Kansas City and St. Louis Earnings Tax for Small Businesses: RD-108, E-234 and the 0.5% Payroll Expense Tax

2026-10-12 · RKube Services

Kansas City and St. Louis earnings tax for small businesses: the 1% net profits tax, RD-108 and E-234 filings, employee withholding, and the St. Louis 0.5% payroll expense tax, with dates and common mistakes.

Missouri has two cities that tax income on their own, and both of them catch small businesses that never thought about a city return. Kansas City and the City of St. Louis each charge a 1% earnings tax. For a business, that tax shows up in up to three places: a tax on the business's own net profit, withholding from employees' paychecks, and (in St. Louis only) an extra tax the employer pays on its payroll.

None of this is handled by the Missouri Department of Revenue. You file with each city's own revenue office, on the city's own forms, with the city's own deadlines and penalties. That's why a business can be fully current with the state and still get a letter from City Hall.

This guide walks through what each city charges, which form goes where, the dates, and the mistakes we see most with owners in Kansas City, St. Louis and the suburbs around them.

The short version

The rest of this article explains each line, because the details decide whether you owe anything.

Kansas City: the Profits Return (RD-108)

Kansas City calls the business side of its earnings tax the "profits tax." The return is Form RD-108, filed with Schedule RD-108B, and the city's Revenue Division says annual returns are due April 15 each year.

Who files. A business with activity in Kansas City, Missouri files. That includes sole proprietors who live in the city: the city's FAQ says self-employed residents pay the 1% tax on the net profit of their business by filing a profits return by April 15. Nonresident businesses that work in the city are also subject to local taxes, and the city asks them to confirm their obligations with Taxpayer Services.

What gets taxed. The starting point is the federal idea of ordinary and necessary business expenses. Kansas City allows those, but it doesn't allow deductions tied to unearned income, special deductions or credits. In practice, your federal Schedule C or entity return is the starting point, and then city adjustments come in.

Partnerships and LLCs taxed as partnerships. Kansas City lets partnerships pass net profits through to the partners, but the partnership still files an informational RD-108/108B listing each partner and their share. A partner who lives in Kansas City pays on their whole distributive share. A nonresident partner pays only on the part of their share that came from business done in the city, and the partnership works out that split on Schedule Y.

S corporations are different. This is the one that surprises people. Kansas City does not treat S corporations as pass-through entities. If an S corp has activity in the city, the S corp itself files the Profits Return, and the individual shareholders don't have a separate filing requirement for that income. So an S corp owner who expects the profit to "flow through" to a personal city return has it backwards in Kansas City.

Rental income. Rental income is taxed to the extent that owning, managing or operating the property counts as a business activity of the owner. The city publishes a separate tax guide for rental businesses, which is worth reading if you hold rentals inside city limits.

No activity or closed. If the business had no activity, you still file a return. If it closed during the year, check the closing box on the return or send the account closure form so the city stops expecting returns.

Filing method. Kansas City's Quick Tax portal lets you file and pay online, and it also handles payment-plan requests.

Kansas City: withholding and the remote-worker rule

If you have employees who live in Kansas City, or who work there, you withhold the city's 1% earnings tax from their pay and remit it to the city. At year end, employers file the annual reconciliation, Form RD-113, together with W-2 records. Since January 1, 2021, the city requires RD-113 and the W-2 records to be filed electronically.

The penalties for missing that reconciliation are set per employee, and they mirror the IRS schedule for late W-2s: the city lists $30 per employee when 30 days or less late, $60 per employee at 31 to 150 days, and $100 per employee after that, each with an annual maximum. For a business with 15 employees, a reconciliation filed five months late is already a $900 problem before any tax is involved.

Remote workers count. Kansas City's FAQ is explicit: a business with even one employee working from a home office in Kansas City, Missouri is subject to local taxes, which generally means the profits tax, earnings tax withholding and a business license. If remote workers are the business's only presence in the city, one license covers all of them.

That catches a lot of out-of-state companies. A software firm in Denver that hires one developer who lives in Brookside now has a Kansas City withholding account, a business license and a profits return to think about.

St. Louis: the business earnings tax (E-234)

The City of St. Louis taxes business earnings at 1% too, and it has since 1954. Every business located in the city pays it, except those exempted by law, and so do nonresident businesses that perform work, services or business activity in the city.

The three-factor test. For a business outside the city, St. Louis uses the three factors on Form E-234 to decide whether you're in: gross receipts, the value of real and personal property (including inventory), and payroll. If any one of those factors is present in the city, you file an E-234, and possibly the W-10 and P-10 quarterly returns as well.

A location with no employees still files. The city says a company with a physical location in St. Louis but no employees is still subject to the earnings tax on the business and must file the E-234.

Which E-234. The return comes in types by entity, with the sole proprietor and contractor version (E-2), the partnership version (E-3) and the corporation version (E-4).

Due dates. A calendar-year business files the E-234 by April 15. With an approved E-8 extension, the date moves to October 15. Fiscal-year businesses file on the 15th day of the fourth month after their year end, with the extension adding six months. Businesses also owe an annual 1099 report (Form E-6 or Schedule G) by March 1.

Inactive or closed. If the business had no activity in a year and you want to keep the account open, file a return showing zero income in the city. If you closed or stopped all activity in St. Louis, send Form E-5, and expect that a final return may still be due depending on the timing.

The airport exception. Lambert International Airport belongs to the city, but it isn't inside the city's geographic boundaries. Businesses whose only location is at the airport are not subject to the earnings tax or the payroll expense tax.

St. Louis: withholding plus the 0.5% payroll expense tax

St. Louis employers carry two payroll taxes, and both go on quarterly returns.

1. Earnings tax withholding (1%). Every employer with employees working in the City of St. Louis withholds the 1% tax from their gross earnings. If the employer itself is a city resident business, it withholds on all employees regardless of where they work. This is remitted on Form W-10.
2. Payroll expense tax (0.5%). This one is paid by the employer, not withheld from employees. It's 0.5% of gross compensation for wages earned in the City of St. Louis, filed on Form P-10.

The city says employers file the two together each quarter. Both the W-10 and P-10 are due April 30, July 31, October 31 and January 31, and the W-3 reconciliation with W-2 data is due January 31.

Exempt employers. Religious and charitable organizations, nonprofit civic and social service groups, nonprofit hospitals and schools, and government agencies are exempt from the payroll expense tax. A nonprofit sends a copy of its exemption paperwork to the Earnings Tax Department, which notes the exemption in its system rather than issuing a letter.

How to file. St. Louis does not take electronic filing of these returns right now. You can pay online, and then mail, fax or email the return so the payment can be matched to it.

A worked example

Take a small marketing agency organized as an S corporation, based in the Crossroads District of Kansas City, with four employees. Two employees live in Kansas City, Kansas, and work at the office, one lives in Overland Park and works in the office three days a week, and one lives in St. Louis and works fully remote from home inside city limits. The S corp had $180,000 of net profit for 2026.

Here is how the city side lines up:

• Kansas City profits tax. The S corp files RD-108/108B for 2026 by April 15, 2027. At 1%, that's about $1,800 on $180,000 of city-taxable profit, before any allocation adjustments. The shareholders don't file a separate Kansas City profits return for their share, because Kansas City taxes the S corp itself.
• Kansas City withholding. All three office employees work in Kansas City, Missouri, so the agency withholds 1% of their pay for the days worked in the city and files RD-113 electronically with W-2 records after year end.
• St. Louis withholding. The remote employee lives in the City of St. Louis and works there. The agency withholds 1% St. Louis earnings tax and files W-10 quarterly.
• St. Louis payroll expense tax. Because that employee's wages are earned in the City of St. Louis, the agency also owes the 0.5% payroll expense tax on that employee's gross pay, filed on P-10 with the same quarterly dates.
• St. Louis business earnings tax. Payroll in the city is one of the three E-234 factors, so the agency should expect to file an E-234 and allocate some share of its profit to St. Louis.

One remote hire turned a single-city business into a two-city filer with four new returns a year. That's the pattern we see most often.

Mistakes we see most

Assuming the state return covers it. Missouri's MO-941 withholding and MO-1120S or MO-1065 returns have nothing to do with the city taxes. Different agency, different accounts.

Forgetting the loss year. Both cities expect a return when there's no profit. Skipping it is how an account ends up with estimated assessments.

Treating a Kansas City S corp like a partnership. The S corp files the Profits Return itself. Don't wait for K-1 income to show up on a personal city return.

Missing remote employees. A hire who lives in Kansas City or St. Louis can create withholding, a license or a payroll expense tax for an employer that has no office in Missouri. Update payroll as soon as an employee's work address changes.

Paying St. Louis late. At 5% a month, a quarterly payment that sits for five months has already hit the 25% cap, and interest keeps running at 1% a month after that.

Waiting until April for the 1099 report. St. Louis wants the E-6 or Schedule G by March 1, six weeks before the E-234.

What to set up now

If you're in either city or employ anyone there, a short checklist gets you most of the way:

1. Confirm whether you have an account with the Kansas City Revenue Division, the St. Louis Collector of Revenue's Earnings Tax Department, or both.
2. Add each employee's work location and home city to payroll so the 1% withholding and the St. Louis 0.5% expense tax are calculated every pay run, not at year end.
3. Put the St. Louis quarterly dates (April 30, July 31, October 31, January 31) and the March 1 1099 report on the same calendar as your federal 941s.
4. For Kansas City, make sure the RD-113 and W-2 records go in electronically each January.
5. Book the city taxes in their own liability accounts in your books, so the city balances reconcile each month instead of turning into a spring surprise.
6. Plan the April 15 city returns alongside your Missouri pass-through return, which is also due April 15 for calendar-year partnerships and S corps.

If you're setting up payroll for the first time, our first-employee payroll setup checklist covers the federal and state pieces that sit next to these city ones.

Where to check the rules

• Kansas City, Missouri Revenue Division: Tax FAQs and Tax Form Descriptions. Taxpayer Services: (816) 513-1120.
• City of St. Louis Collector of Revenue: Business Earnings Tax Information and Employer Withholding and Payroll Expense Tax Information. Earnings Tax Department: (314) 622-4101.

This guide is general information about the Kansas City and St. Louis earnings taxes as of October 2026, not tax advice for your situation. City rules change by ordinance, and both cities update forms each year, so confirm the current year's form and instructions before you file.

How RKube can help

We keep books and run payroll for small businesses across the US, including Missouri companies with city earnings tax accounts in Kansas City and St. Louis. We set up the withholding, track the quarterly W-10 and P-10 dates, and prepare the April 15 city returns alongside your state and federal returns. If you'd like a second look at how your city accounts are set up, book a free scoping call and ask about our free 30-day trial, or call us at (984) 234-7030.