Philadelphia Imposing “Blogger Tax” ?

There’s some conversation going on in the blogosphere this morning over reports that the City of Philadelphia is telling bloggers that they have to pay a $ 300 annual fee:

For the past three years, Marilyn Bess has operated MS Philly Organic, a small, low-traffic blog that features occasional posts about green living, out of her Manayunk home. Between her blog and infrequent contributions to ehow.com, over the last few years she says she’s made about $50. To 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.

Barry’s music-oriented blog, Circle of Fits, is hosted on Blogspot; as of this writing, its home page has two ads on it, but because he gets only a fraction of the already low ad revenue — the rest goes to Blogspot — it’s far from lucrative.

“Personally, I don’t think Circle of Fits is a business,” says Barry. “It might be someday if I start selling coffee mugs, key chains or locks of my hair to my fans. I don’t think blogs should be taxed unless they are making an immense profit.”

The city disagrees. Even though small-time bloggers aren’t exactly raking in the dough, the city requires privilege licenses for any business engaged in any “activity for profit,” says tax attorney Michael Mandale of Center City law firm Mandale Kaufmann. This applies “whether or not they earned a profit during the preceding year,” he adds.

So even if your blog collects a handful of hits a day, as long as there’s the potential for it to be lucrative — and, as Mandale points out, most hosting sites set aside space for bloggers to sell advertising — the city thinks you should cut it a check. According to Andrea Mannino of the Philadelphia Department of Revenue, in fact, simply choosing the option to make money from ads — regardless of how much or little money is actually generated — qualifies a blog as a business.

While some bloggers have tried to characterize this is some kind of effort to stifle dissent or citizen commentary, it’s fairly obvious that what’s really going on here is an effort by the City to extract as much revenue as they can from its citizenry, something governments have been doing since the beginning of time.

Moreover, at some point it’s true that blogging does become something more than a hobby for some people. At that point, when it starts generating revenue, it becomes a business and it’s going to be treated like one.

FILED UNDER: Blogosphere, Economics and Business, Quick Takes
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. James Joyner says:

    I certainly report the income on taxes and otherwise treat it as a business, writing off related expenses and so forth. It’s never occurred to me that I’d need a license to run the site, though.

    I’m not sure how they could justify that, given that the impact would be an abridgment free speech and the press. If they can charge a $300 fee, why not a $3 million fee?

  2. While I’m not familiar with the law in question, I would imagine the city takes the position that this is basically a business license/tax of some kind that would apply to any for-profit business.

  3. john personna says:

    Well, if the city classifies it as a business, the lady has a tax-loss ready to go.

    If I recall correctly though, the feds take the view that a business with nothing but losses for some number of years isn’t really a business. It is a hobby. That might conflict with the local view.

  4. PD Shaw says:

    What’s the nexus between blogging and a given city? Is it where you live, where you work, where your server is?

  5. sam says:

    Uh, what happens if blogger A is in Podunk, PA, and the site’s server is in Richmond, CA?

  6. sam says:

    Ah, see PD beat me to it.

  7. Pete says:

    Things like this just hurt the economy more, making it more difficult for small businesses to get started. All this is really going to do is motivate people to establish their business outside of Philadelphia.