Frequently Asked Questions

For questions and help with our online tax portal eMINTS, check out our eMINTS 101 page.

General

What are the requirements in Louisville Metro/Jefferson County to start a new business?

For an individual or business entity to start a new business there is no local business license required. However, new businesses must be registered with the Louisville Metro Revenue Commission (LMRC), Jefferson County Clerk's Office and the Commonwealth of Kentucky. Registration should take place before earning income or business activity begins.

The registration process with the LMRC consists of completing and submitting a Registration Application for a tax account number. The individual or business entity is required to state the nature of their business; the legal name of the individual or business entity; mailing addresses, telephone numbers, and social security number and/or federal identification number associated with that individual or business entity.

You can register a business online through the LMRC's tax portal eMINTS or by downloading and printing the Registration Application from the Forms and Publications page.  You may also contact the Taxpayer Service Division at 502-574-4860, Monday-Friday, from 8:00 am - 5:00 pm (EST) to request a Registration Application be mailed to you.

What legal holidays are recognized by the LMRC?

The LMRC recognizes the same legal holidays as the Louisville Metro Government. Those holidays can be found here.

Filing Returns

Who is required to file an Occupational License Return (OL-3)?

Any individual (resident or non-resident) or business entity (partnerships, corporations, or S-Corporations) who receive taxable compensation are required to file the Occupational License Return (OL-3) and pay the Occupational License Tax to the Louisville Metro Revenue Commission (LMRC).

If taxes are not withheld by your employer or you are engaged in a business, you must file an OL-3 form each year whether or not tax is due. Examples of business activity include rental properties, sole proprietorships (Schedule C), partnerships, and corporations.  Even if your business has a loss for the year, you are still required to file an OL-3 form.

Are Homeowner's Associations required to file an Occupational License Return (OL-3)?

If a Homeowner's Association reports unrelated business income on their federal tax return for any tax period, an Occupational License Return (OL-3) must be filed and the Occupational License Taxes must be paid for that tax period. 

A Homeowner’s Association is only exempt if it annually submits a copy of the federal tax return reporting no unrelated business income.

Is it necessary to file an Occupational License Return (OL-3) if business activity stopped before the date printed on the return?

Yes. The Louisville Metro Revenue Commission (LMRC) must be advised in writing that there was no business activity conducted within Louisville Metro/Jefferson County. 

If there was no business activity you can check the 'No Activity' box on your OL-3 form. 

If you plan to conduct no activity within this jurisdiction in the future, also check the 'Final Return' box and indicate the date activity ceased in this jurisdiction. The LMRC will then close your occupational tax account.

Is there a penalty for filing late?

You will be charged a minimum $25.00 penalty for late filing.  Additional penalties for the late filing and late payment and interest on any unpaid tax that is not paid by the original due date may be assessed.

If the due date for the filing of a return has past, file the return as soon as possible to avoid any further penalty or interest.

What is the penalty for filing an Occupational License Return (OL-3) late?

There is a five percent (5%) penalty per month, or a fraction of a month, to a maximum of twenty-five percent (25%) of the unpaid license tax liability, for failure to file and/or pay a tax return by the regular or extended due date. Also, there is a minimum $25.00 penalty for failure to file any return or report by the due date.

What is the penalty for filing a Quarterly Withholding Return (W-1) late?

Employers are subject to a penalty of five percent (5%) per month, or a fraction of a month, to a maximum of twenty-five percent (25%) of the total license tax liability, plus interest at a rate of twelve percent (12%) per annum from the due date until paid. The penalty and interest charges are assessed against amounts not paid by the due date. Also, there is a minimum $25.00 penalty for failure to file and/or pay any return or report by the due date. 

Will the LMRC accept a copy of the Federal Extension?

A standard extension request form (OL-3EXT) is available through the Louisville Metro Revenue Commission (LMRC) website.  However, a copy of your federal income extension request for the same year, is acceptable.  Your LMRC account number needs to be clearly marked on the federal extension for proper posting to your account. Also, the extension request must be hand-delivered to the LMRC or postmarked on or before the original filing due date of the tax return.

If the LMRC grants an extension of time for filing a return, any balance unpaid when payment is due, without regard to the extension granted, shall be assessed interest at the rate of twelve percent (12%) per annum from the date first due until paid and a late payment penalty of five percent (5%) per month or, a fraction of a month, to a maximum penalty of twenty-five percent (25%) shall also be assessed upon the balance of the tax, as finally determined, not paid when originally due, unless the extension granted is for no more than thirty (30) days or unless the application for extension is accompanied by payment of an estimated tax in an amount equal to ninety percent (90%) or more of the total tax as finally determined.

Family Limited Partnerships and Venture Capital Funds

What is a Family Limited Partnership (FLP)?

Any family-owned non-corporate business, which the sole activity is the production of investment income, is exempted from Occupational License Tax.

The Louisville Metro Revenue Commission requires an annual questionnaire and an annual informational return to be completed and submitted by any business entity operating as a Family Limited Partnership in order to be exempt from the occupational license tax.

DEFINITIONS TO KNOW:

• Investment Income: All gross receipts derived from dividends, interest, annuities, and sales or exchanges of stock.
• Family-Owned: At least 95% of the equity of a business is owned by members of the family

How does a business qualify for a FLP exemption?

To qualify for the FLP exemption, the income received by family limited partnerships must be:

1. From a family-owned business
2. The sole activity of that business must be the production of income not derived from tangible or real property
3. At least 95% of the business equity must be owned by members of the family

See LMCO 110.03(A)(13) for more information.

What is a Venture Capital Fund (VCF)?

A limited liability company, limited liability partnership, or limited partnership, formed and operated for the exclusive purpose of buying, holding and/or selling securities (including debt securities), on its own behalf and not as a broker. 

The Louisville Metro Revenue Commission requires an annual questionnaire and an annual informational return to be completed and submitted by any business entity operating as a Venture Capital Fund in order to be exempt from the occupational license tax.

How does a business qualify for a VCF exemption?

To qualify for the VCF exemption, the venture capital fund must be:

1. A limited liability company, limited liability partnership or limited partnership
2. Operates exclusively on buying, holding and/or selling securities (including debt securities), on its own behalf and not as a broker, primarily in non-publicly traded companies
3. The capital of the fun is mainly derived from investments by business and/or individuals who are neither related or affiliated with the fund

See LMCO 110.03(A)(12) for more information.

Do businesses that qualify for the FLP and VCF exemptions have to file an OL return?

If the business files an annual informational return along with the required documentation, it is not responsible for filing an OL return.

Transient Tax

What is considered a Short-Term Rental?

A short-term rental is a dwelling unit (like a residence or apartment) that is rented, leased or assigned for a tenancy of less than 30 consecutive days. This includes listings offered on Airbnb, VRBO, and other online booking platforms.

All Short-Term Rental Owners (hosts) mut register with the Louisville Metro's Office of Planning & Design Services as well as the Louisville Metro Revenue Commission.

See LMCO 115.516-115.522 for more information. 

How can short-term rental owners (hosts) comply with LMRC Tax Regulations?

The first step is to register for a tax reporting number. Click here to begin the registration process. Hosts must register for both the Transient Tax (TR1M/TR1M-S) and the Occupational License Net Profit tax (OL-3). The TR1M/TR1M-S return is required to be filed monthly, while the OL-3 return is required to be filed annually. The filing requirements begin the day a host starts short-term rental activity.

After registration, a host can file returns by clicking here or by using the forms found on the Forms & Publications section of the LMRC website.

If I am registered with the Office of Planning & Design Services, why do I need to register with the LMRC?

All short-term rental owners (hosts) are required to report Transient and Occupational License Net Profit taxes to the LMRC. Each host is required to submit a monthly Transient return (TR1M or TR1M-S) as noted in LMCO 121.01.

Also, do to business activity as a short-term rental owner, hosts must file the annual Occupational License Net Profit tax return (OL-3) as well. This tax is collected on all net profits earned by a business within Louisville/Jefferson County. Anyone who engages in business, profession, occupation, or trade will have to pay the Occupational License Tax. There is no minimum earned net profit amount before you are liable to file a tax return.

What is the Transient Tax?

The Transient Tax is an aggregate tax of eight and one‐half percent (8.5%) of the rent for every occupancy of a suite or room charged by all persons, companies, corporations, or others doing business as motor courts, motels, hotels, inns, or similar accommodations businesses.

What is the difference between the TR1M form and TR1M-S form?

The TR1M form should be used by all owners that have permanent guests and is primarily used by hotels. The TR1M-S form is a simplified version that can be used by short-term rental owners and is only for hosts that do not have permanent guests.

When is the Transient tax return (TR1M/TR1M-S) due?

The return and tax due must be filed and paid by the last day of the month following the month of the short-term rental activity. For example, the return and tax for short-term rental activity in May is due by June 30th. See the LMRC Tax Calendar for current due dates.

When is the Occupational License Net Profit return (OL-3) due?

The Occupational License Net Profit return must be filed and paid by the due date listed here LMCO 110.07. See the LMRC Tax Calendar for current due dates.

Do I have to file a return even when I do not have renters?

Yes, hosts are required to file a monthly Transient return even if they do not have renters for that month.

What if I just found out that I should be reporting to the LMRC?

The Transient Tax filing requirement starts the day short-term rental activity begins. All past due returns should be filed as soon as possible. Past due returns will be subject to penalty and interest. Directions for calculating penalty and interest can be found on the TR1M/TR1M-S instructions.

Do I need to register and file separate returns for each rental property?

No, a short-term rental owner should only register once with the LMRC even if they have multiple rental properties or use different renting methods. The TR1M and TR1M-S forms have fields for the host to report rental activity for multiple locations and multiple rental methods. The host should only file one Transient Tax Return per month for all short-term rental activities.

Sole Proprietors

What is a sole proprietor?

A sole proprietor is an individual engaged in any business, profession, or occupation, but not as an employee. If your business is registered with the Kentucky Secretary of State as a Limited Liability Company (LLC), you are not a sole proprietor. All sole proprietors are required to register for an Occupational License tax account with the Louisville Metro Revenue Commission and to pay Occupational License taxes.

What additional forms or schedules do I need to include when filing my OL-3 net profit return?

Sole proprietors should include their entire form 1040, including ALL schedules and statements. Include forms 4797 and 6252 if you had any gains from the sale of business property.

 I have 2 separate sole proprietorships that I operate in Louisville Metro. Do I need to have a separate account for each business?

No, you may file a net profit return for both businesses under one account number if you wish, so long as both businesses are sole proprietorships that operate in Louisville Metro, and you are the owner.  If either of the businesses is organized as an LLC, then the LLC will need a separate account.

My spouse and I file a joint return and each of us own a business that is a sole proprietorship. Can we combine our schedule C’s like we do on our federal return and file under one occupational license tax account number?

No, the income from multiple sole proprietorships operating in Louisville Metro can only be combined and filed under one account number when the sole proprietorship is owned by the same individual. You and your spouse require separate accounts.

I have a short-term rental that is listed on Air BnB, and they collect and pay all of the taxes on my behalf. Am I required to file an OL-3 net profit return too?

Yes, the transient tax is similar to an excise tax that is typically paid by the consumer (in this case the person renting the property). The OL-3 tax is an annual tax which is based on the net profits of your business.

I am the owner of a sole proprietorship that is located outside of Louisville Metro. I rarely enter Jefferson County to provide my services. Am I required to file an OL-3 net profit return?

A non-resident sole proprietor who performs business services within Louisville Metro is required to register and file an OL-3 return if they provide services within Louisville Metro during any part of four or more days in a calendar year, or if their gross receipts for services in Louisville Metro are $3,000 or more in a calendar year.

I am the owner of a sole proprietorship that is located in Louisville Metro. I work from my home, and I sell all of my products through an online retailer. Am I required to file an OL-3 net profit return?

Yes, you are operating a business in Louisville Metro and are required to register and file an annual OL-3 net profit return. In addition, if you have employees, or compensate family members or other individuals for labor provided to your business, you are required to withhold and remit the occupational license tax on wages, which is filed quarterly on form W-1.