If you operate a small business in Kentucky, you must pay certain taxes. These can include corporate taxes, sales tax, and payroll taxes. Let’s take a look at the Kentucky small business taxes that you need to pay in order to maintain your tax compliance.
Maintaining Small Business Tax Compliance in Kentucky
When you own a business in Kentucky, whether that’s a corporation, LLC or partnership, you are obligated to pay certain taxes to the state.
Corporate Tax
Kentucky’s corporate tax rate is 5 percent. To calculate this, the corporation must have completed its Federal tax return. This is because the corporate tax rate is based on the business’s federal taxable income. Of course, items will be subtracted and added in accordance with Kentucky’s tax laws.
LLET Tax
In addition to the corporate tax, businesses that have taken steps to protect themselves against liability must pay the Limited Liability Entity Tax (LLET). This tax applies to corporations, LLCs and limited liability partnerships as well as other types of businesses that are not subject to limited liability.
The minimum tax that any business could pay for the LLET is $175. This applies to businesses that have gross profits or gross receipts that are less than $3 million. If the company has gross receipts or gross profits that are above $6 million, the gross receipts are multiplied by .095, and the gross profits are multiplied by .75. The company then owes the smaller of those two numbers. The good news is that if the company also pays the corporate tax in addition to the LLET, the company is allowed to subtract the amount of the LLET from its income tax liability.
Sales Tax
Kentucky has a flat 6 percent sales tax and no local sales taxes. This tax applies to certain types of services, goods and digital products. Companies must pay the sales taxes to the state monthly, quarterly or yearly.
Unemployment Tax
Businesses that employ employees must pay the state’s unemployment tax. The tax rate can vary from .3 percent to 9 percent, depending on the rating of the employer and whether or not they’re a new employer.
In general, postie-rated employers pay between .5 and 2.9 percent of the wages they pay out to their employees. Employers who are negative-rated can expect to pay between 7 and 9.5 percent. New employers typically pay 2.7 percent.
Payroll Taxes
Employers must file and pay payroll taxes. The current rate withholding tax rate for the state of Kentucky is 4.5 percent. The good news is that Kentucky is slowly lowering its state income tax. In 2024, the state income tax is slated to be 4 percent.
In addition to the Kentucky income tax, employers must also pay certain federal taxes, including Social Security and Medicare. The current Social Security tax rate is 6.2 percent, and the Medicare tax rate is 1.45 percent.
Employers are required to maintain compliance with all of the Kentucky small business taxes and federal taxes. If you’re a new business, this may seem daunting. After all, there are a lot of taxes involved in owning and operating a business. The good news is that a payroll provider, like ASAP Payroll, can help you keep up with your tax obligations and stay compliant.
HR and Payroll Services with ASAP Payroll
Asap Payroll can help you with all of your Kentucky state taxes, including sales tax, unemployment tax, corporate tax and LLET tax. They can even help ensure you pay all of your federal taxes on time. ASAP payroll does this by ensuring that they are always up to date with the current local and federal taxes and tax laws. They can even offer payroll services for Kentucky businesses that can help you simplify your payroll so that your employees are always paid on time.
