Unemployment Insurance Tax
Applicable Entities: Employers that 1) pay at least $1,500 in gross wages in a single calendar quarter or 2) have at least one worker performing service in any part of 20 different weeks out of a calendar year.
Tax Rate: Varies based on the business’s experience rating
Wage Base: $11,700
Filing Requirements: File quarterly reports (Form UI-3) by April 30, July 31, October 31, and January 31.
Personal Property Tax
Applicable Entities: Businesses using personal property
Tax Rate: Based on property type and value
Filing Requirements: Report annually to the local Property Valuation Administrator (PVA) by May 15.
Limited Liability Entity Tax (LLET)
Applicable Entities: C corporations, LLCs, S corporations, limited partnerships, and other businesses with limited liability
Tax Rate: The smaller amount of 0.095% of gross receipts or 0.75% of gross profits
Filing Requirements: File Form 720 or Form PTE by the 15th day of the fourth month after the tax year ends.
Nonresident Withholding Tax
How to File and Pay Kentucky Business Taxes
Business taxes in Kentucky can be filed and paid through various methods:
Online Filing and Payment: Use Kentucky Business One Stop for electronic submissions and payments.
Mail: Send forms and payments to the address provided on the form (where applicable).
Important Deadlines
Keep track of these key dates to avoid penalties:
Corporate Income Tax Returns: Due by the 15th day of the fourth month after the tax year ends
Estimated Tax Payments: Due quarterly on April 15, June 15, September 15, and December 15
Sales and Use Tax Returns: Due monthly, quarterly, or annually, based on sales volume
Withholding Tax Returns: Due twice-monthly, monthly, quarterly, or annually, based on withholding amounts
Unemployment Insurance Reports: Due quarterly by April 30, July 31, October 31, and January 31.
Tax Credits and Incentives
Kentucky offers several tax credits and incentives for small businesses, including:
Kentucky Small Business Tax Credit program: A credit of $3,500–$25,000 per year for businesses with no more than 50 full-time employees that have 1) hired and sustained at least one new job in the last year, and 2) purchased at least $5,000 in qualifying equipment or technology.
Employer’s Unemployment Tax Credit: A credit of $100 per employee for businesses that hire unemployed Kentucky residents and maintain their employment for at least 180 consecutive days.
Inventory Tax Credit: A credit for businesses that timely paid tangible personal property taxes on inventory to a taxing jurisdiction in Kentucky.
New Markets Development Program Tax Credit: A credit of up to $10 million per fiscal year for businesses that make a qualified equity investment in a qualified low-income community.
Qualified Research Facility Tax Credit: A credit equal to 5% of qualified construction costs for certain taxpayers that construct and equip new facilities or expand or remodel existing facilities in Kentucky for qualified research purposes.
For more information, check out our article on business tax credits for Kentucky businesses.
Kentucky’s business tax breakdown by business type
Business taxes can get complicated, so we’ve included a chart that breaks down which taxes different business structures usually pay.
Remember that pass-through entities don’t pay federal income taxes themselves—the obligation is passed on to their business owners or shareholders, who pay them through their personal income tax returns.
Business type | Personal income tax | PTE election tax | Corporate income tax | LLET | Sales and use tax | Withholding tax | Unemployment tax | Federal income taxes |
C corporation | No | No | Yes | Yes | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes |
S corporation | Yes (pass-through), if not making the PTE election | Yes, if it makes the election | No | Yes | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes (pass-through) |
LLC | Yes (pass-through), if not making the PTE election | Depends on how it’s structured | Depends on how it’s structured | Yes | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes (pass-through) |
Partnership | Yes (pass-through), if not making the PTE election | Yes, if it makes the election | No | Limited partnerships and limited liability partnerships only | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes (pass-through) |
Sole proprietorship | Yes (pass-through) | No | No | No | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes, by way of individual income tax |
File your Kentucky small business taxes with Gusto
As a business owner, your time and energy are valuable, finite resources. So, instead of managing your taxes manually, let Gusto give you a hand. Our easy-to-use software automatically files all your payroll taxes each time you run payroll—freeing up your bandwidth for the work that matters most.
Learn how else Gusto can simplify the operations of your small business by creating an account today.
Kentucky Small Business Taxes: The Employer’s 2024 Guide
Kentucky offers a vibrant environment for business with over 363,000 small businesses, employing about 42% of the state’s workforce. Whether you’re an established business owner or planning to start a new venture, understanding the tax landscape in Kentucky is crucial. This guide provides an overview of the various taxes small businesses in Kentucky must navigate, including tax rates, filing requirements, and deadlines.
Types of Business Taxes in Kentucky
Business owners in Kentucky may be subject to various taxes depending on their business structure, activities, and revenue. Here’s a breakdown of the main types of taxes:
Corporate Income Tax
Applicable Entities: C corporations and entities taxed as C corps at the federal level
Tax Rate: 5%
Filing Requirements: File Form 720 by the 15th day of the fourth month after the tax year ends.
Estimated Payments: Required if liability exceeds $500. Payments are due quarterly on April 15, June 15, September 15, and December 15.
Pass-Through Entity (PTE) Tax
Applicable Entities: S corporations, partnerships, and LLCs with at least two members
Tax Rate: 4%
Filing Requirements: File Form 740-PTE by the 15th day of the fourth month following the close of the tax year.
Estimated Payments: Required if liability is expected to exceed $500 for an individual shareholder, partner, or member. Payments are due quarterly by April 15, June 15, September 15, and January 15.
Sales and Use Tax
Withholding Tax
Unemployment Insurance Tax
Applicable Entities: Employers that 1) pay at least $1,500 in gross wages in a single calendar quarter or 2) have at least one worker performing service in any part of 20 different weeks out of a calendar year.
Tax Rate: Varies based on business’s experience rating
Wage Base: $11,400
Filing Requirements: File quarterly reports (Form UI-3) by April 30, July 31, October 31, and January 31.
Personal Property Tax
Applicable Entities: Businesses using personal property
Tax Rate: Based on property type and value
Filing Requirements: Report annually to the local Property Valuation Administrator (PVA) by May 15.
Limited Liability Entity Tax (LLET)
Applicable Entities: C corporations, LLCs, S corporations, limited partnerships, and other businesses with limited liability
Tax Rate: The smaller amount of 0.095% of gross receipts or 0.75% of gross profits
Filing Requirements: File Form 720 or Form PTE by the 15th day of the fourth month after the tax year ends.
Nonresident Withholding Tax
How to File and Pay Kentucky Business Taxes
Business taxes in Kentucky can be filed and paid through various methods:
Online Filing and Payment: Use Kentucky Business One Stop for electronic submissions and payments.
Mail: Send forms and payments to the address provided on the form (where applicable).
Important Deadlines
Keep track of these key dates to avoid penalties:
Corporate Income Tax Returns: Due by the 15th day of the fourth month after the tax year ends
Estimated Tax Payments: Due quarterly on April 15, June 15, September 15, and December 15
Sales and Use Tax Returns: Due monthly, quarterly, or annual filing based on sales volume
Withholding Tax Returns: Due twice-monthly, monthly, quarterly, or annually based on withholding amounts
Unemployment Insurance Reports: Due quarterly by April 30, July 31, October 31, and January 31.
Tax Credits and Incentives
Kentucky offers several tax credits and incentives for small businesses, including:
Kentucky Small Business Tax Credit program: A credit of $3,500–$25,000 per year for businesses with no more than 50 full-time employees that have 1) hired and sustained at least one new job in the last year, and 2) purchased at least $5,000 in qualifying equipment or technology.
Employer’s Unemployment Tax Credit: A credit of $100 per employee for businesses that hire unemployed Kentucky residents and maintain their employment for at least 180 consecutive days.
Inventory Tax Credit: A credit for businesses that timely paid tangible personal property taxes on inventory to a taxing jurisdiction in Kentucky.
New Markets Development Program Tax Credit: A credit of up to $10 million per fiscal year for businesses that make a qualified equity investment in a qualified low-income community.
Qualified Research Facility Tax Credit: A credit equal to 5% of qualified construction costs for certain taxpayers that construct and equip new facilities or expand or remodel existing facilities in Kentucky for qualified research purposes.
For more information, check out our article on business tax credits for Kentucky businesses.
Kentucky’s business tax breakdown by business type
Business taxes can get complicated, so we’ve included a chart that breaks down which taxes different business structures usually pay.
Remember that pass-through entities don’t pay federal income taxes themselves—the obligation is passed on to their business owners or shareholders, who pay them through their personal income tax returns.
Business type | Personal income tax | PTE election tax | Corporate income tax | LLET | Sales and use tax | Withholding tax | Unemployment tax | Federal income taxes |
C corporation | No | No | Yes | Yes | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes |
S corporation | Yes (pass-through), if not making the PTE election | Yes, if it makes the election | No | Yes | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes (pass-through) |
LLC | Yes (pass-through), if not making the PTE election | Depends on how it’s structured | Depends on how it’s structured | Yes | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes (pass-through) |
Partnership | Yes (pass-through), if not making the PTE election | Yes, if it makes the election | No | Limited partnerships and limited liability partnerships only | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes (pass-through) |
Sole proprietorship | Yes (pass-through) | No | No | No | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes, by way of individual income tax |
File your Kentucky small business taxes with Gusto
As a business owner, your time and energy are valuable, finite resources. So, instead of managing your taxes manually, let Gusto give you a hand. Our easy-to-use software automatically files all your payroll taxes each time you run payroll—freeing up your bandwidth for the work that matters most.
Learn how else Gusto can simplify the operations of your small business by creating an account today.
