Business License and Payroll Tax

Contact

Business License and Payroll Tax Payment Options

Payments can be made in-person at City Hall or over the phone at 270-444-8513. Real estate and personal property taxes also have an Online Payment option.

In addition to cash and/or check, the City of Paducah accepts credit and debit card payments. Services payable by credit or debit card include business licenses, property tax bills, building permits, fines, and liens. A 2.95 percent service charge will apply on credit and debit card payments. Payment types include Discover, MasterCard, and Visa. The City does not charge or retain this service charge. There is a $2.00 minimum per transaction.

Forms

Business License

The Business License Tax (also called the Occupational License Tax) is outlined in Section 106 Article III of the Paducah Code of Ordinances. It's projected to generate approximately $5.4 million for Fiscal Year 2024. The funds are placed in the General Fund, the City's main operating fund.

Business License Frequently Asked Questions

Payroll Tax and Investment Fund

The City of Paducah levies an Occupational License Fee (employee payroll withholding tax, also known as payroll tax) of 2.0 percent as described and further amended in Sec. 106-182 of the Code of Ordinances. This means that 2.0 percent of gross salaries, wages, commissions, and other compensation that is earned within the City limits should be remitted to the City of Paducah. In other words for every $1.00 that is earned, $0.02 is paid to the City of Paducah. The payroll tax is the City's largest revenue source. Three-quarters of the payroll tax revenue (equal to $19.0 million for Fiscal Year 2024) is placed in the General Fund. The remaining quarter of the payroll tax is placed in the Investment Fund which is dedicated to the following expenditures:

  • Economic Development
  • Neighborhood Redevelopment
  • Infrastructure Capital Investment
  • Property Tax Relief

History On August 9, 2005, the Paducah Board of Commissioners increased the payroll tax from 1.5 to 2.0 percent. That increase became effective October 1, 2005, but was set to sunset on October 1, 2008. On September 25, 2007, the Board of Commissioners voted to permanently amend the ordinance to maintain the payroll tax at 2.0 percent. The revenue generated from the 1/2 percent increase in the payroll tax is placed into a special fund, the Investment Fund.

Business License Frequently Asked Questions

What is a City of Paducah Business License?

A Business License Tax is an annual tax you pay each fiscal year for doing business within the City of Paducah. The City's municipal code requires that you obtain a license PRIOR to conducting any business activity within the City - even if your business is located outside the city limits or you have a business license from another city. The Business License is evidence only that your tax has been paid. Other permits may be required to open your business. A separate tax certificate is required for each type of business at the same location or for each branch location. Receipt of a Business License does not constitute an endorsement of the business, nor does it grant permission to conduct business at any place prohibited by the City's Zoning Ordinances or any other Federal, State, or Local regulation.

Do I need a Business License?

According to Paducah Code of Ordinances Chapter 106-63, any corporation, partnership, proprietorship, individual that receives or expects to receive gross receipts in excess of $600 annually in the conduct of business in Paducah is required to obtain a business license.

Also, businesses that are not physically located within the city limits but are conducting business within the city such as licensed construction contractors, real estate sales, janitorial services, security services, gardening services, property management, etc. are also required to obtain a Business license.

Any person who conducts or operates a business within the City of Paducah must obtain a business license before operations begin. Conducting business without a business license may result in enforcement action against the business and its owners including citation and court action.

What are gross receipts, and what is Paducah's business license fee rate structure?

Gross receipts are what you receive such as cash, credit, and/or property taken in lieu of cash payments for the goods or services that you sell. Gross receipts are defined in Paducah Code of Ordinances Chapter 106-61(1) and Chapter 106-101.

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 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 with its five rates is unique and has been called a modified gross receipts system.

A 0.00045
B 0.00075
C 0.00150
D 0.00300
E 0.00450

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 wages. You are taxed on your income before your deductions.

How do I apply for a Business License?

Information and instructions on how to apply for a business license can be found on the form (scroll to top of page) which can be submitted by email to the Finance Department at revenuepaducahky.gov. Reach out to that email if you have questions.

How long is this license valid, and when does it expire?

Initial licenses are valid from the time of application to the end of the taxpayer’s year. Any permit fee or regulatory permit fee will not be prorated. Renewals are valid for 12 months and also correspond with the taxpayer’s year. City business licenses expire on December 31 of each year. Business license renewals are due the 15th day of the 4th month following the end of the taxpayer’s year. Penalties will apply after the due date.

What are the payment options?

Payments can be made in-person at City Hall or over the phone at 270-444-8513. Real estate and personal property taxes also have an Online Payment option. In addition to cash and/or check, the City of Paducah accepts credit and debit card payments. Services payable by credit or debit card include business licenses, property tax bills, building permits, fines, and liens. A 2.95 percent service charge will apply on credit and debit card payments. Payment types include Discover, MasterCard, and Visa. The City does not charge or retain this service charge. There is a $2.00 minimum per transaction.

What happens if I don't pay on time?

Penalties and interest will be assessed in accordance with Paducah’s Code of Ordinances for payments not received or postmarked on or before the expiration date of the license. Your business license will be invalid until the license fees and penalties are paid. Businesses that do not maintain current licenses are subject to enforcement action.

I have a McCracken County Business License. Does that cover the City of Paducah’s jurisdiction?

No, any person who conducts business in the City must obtain a City of Paducah business license in addition to a McCracken County license.

I have a State License (real estate, construction contractors, etc.). Does this exempt me from the City of Paducah’s business license?

No. The City business license and your State license serve different purposes. The regulatory licensing of certain trades rests entirely with the State of Kentucky. The City of Paducah does not regulate, in any way, these industries. If your relationship to your employer is that of an "independent contractor" or you are self-employed and working in the City, you need to pay the City business tax.

Do I need a business license if my business is homebased?

Every business conducted from a home in the City of Paducah must have a city business license. Furthermore, the Planning Department may require a conditional use permit for certain business types. Contact the Planning Department at 270-444-8690 for information.

I receive rent payments from Commercial and/or Residential properties. Do I need a business license?

Yes, property owners receiving rent are required to obtain a business license.

If I have more than one business or location, do I need multiple licenses?

Yes. Separate licenses must be obtained for each branch, establishment, or location of a business. In addition, separate licenses must be obtained for each and every class and type of business specified in Paducah’s code, even though several classifications or types of businesses may be operated under the same business name and at the same place of business.

However, any person conducting several classifications or types of business, each of which is required to pay a license fee on the basis of gross revenues, at the same location and under the same business name, can file for one license if the classifications are taxed at the same rate.

Are there restrictions on where I do business?

Every business must meet zoning and building requirements to ensure that its business category and site are compatible BEFORE SIGNING any leases or rental agreements. The Fire Prevention Division and the Planning Department review all new business license applications to ensure that the proposed use is consistent with the established zoning regulations and policies of Paducah. Check with the Planning Department at 270-444-8690 prior to signing a lease or committing your business to a certain location to determine if your use is permitted in the zone and what additional permits or documentation may be required prior to the issuance of a business license.

Are there special requirements if I sell or prepare food?

If you will be selling or preparing food, apply for a health permit from the Purchase District Health Department. Necessary permits must be obtained from the Health Department prior to the issuance of a City of Paducah business license.

What if I move to a new location in Paducah?

To process a change of business address, a new Business application shall be submitted to file for an address change. A business license is not transferable and a zoning clearance will be required.

I have a change to my mailing or business address. What should I do?

Changes must be made in writing by mail or email to revenuepaducahky.gov. Be sure to provide contact information in case there are questions. Requests for changes can be made in-person. Picture ID is required when making changes in person.

What should I do if I stop doing business or move away?

If you choose to close or sell your business, please notify the Revenue Division in writing so that we may cancel your license(s). Be sure to include the business name, address, certificate number, owner's name, date of when you stopped conducting business in the City, and the signature of the owner, or submit a Cancellation Request Form. No refunds are given when a business ceases to operate. Your account will remain open and may show a delinquent status if the account is not officially closed.

  • A final return will need to be filed as outlined in Paducah Code of Ordinances 106-63(b).
  • If you hold a state license with a local address, it will need to be inactivated in order to close the local business license. This also applies to business entities on file with the Secretary of State (Corp/LLC).
  • If you sold your business, please provide the escrow closing date and the new owner’s name, address, phone number.
  • If you are moving away and plan to return to Paducah to work with your clients, a valid Paducah business license is required.

Attention: we do not automatically cancel your license if we don’t hear from you. We assume your payment is late and continue to send billing notices. Eventually your business name is placed on our delinquent list. Please let us know in writing if you want your license canceled.

What if I want to change or add aspects to my business?

You must notify the Revenue Division whenever you change your address, phone number, business activity, or ownership. The Revenue Division will provide you with the necessary information and fees related to the requested changes. To verify that the location is zoned properly for the intended use and whether a use permit or other approval is needed, contact the Planning Department at 270-444-8690.

May a business license or permit be transferred from one owner to another?

When the structure of a business entity is substantially changed, such as through acquisition by another entity, the new entity is required to obtain a new business. In the case of adding or dropping a partner, no new business license is required; however, please notify the Revenue Division of additional owners or officers.

My business has had a change of ownership, what should I do?

A change of ownership will require a new Business License. Proof of ownership, escrow papers, etc., will need to accompany the new application. Open date is the date the ownership took effect.

How do I file a complaint or report suspicious activity about a business operating in the City of Paducah?

Illegal Activity – Contact Police Department at 270-444-8550.

Food & Drink Establishments – Contact Purchase District Health Department at 270-444-9625.

Zoning Compliance – Contact the Planning Department at 270-444-8690.

Building Code Enforcement – Contact the Fire Prevention Division at 270-444-8527.

Do I need to obtain a license if I drive for Uber, Lyft, or another Transportation Network Company (TNC)?

Yes. Anyone that drives for Uber, Lyft, or another Transportation Network Company (TNC) and resides in the City of Paducah is required to register for a business license which is renewed annually.

How do I obtain a contractor's license?

Contact revenuepaducahky.gov for an application and filing instructions. A license can also be purchased for a one-time job.

Does a nonprofit organization need a business license?

Yes, nonprofit organizations must apply for a business license. We will waive the license fee if they provide their 501C3 the initial year and their 990 with renewals. Proof of nonprofit status from the Internal Revenue Service is required. Organizations not holding nonprofit status with the Internal Revenue Service will be classified as a for-profit business for licensing purposes. Nonprofit organizations must comply with all City ordinances including Planning and Zoning requirements for the location from which they plan to operate.

Will the City notify me when it is time to renew my license?

Yes. However, it is your responsibility to renew your business license on time, even if a renewal notice is not received. All renewal fees must be paid before the expiration date of the license to avoid penalty fees and interest. Penalties and interest are assessed for delinquent payments, regardless of whether or not you received a renewal notice. Please be sure to keep your mailing address current and on file with the Revenue Division. This will help avoid delays in receiving correspondence.

How do I check the status of my business license application?

To check the status of your business license application, email revenuepaducahky.gov. Please keep in mind that it takes time to process and approve applications.

Can I check if a business has a valid City of Paducah business license?

Yes, email revenuepaducahky.gov to determine if the business is registered and current on its business license.

What if I have other questions?

If you have questions, contact the Revenue Division of the Finance Department by email at revenuepaducahky.gov.