Have a blog that makes no money? Philly wants $300
We all know the budget problems facing our cities, counties and state governments. Still, what’s Philadelphia’s next great idea, taxing lemonade stands?
It would probably be a better revenue model than their plan to charged bloggers $300 for a business privilege license:
Between her blog and infrequent contributions to ehow.com, over the last few years she says she’s made about $50. To [Marilyn] Bess, her website is a hobby. To the city of Philadelphia, it’s a potential moneymaker, and the city wants its cut.
In May, the city sent Bess a letter demanding that she pay $300, the price of a business privilege license.
“The real kick in the pants is that I don’t even have a full-time job, so for the city to tell me to pony up $300 for a business privilege license, pay wage tax, business privilege tax, net profits tax on a handful of money is outrageous,” Bess says.
It would be one thing if Bess’ website were, well, an actual business, or if the amount of money the city wanted didn’t outpace her earnings six-fold. Sure, the city has its rules; and yes, cash-strapped cities can’t very well ignore potential sources of income. But at the same time, there must be some room for discretion and common sense.
When Bess pressed her case to officials with the city’s now-closed tax amnesty program, she says, “I was told to hire an accountant.”
She’s not alone. After dutifully reporting even the smallest profits on their tax filings this year, a number — though no one knows exactly what that number is — of Philadelphia bloggers were dispatched letters informing them that they owe $300 for a privilege license, plus taxes on any profits they made.
Even if, as with Sean Barry, that profit is $11 over two years.
So the city wants some people to pay more in taxes fees than they earn. Brilliant!
This is one of the stupidest things ever. Especially for Mayor Nutter who was adopted and pushed by many of the local political blogs in Philly. It’s time to rethink the definition of business — so that people basically supporting a cheap hobby are exempted. Or there needs to be a new non-profit organization that these blogs can legally affiliate with to escape the taxes.
If a blog is set-up to try to make money, such as ad word money, it is a for-profit business and should be taxed as a business. If you don’t want to pay taxes on a blog, don’t set it up to try to make money with it. That is the only common sense needed here.
The advice to get an accountant is good advice. Bess could probably easily get tax-deductions against her other income that would easily pay for her business license expenses as well as demonstrate that her blog is a money-loser.
The really stupid thing was reporting $50 to the IRS.
There are a few issues with this, as I see it. Does it only apply to bloggers that live in Philly or does it affect bloggers that write about Philly issues (therefore their customers are in Philly) or does it apply to blogs where the servers that the blog lives on are in Philly. Would micro-blogging like Twitter be impacted? If I go up to Philly to cover a Presidential visit, must I pay the fee in order to blog from Philly?
The other area of concern is that the anonymity of bloggers could be impacted. If a blogger is critical of the Philadelphia Police or City employees, does that blogger end up getting outed and/or harassed because of their views?
I wonder what Silence Dogood would think about this.
Just write “No business at this address” at the top of the letter and mail it back.
It only has to do with the place of business, LG. If the person lives and/or receives wages and/or owns a business in Philadelphia, than they are subject to the relevant taxes. You wouldn’t be taxed for blogging from Philadelphia if your place of business is in Delaware, for example.
In regards to anonymity, if you’re going to legally collect revenues from your website, you’re not going to be anonymous to the state.
It’s absurd to change a $300 “privilege” fee for a “business” that cannot possibly make more than a quarter of that annually. It’s essentially an edict that you cannot profit from blogging unless you sell out big time.
And it assumes that those profits are about enriching yourself. Somebody making $50.00/year is making their hosting fees at best. Just covering your costs for a blog is something of a Holy Grail for most bloggers. Do Philadelphians need to pay a business privilege fee to sell their stuff on ebay or at a garage sale?
The problem isn’t that the blogs have low revenue – it’s that the fee is misapplied.
Should General Motors be exempted from its business fees in years when it doesn’t make money?
Also…
I wonder if the bloggers can use this letter as evidence they are a business and thereby claim some type of tax credits or incentive program… it might be worth it to pay the fee…
That’s actually the point, anon. If your blog is a business, you would likely be able to deduct all of the associated expenses from other income, resulting in a net gain at tax time even though the business lost money. Expense can include computers, software, web hosting, travel, books and media, entertainment, local taxes, etc, as long as they are business related.
This is one reason the IRS does not like people claiming that a hobby is a business. On the other hand, if people are making a business regularly selling stuff on eBay for profit, then they are a business.
This is why seeing an accountant is good advice.
This is one reason the IRS does not like people claiming that a hobby is a business.
Then maybe the Philly bloggers need to get a nice letter from the IRS stating that they are not a business. And then staple the letter to Mayor Nutter.
The IRS would not write such a letter unless an individual had taken a lot of tax deductions that the IRS has disallowed because they ruled that it was a money-losing “hobby” and not a money-losing business. Also, the IRS definition of a hobby versus a business is likely different from Philadelphia’s. However, if a person does have a local business license and pays local business taxes, they are in a much stronger position to argue to the IRS that their blogging or other business is not a hobby.
You’ve been punked:
Building on the preceding comment:
It was clearly a case of “have cake” (be a business and report business income and claim deductions on federal taxes) and “eat it too” (not be a business on state and local taxes).
I suspect that most of the bloggers caught up in this–and there don’t really seem to be many–acted more from ignorance of the law (realizing “Well, gee, I’d better report this to the feds because the Big Blog Advertising firm is going to file a 1099 (or 10-something)” without thinking of the state and local implications) than from any intent.
I can be sympathetic. I’ve made mistakes on my taxes too.
But not very sympathetic.
Sorry. You’re a business or you’re not. End of story.
By the way, $50 a year is not that much for a business license. NCCo is more.