
Got a blog that makes no money? Philadelphia wants $300 from you - yoasif_
http://citypaper.net/articles/2010/08/19/blogging-business-privilege-tax-philadelphia
======
dogas
Glad to see some light shed on how business-unfriendly Philadelphia is, with
their exorbitantly high gross receipts tax and city wage tax.

The city wage tax is responsible for the city's 40 year long population
decline, and most people now do the reverse commute to neighboring counties,
because no business owners in their right minds would begin or continue
operations in philadelphia county. In fact, there's a good amount of large
companies set up right across the city line. The net effect is you see
shuttered store fronts and blight on nearly every street, regardless of how
nice the neighborhood is.

And, of course, nobody in city hall understands this. The entire political
scene in philly is entrenched, pay to play politics.

Don't get me wrong, if these taxes were making philly a great place to live, I
wouldn't be bitching. If they had an amazing transportation system, the
streets were nice and pothole free, the services provided were amazing, the
homeless had a place to go, the police coverage was very effective, then sure,
I'll pay for those great things. However absolutely none of that exists in
philly, which makes living and starting a business in a neighboring county
that much more attractive.

~~~
robdimarco
I agree with you that the wage tax makes the city less attractive to live in
than the neighboring burbs. I chose to live in Conshohocken rather than
Chestnut Hill/Mount Airy mainly because of the wage tax.

That being said, I do think that the Nutter administration realizes this
issue. The problem is that if you cut the wage tax, you have to increase
revenue generation from something else. The city is already has revenue
issues, so a radical change in tax structure seems unlikely.

~~~
dantheman
You can cut taxes and services.

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keane
With an unreasonable policy like this and with the city demonstrating an
inflexible attitude, it seems likely that there would be other unfriendly
policies in place... I am glad I do not live in Philadelphia.

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JangoSteve
EDIT: Perhaps I was unclear in my comment below. I am by no means endorsing
this law. I think it is unreasonable and I do not agree with it. However, that
is a separate issue than the question of whether or not the law applies to
bloggers trying to make money from their blog, given that the law was already
in place. /EDIT

When I first started reading this, I was outraged. "This is a violation of
free speach!" I thought, acknowledging that such a law restricts public
writing and blogs to those who can afford it.

Then, halfway through the article, it finally clarifies the city's stance with
this:

 _[...] the city requires privilege licenses for any business engaged in any
"activity for profit," [...] 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._

So, the city requires a business license fee from anyone setting up shop to
make money. And by putting ads on your blog, that's exactly what you're doing.
This seems reasonable to me.

To the Philidelphia bloggers complaining that they have to pay a $300
licensing fee even though they only make $5-$20 per year from ads, I have some
advice: remove the ads. It's not worth it. In fact, why would you undermine
your blog's credibility [1] for a few measely dollars in the first place?

[1] See item 9 on <http://credibility.stanford.edu/guidelines/index.html>

~~~
cjy
Just because the law applies equally to everyone, doesn't make it a reasonable
law. It's dumb to charge every entity that brings in revenue a $300 license
fee. From the sounds of it, this law applies to every kid who shovels snow or
mows a couple of lawns in the summer. How about if you have a yard sale or
sell your motorcycle through the classifieds? When does a person become a
business? What this law ends up doing is encouraging people to lie about any
minor sources of income they receive. Activities that are done primarily for
pleasure should not be treated like businesses in the tax code. That's just
unreasonable.

~~~
jamesbritt
"What this law ends up doing is encouraging people to lie about any minor
sources of income they receive"

Which, in turn, makes them that much more cynical about the law and legality.

If you go about making everyone a criminal then pretty soon the notion of
criminals being the Bad Guys starts to fade.

Good way to undermine the rule of law.

~~~
billswift
Three Felonies a Day: How the Feds Target the Innocent

[http://www.amazon.com/Three-Felonies-Day-Target-
Innocent/dp/...](http://www.amazon.com/Three-Felonies-Day-Target-
Innocent/dp/1594032556/ref=sr_1_4?ie=UTF8&s=books&qid=1282467538&sr=8-4)

------
nhebb
_If their bill passes, bloggers will still have to get a privilege license if
their sites are designed to make money_

Even though this is sold as an improvement over existing policy, it's still a
bad policy. Adding layers of bureaucracy not only hampers entrepreneurship but
it lowers the quality of life, a little chunk at a time. I'm convinced that
future generations of Americans won't have the same freedom I had growing up.
I know it sounds like hyperbole, but I really do believe that loss of freedom
is more likely to happen in baby steps than is some sweeping revolution.

~~~
bugsy
In practice I can imagine how this would be enforced. A typical cat and
knitting blogger no one knows about won't be contacted. But the blogger that
starts writing critically about the city waste and corruption is suddenly on
the radar and will definitely have to pay the tax, and quite likely will be
arrested for tax evasion.

------
borisk
In Switzerland cantons have different tax laws, which have led to competition
for businesses and very low taxes. I'm wondering why the same thing is not
happening in US.

~~~
JunkDNA
This is on display right around Philadelphia. As soon as you cross the border
into neighboring areas, you notice businesses all over the place. Philadelphia
has a number of big employers who can't easily relocate including a number of
universities and medical centers. My understanding is that many of the really
big corporations are given tax incentives to be in the city. Pretty much
anyone else has long ago escaped to neighboring counties.

------
shortformblog
Considering she runs a Wordpress.com blog (which doesn't allow advertising at
all unless she hits a certain threshold), something tells me that she's only
made money off of eHow articles.

<http://en.support.wordpress.com/advertising/>

Which makes this even worse.

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jrockway
Isn't this why people incorporate in Delaware?

The article doesn't make it clear how Philadelphia asserts jurisdiction over
the blogs. Is it blogs hosted on servers inside Philadelphia? Is it blogs
hosted on servers administered by someone physically located inside
Philadelphia? Is it blogs hosted on servers whose business bank account is in
Philadelphia? Is it blogs written by authors who live in Philadelphia? Is it
blogs whose Adsense are sent to an address in Philadelphia? And so on.

Personally, I feel like they would have a hard time going after someone who
works for a company incorporated outside of Philadelphia. The corporation runs
the blog and pays you to write it. The business exists outside of
Philadelphia's jurisdiction, and you just do some work on the side for it from
Philadelphia.

Interestingly, the literal reading is "every individual ... engaged in an ...
activity for profit must file a Business Privilege Tax Return". Sounds like
this applies to anyone with income. Sounds like this applies to anyone on
unemployment (after all, sitting around trying to keep your unemployment
checks coming is techncially profitable).

This sounds like exactly the law that someone making $50 in profit from Google
ads can safely ignore.

~~~
nicholasjbs
_Isn't this why people incorporate in Delaware?_

People incorporate in Delaware for several reasons: corporate legal disputes
are handled by judges rather than randomly selected juries; one person can
fill multiple roles for a company (e.g., he can be listed as the CEO,
treasurer, and secretary -- other states don't allow this); since so many
companies do it there is more established case law and precedent (= less
risk); and, of course, the filing fees are cheap.

------
GiraffeNecktie
It might actually be worth it if it enabled you to expense a portion of your
rent, lights, Internet etc.

------
davidmurphy
I'm curious when people think something is a "business" vs. a hobby/personal
project, in general, in terms of business licenses (not the IRS, which is
separate).

For instance, if one were to publish, say, an email newsletter for free with
no ads, would that require a business license? Or would it only require one
when you went out and solicited ads/started making money?

Edit: I wish all cities had exemptions for tiny/new businesses. Some do. Some
don't.

------
aristidb
I think having to get a license to do business in full liability is a terrible
limitation of freedom, even when it does not cost money. Taxes on business
income of course are more justified, I'm complaining merely about the
requirement to get a license to do business.

That being said, you probably should not enable advertising on a blog before
it has a substantial readership.

------
rwhitman
I skipped out on Philly wage tax when I moved to Los Angeles... 6 years later
and I've never heard anything of it. Maybe their enforcement has gotten better
since then, but city taxes are typically a breeze to skip out on.

When I moved to LA I discovered the city tax code here, which gives you a
bunch of reasonable exemptions, particularly if you make less than $100k gross
you don't pay city business taxes. New businesses are also exempt their first
year. And if you screw it up the city will actually have a friendly
conversation with you about it and try to help. Can't picture that ever
happening in Philly haha

But honestly, politicians have been telling people for years they are getting
rid of the wage tax and it never happens. Its just a huge insult to the
workers and small businesses that are trying to make the city a better place
to live. There has to be a better way to restructure taxes in philly.

~~~
JunkDNA
Philly now has a 2% sales tax as well. The hits just keep on comin!

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VengefulCynic
If you do a bit of digging around on the City of Philadelphia website, you
will find the following text under the Description of the Business Privilege
Tax section:

"Every individual, partnership, association and corporation engaged in a
business, profession or other activity for profit within the City of
Philadelphia must file a Business Privilege Tax Return, whether or not they
earned a profit during the preceding
year."([http://www.phila.gov/revenue/pdfs/Rev%20PDFs/BPT_internet.pd...](http://www.phila.gov/revenue/pdfs/Rev%20PDFs/BPT_internet.pdf))

Basically, this is a $300 one-time licensing fee to conduct a business from a
property within the City of Philadelphia.

There are two types of examples that this article uses:

1) Home-based "I'm just dicking around and use Google ads to offset the cost
of my basic Wordpress subscription and server" bloggers. This seems kind of
shady to me and I would be really interested to see about what an actual
accountant and/or lawyer would have to say about this. After all, this is
someone going asking the City of Philadelphia's Revenue Department if they
have to pay more taxes. That's like going to a divorce lawyer and asking if
you need a divorce... of COURSE the answer is going to be "yes."

2) Home-based business that turns no profit - Regardless of the profitability
of a business, in the United States (and most everywhere else in the world)
you have to pay the relevant city/state/county/federal
licensing/inspection/regulatory/screw-you fees. That's the way running a
business is. Don't like it? Don't run a business (out of your house or
otherwise) if you can't make peace with that.

All in all I find this article to be long on rhetoric, anecdote and high-
minded moralizing and short on details and investigative journalism. Were I a
denizen of the City of Philadelphia and concerned about this, I would put in a
couple of hours of research at the reference desk of the public library and
wait for some better analysis on this subject from a slightly more reputable
source before shelling out for this fee.

~~~
chmike
Lesson learned: philadelphia is not a place encoraging early stage
bootstrapping entrepreneurs.

~~~
ecaradec
lesson learned : don't declare $50

~~~
jacquesm
Lesson learned: don't be honest.

That sucks though, because many people are honest and to drive them in to
dishonesty with such stupid policies is setting up for bigger dishonesty down
the line. If you're already a tax fugitive for $50 why stop there?

------
moondowner
The first blog mentioned doesn't even have ads, I really don't know how the
blog author could've made money. It doesn't even have a donate button.

At least they should've made a set of rules if a blog applies for being taxed.

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jmaygarden
Can they exempt themselves from the tax by putting all earnings towards cost
and donating any profits to charity (i.e. become a non-profit)?

------
wil2k
IRS loses challenge to prove tax liability

Lawyer is acquitted after arguing income levy lacks legal foundation

<http://www.wnd.com/?pageId=42749>

~~~
hhjj
Do you have a better source ? Because wikipedia seems to differ :
<http://en.wikipedia.org/wiki/Tom_Cryer>

