Kansas City and St. Louis Earnings Tax: The 1% Business Owners Owe

If you're starting or running a business in Missouri, you've likely heard about the state's favorable tax climate. Missouri has no annual LLC reporting requirements, no franchise tax on corporations, and no statewide business license. But here's what catches most business owners off guard: two Missouri cities levy their own earnings taxes that apply directly to your bottom line. Kansas City and St. Louis both impose a 1% earnings tax on business profits, and St. Louis adds another 0.5% employer payroll expense tax on top of that. For small business owners, these local taxes can mean the difference between a profitable year and breaking even.

Missouri's Unique Two-City Earnings Tax System

Most states have statewide income or business taxes that apply uniformly across all cities and counties. Missouri took a different approach. State law authorizes only Kansas City and St. Louis to levy an earnings tax, and since 2011 each city's voters must reapprove it every five years. No other Missouri city can impose one. This creates a patchwork system where business owners in Kansas City owe a very different tax burden than those in Springfield, Columbia, or rural Missouri.

Both the Kansas City earnings tax and the St. Louis earnings tax operate on the same basic principle: a 1% rate applied to business net profits, resident wages, and wages earned by nonresidents who work in the city. The key difference is that St. Louis adds a 0.5% employer payroll expense tax on top of the standard earnings tax, making St. Louis the more expensive city for employers. Both taxes were renewed by each city's voters on April 7, 2026, for an additional five years, so these taxes will remain in place through at least 2031.

The Kansas City Earnings Tax: What Business Owners Pay

Kansas City's earnings tax, formally known as the KCMO earnings tax (KCMO stands for Kansas City, Missouri), applies to three income streams: resident wages, nonresident wages earned within city limits, and business net profits. If you're a sole proprietor or owner of a pass-through entity like an LLC or S corporation operating in Kansas City, your business is subject to the 1% tax on net profits.

The 1% rate sounds modest, but it adds up quickly. If your business generates $100,000 in net profit and you operate in Kansas City, you owe $1,000 to the city in earnings tax on top of federal and state income taxes. Over five years, that's $5,000 in earnings tax alone.

For Kansas City earnings tax purposes, "net profit" generally means your business income after ordinary business deductions. The Kansas City earnings tax return, formally called the RD-108 return, is due on April 15 each year. If you already file federal income tax returns for your business, much of the information you'll need for the Kansas City earnings tax return will come directly from those federal filings.

One important consideration: if you're a nonresident business owner with a company operating in Kansas City, you still owe the 1% earnings tax on the profits your business generates. The earnings tax applies to anyone earning income in Kansas City, whether they live there or not. The rule is different for your employees: a Kansas City resident owes the 1% tax on all earned income, even wages earned outside city limits. But if a resident of Overland Park works for you inside Kansas City, that employee's earnings are subject to the tax (though employers typically withhold it from employee paychecks).

The St. Louis Earnings Tax: Double Taxation for Employers

St. Louis City operates under a more complex earnings tax structure than Kansas City. Like Kansas City, St. Louis imposes a 1% earnings tax on resident wages, nonresident wages earned within the city, and business net profits. But St. Louis adds a second layer: a 0.5% employer payroll expense tax.

This means if you're an employer in St. Louis City, you face a dual hit. First, there's the 1% earnings tax on your business net profits. Second, there's the 0.5% payroll expense tax calculated on the total wages you pay to all your employees. Unlike the earnings tax, which applies only to net profit, the payroll expense tax applies to gross payroll with no deductions.

Here's what that looks like in practice: suppose you run a small marketing agency in St. Louis City with $200,000 in annual payroll. The 0.5% payroll expense tax costs you $1,000 per year. If your agency generates $150,000 in net profit, the 1% earnings tax on that profit costs another $1,500. Combined, you're paying $2,500 in local taxes on top of federal and state obligations. Over five years, that's $12,500.

The payroll expense tax applies only to wages earned in the City of St. Louis, so employers that operate just outside city limits, for example in St. Louis County, do not owe it.

Like Kansas City, St. Louis renewed its earnings tax system in April 2026. Voters approved both the 1% earnings tax and the 0.5% payroll expense tax for another five-year term, meaning both taxes remain in effect through at least 2031.

Who Pays What: A Business Owner's Breakdown

The earnings tax structure can be confusing because it applies differently depending on your business structure, location, and employee situation. Here's a practical breakdown:

Self-employed sole proprietors in Kansas City: You owe 1% on your net business profit. File the RD-108 return with your federal income tax return.

LLC or S corp owner in Kansas City: The earnings tax applies to the net profit that passes through to you. Again, 1% rate, RD-108 return, April 15 deadline.

C corporation in Kansas City: As a C corp, the business itself pays the 1% earnings tax on corporate net income. There's no separate state corporation franchise tax in Missouri, but the Kansas City earnings tax applies to the corporation's profits.

Employer in St. Louis City: You pay both the 1% earnings tax on business net profit and the 0.5% payroll expense tax on total employee compensation. If you have five employees earning $40,000 each ($200,000 total payroll), the payroll expense tax alone is $1,000 annually.

Remote worker or nonresident in Kansas City or St. Louis: If you don't live in these cities but earned income within them, your employer is responsible for withholding the earnings tax from your paycheck. As an individual, you handle it through your personal income tax filing, not through a business return.

Filing Deadlines and Practical Steps

For Kansas City, the earnings tax return (RD-108) is due April 15, the same day as your federal tax return. This timing makes sense since you'll use your federal tax information to complete the city return. If you need more time, check the Revenue Division's current extension rules, which may require a copy of your federal extension.

For St. Louis, the business earnings tax return reports net profit using information from your federal return. The payroll expense tax is filed quarterly on Form P-10, due April 30, July 31, October 31 and January 31.

If you operate in both Kansas City and St. Louis, you'll file separate returns for each city. Your accountant or tax professional should help you allocate income correctly between jurisdictions based on where the income was earned.

Late payments trigger penalties. Both cities assess additional fees for filings submitted after the deadline, so mark April 15 on your calendar and plan ahead. If you anticipate owing these taxes and haven't built them into your quarterly estimated tax payments, you risk underpayment penalties when you file.

Planning Around the Earnings Tax

The 1% Kansas City earnings tax and St. Louis's 1% earnings tax plus 0.5% payroll expense tax are in place at least until the next voter renewal in 2031, but you can manage their impact. Here are three practical strategies:

Location matters. If you operate a service business or work remotely, you have more flexibility to choose your location. Many entrepreneurs choose suburbs like Overland Park, Lee's Summit, or Clayton specifically to avoid these taxes. If you're already in Kansas City or St. Louis, this decision is made, but it's worth factoring into expansion plans.

Structure your business carefully. Pass-through entities like LLCs and S corporations don't reduce the earnings tax on business profit, but they can reduce your overall tax burden through different depreciation schedules or deduction timing. Work with a tax professional to choose the right structure for your specific situation.

Budget for cash flow. The earnings tax reduces your net profit, which affects how much cash your business generates. If you're projecting profitability in Kansas City or St. Louis, add the 1% tax (or 1.5% in St. Louis) into your cash flow model from day one.

Where to File and Find Official Resources

For Kansas City earnings tax questions, contact the Revenue Division of the Kansas City Finance Department. It manages the RD-108 return process and can answer questions about filing requirements and deadlines.

For St. Louis, the Earnings Tax Department of the Collector of Revenue handles the earnings tax and payroll expense tax. They provide forms, instructions, and support for both filings.

The Missouri Department of Revenue provides statewide tax information at dor.mo.gov/taxation/business/, though city earnings taxes fall outside their jurisdiction. For sales tax registration and state-level tax questions, the Department of Revenue is your resource; business licenses come from your city.

If you're just starting a business in Missouri, the Missouri Small Business Development Center (Missouri SBDC) at sbdc.missouri.edu offers free business planning and tax guidance. The SBA's St. Louis district office at sba.gov/district/st-louis can also point you toward local resources.

Important Disclaimer: Seek Professional Advice

This guide is informational only and does not constitute legal or tax advice. Kansas City and St. Louis earnings taxes are complex, and your specific situation may involve nuances this guide does not cover. Withholding requirements, deduction eligibility, filing deadlines, and penalty calculations can vary based on your business structure, income sources, and employment situation.

Before you file your first earnings tax return in Kansas City or St. Louis, consult a qualified tax professional, CPA, or tax attorney familiar with local tax law. The cost of professional guidance (typically a few hundred dollars) is far less than the cost of an audit, penalties, or interest charges from underpayment.

Tax law changes. The Kansas City earnings tax and St. Louis earnings tax were renewed in 2026, but rates, definitions, and filing requirements can shift. Stay current by checking the official city websites and consulting your tax advisor annually.

The Bottom Line

The 1% Kansas City earnings tax is straightforward: it applies to your business net profit and is due April 15 each year on the RD-108 return. The St. Louis earnings tax is more aggressive, adding a 0.5% payroll expense tax on top of the standard 1% earnings tax, which means employers shoulder a heavier burden.

Neither tax is going away. Both were reauthorized by voters in April 2026 for another five years. If you operate in Kansas City or St. Louis, treating these taxes as a permanent part of your cost structure and planning accordingly is the most realistic approach. Work with a tax professional to ensure you file correctly, budget for the tax obligation, and explore legitimate strategies to minimize your overall tax burden.

Starting or growing a business in Kansas City or St. Louis means accepting the earnings tax as part of the cost of doing business in these cities. With proper planning and professional guidance, you can manage this obligation and keep your business on track.