If you run a business or work in Lexington, you're likely paying more than one local occupational tax, and most people don't realize there are two.
The Lexington-Fayette Urban County Government (LFUCG) charges an occupational license fee of 2.25% on both payroll compensation and business net profits earned within Fayette County. If you have employees, this gets withheld from their paychecks alongside federal and state withholding. If you're self-employed or run a pass-through business, it applies to your net profit.
Here's the part that catches people off guard: Fayette County Public Schools (FCPS) levies its own separate net profits tax, 0.5%, on top of the LFUCG fee. It's a different filing (Form 228-S), it goes to a different office, and it's easy to miss if you're not looking for it. Combined, LFUCG and FCPS add up to roughly 2.75% of your net profits going to local occupational taxes, on top of whatever you owe the state and federal government.
Filing deadlines mirror the federal calendar for most businesses: net profit returns are due the 15th day of the fourth month after your fiscal year ends, which is April 15 for calendar-year filers. LFUCG offers Form 228 for the annual return, Form 228-ENP for quarterly estimated payments, and Form 228-EXT if you need an extension. Online filing is now available through LFUCG's portal, which has made this considerably less painful than the old mail-in process.
Who owes it? Basically anyone doing business in Fayette County, including corporations, partnerships, sole proprietors, and, for FCPS purposes specifically, individuals with $50,000 or more in annual rental income. If you're a W-2 employee working in Lexington, you're paying the LFUCG portion through payroll withholding whether you notice it or not.
We handle both the LFUCG and FCPS filings for our clients as part of their regular tax prep, so nothing falls through the cracks. If you've started a business in Lexington recently and aren't sure whether you're registered and filing correctly with both, that's worth a quick check before it turns into a notice.
Book a consultation and we'll make sure your local filings are covered.
