City of Owensboro Occupational Tax: Rates, Filing, and Refunds

The Owensboro occupational tax is a 1.78% license fee on wages earned and net profits generated within city limits. Employers withhold it from employee paychecks, and businesses and self-employed people pay it on their net profits, with a $75 minimum annual fee.¹ It applies to residents and nonresidents alike, as long as the work happens inside the city.

Who Owes the Tax

If you earn money for work performed within Owensboro’s corporate limits, you owe this fee. That covers W-2 employees, independent contractors, sole proprietors, partnerships, corporations, and any other entity engaged in a trade, profession, or business activity in the city.¹ Filing a return with the IRS or Kentucky Revenue Cabinet for business income earned in Owensboro is enough on its own to trigger the requirement.

For most employees, the mechanics are simple. Your employer withholds 1.78% from your wages and sends it to the city. Independent contractors and business owners handle their own reporting and payment. Having a physical office in Owensboro is not required. If any of the work happens inside city limits, the income from that work is taxable.

Rate and Wage Cap

The 1.78% rate applies to two categories of income:¹

Employee wages, salaries, commissions, and other compensation for work done in the city.
Net profits from any business, profession, or enterprise conducted in Owensboro, subject to the $75 minimum annual fee.

Payroll withholding stops once your wages for the calendar year cross the Social Security maximum taxable earnings limit. For 2026, that ceiling is $184,500.² The cap applies only to employee wages. It does not limit the net profit calculation for business owners.

Income That Is Exempt

Employers should not withhold the occupational license fee from the following:³

Domestic servants, such as household housekeepers or nannies.
Compensation paid to ordained ministers.
Third-party payments for disability, sickness, or accident claims.
Workers compensation benefits.
Unemployment benefits paid by a government agency.
Earnings of employees under 16.
Death benefits paid to the beneficiary or estate of a deceased employee.

If you fall into one of these categories and your employer withheld the fee anyway, you can request a refund using the process below.

Registering Your Business

Any person, partnership, corporation, or other entity must register with the Occupational License Division before doing business inside city limits.¹ The application asks for your Federal Employer Identification Number (or Social Security Number for sole proprietors), the legal name of the business, and the start date of city operations.⁴ Planning and zoning staff must approve and sign the application before a license is issued.

The $75 minimum license fee is due at registration.¹ No license will be issued or renewed if you owe the city any delinquent real estate taxes, tangible property taxes, occupational fees, or other outstanding assessments.⁴ False statements on the application can result in denial or revocation.

Filing Forms and Deadlines

Employer Withholding Returns

Employers report withheld fees using the Employer’s Return of License Fee Withheld (Form E-1). Filing frequency is initially based on your estimated quarterly wages. Most employers file quarterly, with returns due April 30, July 31, October 31, and January 31.³ The city no longer mails these forms automatically, so you need to download them from the city website or request them from the Finance Department.⁵

Net Profit Returns

Business owners and self-employed people file an annual Net Profit License Fee Return. For calendar-year filers, it is due April 15. For fiscal-year filers, it is due the 15th day of the fourth month after the fiscal year ends.¹ You owe the greater of $75 or 1.78% of net profits earned in Owensboro.

Extensions

A federal extension does not extend your city deadline on its own. If you request more time to file federally, you must also submit a copy of the federal extension request or complete a City of Owensboro extension form, on or before the original due date.¹

Penalties and Interest for Late Payment

Two charges run at the same time when you file or pay late:³

A penalty of 5% of the unpaid fee for each calendar month or partial month the return is late, capped at 25% of the total fee due, with a $25 minimum penalty.
Interest of 1% of the unpaid fee for each calendar month or partial month it remains outstanding. Interest has no cap and keeps accruing until the balance is paid.

Filing on time even when you cannot pay the full balance is usually the better move, because the penalty stops climbing once the return is in and only interest continues.

Claiming a Refund

If you overpaid or had the fee incorrectly withheld, file an Annual Individual Employee Return (Form RU-1). A strict two-year statute of limitations applies. The refund request must be postmarked within two years of the 15th day of the fourth month following the end of the calendar year for which the refund is due.⁶ A 2025 overpayment, for example, has an April 15, 2028 deadline.

Each claim requires a separate return for each employer and each year. You must attach the applicable W-2 and your final pay stub for the year, and both you and your employer need to sign the form. If more than one employer withheld the fee, file a separate RU-1 for each.⁶

One detail that catches people off guard: refunds are mailed to the employer at the employer’s last known address, not to you. To have the money sent to you directly, submit a signed authorization from your employer along with the refund request.

Daviess County’s Separate 1% Tax

Owensboro’s 1.78% fee is not the same as the Daviess County occupational tax. The county imposes its own 1% fee on wages and net profits earned within county boundaries.⁷ The county contracts with the city to administer its program, so both are handled through the same Finance Department office.⁸ If your business operates inside Owensboro, the city’s 1.78% rate applies. If you also work in unincorporated parts of Daviess County, the county’s 1% rate applies to that income. Track earnings by location so you report the correct amounts to each jurisdiction.

1
City of Owensboro. Business License Information and Forms
2
Social Security Administration. Contribution and Benefit Base
3
City of Owensboro. Form E-1 Employer Return of License Fee Withheld
4
City of Owensboro. City of Owensboro Occupational Business License Application
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City of Owensboro. Finance
6
City of Owensboro. Annual Individual Employee Return (RU-1) Instructions
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Daviess County, Kentucky Code of Ordinances. Daviess County Code 110.17 – Occupational License Fee Payment Required
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Daviess County Fiscal Court. Occupational Tax/Business License