Request By:
Mr. Jonathan A. Mason
Denicola & Mason Co., L.P.A.
901 Fifth & Race Tower
120 West Fifth Street
Cincinnati, Ohio 45202
Opinion
Opinion By: Steven L. Beshear, Attorney General; By Alex W. Rose, Assistant Attorney General
In your letter to the Attorney General you ask if it is permissible for Crescent Springs, a city of the fifth class, to levy (1) an occupational license fee on all salaries, wages and commissions earned in the city and all net profits of all businesses, professions and occupations and (2) an income tax on the earnings of every person who lives within the municipal corporate boundaries of the city. The city is considering implementing these two taxes through a combined ordinance in an attempt to equitably tax not only people who earn their living in the city, but also people who are residents of the city.
Municipal taxation is governed by Section 181 of the Kentucky Constitution. This section has been codified in KRS 92.280 and 92.281. The only taxes that a city may levy are (1) an ad valorem tax, (2) a license fee on trades, occupations, professions, etc., and (3) a tax on personal property, tangible and intangible, based on income, licenses or franchises, in lieu of an ad valorem tax thereon. See OAG 75-411 (copy enclosed).
In Baker v. City of Corbin, Ky. App., 556 S.W.2d 449 (1977), the Kentucky Court of Appeals upheld an occupational license tax levied by a city.
In Patrick v. City of Frankfort, Ky., 539 S.W.2d 275 (1976), the Kentucky Supreme Court stated that a city may not levy an income tax.
Therefore, in answer to your question, a city of the fifth class may levy an occupational license fee, but it may not levy an income tax.