This story is making the rounds.
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.
Ah but the devil, as always, is in the details:
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.
Let me guess: each one of these people filed a Schedule C (pdf). Probably did so to claim expenses, like their internet service, or to deduct the cost of a computer, most likely on the (bad) advice of a friend or even an accountant.
A Schedule C is entitled “Profit or Loss from Business” for a reason. From the instructions (pdf):
An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business.
So by completing Schedule C, you are acknowledging that this is not a hobby. And guess what most localities – including every one in Virginia – require? A business license.
I have to wonder what exactly Bess reported on her tax return. Her blog is hosted – for free – at wordpress.com. The policy of wordpress.com is that advertisements are not allowed. (My blog is also hosted at wordpress.com. The company runs ads on our sites, that regular visitors do not see but if you find us via a search engine, you will see them. All of the money for those ads goes to wordpress.com, not the bloggers.) So unless she’s got income from her other gig – and the story says she earned money as a freelance writer – she was a bad example.
So enough with the $300 blogging license meme.
I do take exception to this:
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.
Unless that is specifically in the code in Philadelphia, that is not the case. Many people had ads on their blogs simply to offset the cost of hosting, and making a profit is not the motive. I simply don’t see how ads alone elevate the operations to that of a business. Perhaps she needs to familiarize herself with the IRS rules.
Of course, the bloggers in the story need to learn the rules, too.
VIVIAN J. PAIGE | All Politics is Local 
It’s the City of Philadelphia: don’t get Brian Kirwin started.
BTW, no post on how my Ravens whupped your Deadskins 23-3 Saturday night? 🙂
Now is when I say “it’s just a preseason game” 😆
I think the whole idea of requiring licenses for writers — whether book authors, free-lancers, or bloggers — violates the First Amendment.
You’re going to have to explain why writers should be treated differently from any other business. How does that violate the 1st Amendment?
Freedom of expression should not be subject to penalties from the government, who can use its power to disadvantage those writers and speakers who criticize it or otherwise make it uncomfortable.
Hugo Chavez has learned that lesson well. When a newspaper bothers him, he just shuts it down.
No government should have the power to punish speech through taxation.
How is paying a license – which every business has to pay – somehow a “penalty” from the government? How is that punishing speech?
By that logic, a newspaper should not have to pay any taxes at all. Or, for that matter, any writer.
Vivian,
You forget newspapers in Virginia are exempt from BPOL.
I’m going to have to side with Vivian on this one.
What we’re obviously talking about here is a business license tax that applies to everyone engaged in a for-profit business. If that applies equally regardless of whether your business is blogging or babysitting, then I don’t see a First Amendment issue.
And, yes, blogging can at some point become a business rather than a hobby.
Henry,
And the Philadelphia “tax” at issue is not a BPOL tax. It is a generally applicable business license fee.
One can argue that it’s excessive in this context, but that’s a policy issue not a question of freedom of speech
I didn’t forget. By his logic, no taxes, including BPOL, should apply to any writers, including newspapers. (And newspapers are only one group exempt from BPOL. It has nothing to do with the 1st Amendment – it’s political.)
One would think that the only real exemption should be not for profits, of course newspapers are for the most part for profit entities and thus should be bound by the tax code like any other business IMHO. If the Feds cannot see how to levy sales taxes and the like on internet commerce how than can you levy a “business license” (we all know thats government speak for tax) on a blog whose purpose is not in its truest form a business enterprise….if this is the case should not any seller on ebay be charged in Philly for a license if they routinely sell items on that platform generating profits? Just saying.
The key is that if a blog isn’t a business, then they shouldn’t be filing Schedule C, which is, no doubt, how Philly found out about them in the first place!
If an eBay seller puts his/her income and expenses on Schedule C (and I’ve had clients do exactly that), it is because it is a business, not a hobby. And yes, they should have to pay the fee.
So, how do you feel about this tax when applied to people who are making considerably less than $300 from their blogging activities? Would you be opposed to, instead of a flat fee, a flat rate (say 10 or 15%, just as an example) being applied to such activities?
If somebody is grossing less than $300, I find it hard to believe they have a profit motive and, therefore, are a business.
By the way, in VA, the BPOL tax is charged on gross receipts, not profits.
Hey Vivian, don’t give Sharon McDonald any ideas…you know how she agressively seeks tax revenues for Norfolk!!! Norfolk Bloggers beware! Your tax return may be audited.
Oh, she already gets the information on people filing Schedule Cs. I’m not talking out of school here.
You and I know McDonald gets the info on taxpayers filing Schedule C’s but others out there may not. That’s why there should be someone with intergrity, honesty and good judgement in that office.And based on recent investigations and audits we know Ms. McDonald has none of these attributes.
The power to tax is the power to destroy.
If a blogger is making $11 a year from her blog and is presented with a bill for $300 and the choices are (a) pay it; (b) go to jail for not paying it; or (c) stop blogging, the answer is pretty clear — she’ll stop blogging.
Philadelphia can easily use its “business licensing” system to shut down critics of the local government, simply by sending them a bill and harassing them until they pay it.
I also have a question for Vivian: Do you have knowledge that the people in Philadelphia who had been billed by the city had, in fact, reported blogging expenses on their Schedule Cs? Or is that speculation on your part?
Actually there is another option: stop claiming it’s a business!
There is no way that the city would have knowledge of someone claiming to be a business unless they filed a Schedule C. Take a look at this article:
And the option I mentioned – stop claiming it’s a business – is exactly what the city said:
The real problem is that people want to be “in business” in order to claim expenses, typically expenses that far exceed their incomes. If you are making $11 gross income from advertising on a blog, put it on the Misc income line of the tax return and call it a day. But that’s not what people do. They claim their entire internet bill, the cost of their computers, etc, as expenses against that measly $11, creating a loss on their tax returns.
In Virginia, go ahead and try that. You’ll get two bills: one for the business license and one for the personal property taxes on the computer.
Oh – and if the IRS determines that your “business” is really a hobby, you’ll have to pay back the money you saved from claiming those losses.
This isn’t about free speech – it’s about people cheating on their taxes!