Legal Definitions - occupation tax

An occupation tax is a type of tax or fee levied by a government entity (such as a city, county, or state) on individuals or businesses for the privilege of engaging in a particular profession, trade, or business within its jurisdiction. It is essentially a charge for the right to operate or practice a specific occupation, rather than a tax on income or property.

Here are some examples to illustrate this concept:

• Example 1: A city ordinance requires all independent contractors who provide landscaping services within city limits to pay an annual "business privilege license fee" of $150. This fee must be paid regardless of how much income the landscaper earns, simply for the right to offer their services in that city.

  Explanation: This annual fee is an occupation tax because it is specifically imposed on individuals engaged in the occupation of landscaping within the city. It's a prerequisite for them to legally operate their business in that specific location, demonstrating a tax on the privilege of engaging in that trade.

• Example 2: A state mandates that all licensed real estate agents must pay a biennial (every two years) "professional practice assessment" of $200 to the state's real estate commission. This assessment is separate from any general business registration fees or income taxes.

  Explanation: This assessment is an occupation tax because it targets a specific profession—real estate agents—and is a recurring charge for the right to continue practicing that profession within the state. It's a fee for maintaining the privilege of their occupation.

• Example 3: A county government imposes a special "lodging operator permit fee" on anyone who rents out a room or property for short-term stays (e.g., through platforms like Airbnb or VRBO) within the county. This fee is distinct from property taxes or sales taxes on the rental income.

  Explanation: This permit fee functions as an occupation tax because it is specifically directed at individuals or entities engaged in the business of short-term lodging. It's a charge for the privilege of operating that particular type of commercial activity within the county's jurisdiction.