The Impact of the “Philly Blogger License”

I know everyone has seen this story already. It’s being touted as though Philadelphia is requiring a blogging license – which is not true. Philadelphia is requiring bloggers who make money off of their sites (in the cited examples, pitifully little money) to set them up as businesses. City Paper notes that they have the same requirements for freelance writers in Philadelphia. Bloggers aren’t being unfairly targeted – anyone conducting any form of financial transaction is being targeted.

Most of the commentary I’ve seen focuses on discretion in applying the law. I can sympathize with that point because it’s what we call “common sense.” And the impact will be felt here in the blogosphere. Wyatt says he’ll quit blogging if they come after him, and but all he’s got is a tip jar. I find his True Detective Stories to be a real eye-opener in the law enforcement world. (I assume most officers are brilliant like Wyatt, but it’s always good to be reminded that there are a significant number who are not. We’ll just leave it at that before I get into too much trouble.) I would consider the loss of his blog a real loss in the realm of serious public discussions, even if the True Detective Stories just want to make beat your head against your desk. (We live in the suburbs. Suck it, Philly.)

The good news is that the original story (and not the abbreviated/quoted Examiner piece that’s been linked everywhere) highlights one potential correction that’s not just a matter of relying on bureaucrats to use a little common sense when they try to open your wallet & take their “fair share.”

But bloggers aren’t the only ones upset with the city’s tax structure. In June, City Council members Bill Green and Maria Quiñones-Sánchez unveiled a proposal to reform the city’s business privilege tax in an effort to make Philly a more attractive place for small businesses. If their bill passes, bloggers will still have to get a privilege license if their sites are designed to make money, but they would no longer have to pay taxes on their first $100,000 in profit. (If bloggers don’t want to fork over $300 for a lifetime license, Green suggests they take the city’s $50-a-year plan.)

Their bill will be officially introduced in September.

The paper rightly points out that it doesn’t fix the business license requirement, and it still may mean they would have to pay more in taxes than they earn if they aren’t a large site. That’s a legit concern, but just like most things, fixes will come a step at a time.

The other good news is that this was a Drudge headline for a while, so it should drum up enough anger around the country to shame Philadelphia bureaucrats into behaving like reasonable adults for the time being. But, for any bloggers looking to escape, there are some lovely houses for sale in our suburban neighborhood.

12 thoughts on “The Impact of the “Philly Blogger License””

  1. One aspect of this that I’ve only seen addressed in one place and by a commenter, not the original poster:

    When those honest people reported the small income they got from their blog, because they weren’t a “business”, were not allowed to deduct expenses related to realizing that small income as deductions.

    If Philly requires bloggers to register as business, all of those expenditures instantly become tax deductible as business expenses.

    Time, hosting services, ISP charges, home office space use, computer hardware, electricity, even the cost of the business license itself become tax deductible business expenses.

    The net impact, of course, will be that those new “businesses” will actually be reducing the taxes paid by those bloggers who would otherwise foot those expenses on their own dime.

    Philly itself may gain the $50 a year (or one-time $300 fee) for demanding that they get a business license, but the state will actually lose money on the deal in reduced income tax liability.

    How long do you think it will take for the PA legislature to realize that Philly’s pettiness is costing them money and put a stop to it?

  2. A few people told me to compile the TDS and put them in a book. Might not be a bad idea.

    Like you said, Bitter, my blog doesn’t make money – neither does the tip jar, but I feel smarmy in promoting it – so I shouldn’t be targeted. My worry is that this will be another slippery slope set to:

    1. Generate tax revenue.
    2. Silence dissent.

    And by that, I mean the aforementioned discretion in enforcement. Probably a little paranoid, but I’ve lived here all my life. Maybe I can just drive a few miles to Bensalem and post from there. :)

    And thank you for the “brilliant’ adjective. Undeserved, but thanks anyway.

  3. There must be some sort of way to *completely* anonymize a blog. There just has to be a way…. You could then have any money from the tip jar go to a buddy who lives outside of the city :).

  4. “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.”

    Sounds like you will need a business license for more than just a tip jar.

  5. This is a serious problem in the “new economy” – micropayments can make someone a crapton of money if they hit it right. I met a guy on a recent vacation who was able to quit his day job and support a wife in med school on one app in the Apple Store; but you have to start small, and the startup fees set at a level for “brick and mortar” businesses are going to smother these entrepeneurs. $300 doesnt’ sound liek a lot of money, but if you only sell your app to your facebook friends list, you’re not going to make that back; and you won’t KNOW.

    One of the biggest strengths of America has been the freedom to start small and fail small. The more expensive it is to start, the riskier it is to fail.

  6. Actually, that’s not the case. The city taxes all receipts, regardless of profits.

    But that doesn’t address the ability to deduct business expenses from your state and federal income tax returns…which was my point.

    The city might make some small income from treating blogs as businesses, but the state will lose money for the reasons I mentioned…which was my point.

    Or does PA not allow businesses to deduct expenses from their receipts for tax purposes?

    I’m not familiar with PA taxes so I don’t really know, but in the several states I’ve lived in in my life, I’ve never seen a state that taxes receipts without allowing deductions for expenses.

    That would be suicide for business as no startup would ever be able to survive. Hearing that Philly does such a ridiculously harmful thing, even if the tax rate on those receipts is quite low, makes me wonder why anyone would ever want to do business there?

    1. First of all Pennsylvania is fairly widely known for not being terribly friendly to business. I suspect we benefit mostly because we’re not New Jersey. Many companies are technically Delaware companies because they are far friendlier to businesses, and the state is desperate to get their hands into that pot.

      Yes, deductions can be made, but you made the point that the amount would be very tiny. There’s no incentive for the state to give a damn. If you can find a lot of Philly bloggers to prove otherwise, then maybe there would be a point. But there aren’t very many Philly proper bloggers, especially those making money. In addition to the licenses and taxes on receipts regardless of profits, Philly will also make money because they are demanding that the bloggers pay the wage taxes the city has above and beyond state taxes.

  7. I wonder whether serious bloggers ought to incorporate as a defensive measure for various things. The righthaven LLC suit, for example, might have run into issues if they had hit a blogger who was incorporated but making small money. Bankrupt the company, let it shut down, and walk away.

    I’m sure there are obstacles to this, but it’s an interesting thought. Most creditors now make the business owner sign for personal liability in case of bankruptcy so the owner can’t dodge out, but I don’t know how well that would work for a judgement.

  8. Yes, deductions can be made, but you made the point that the amount would be very tiny. There’s no incentive for the state to give a damn.

    No, what I said was that the receipts are relatively tiny.

    The deductions could be quite significant.

    I used to run a sole proprietorship business out of my home, I’m well versed in what expenses can be deducted.

    Believe me, if my city decided that I had to buy a business license to blog, I’d be deducting every penny I could. I bet I could reduce my taxable income by at least $1000 or $1500 a year based on deducting expenses related to publishing a blog.

    How much real reduction in tax liability that would translate to would depend on what your total income is now, whether that deduction would take you to the next lower bracket, things like that.

    For someone like me with a relatively meager income (my wife has been out of work for over a year now), it could make a pretty significant difference.

    Definitely would offset the $50 a year plus a small tax on any receipts from the blog. Probably by quite a bit.

    I prefer it the way it is now…it’s a hobby that I pay for out of my pocket and any small amount I make from donations or advertising helps offset the expense of participating in the hobby…but if the city decided to push the issue, you can bet that I’d be using every trick in the tax book to offset their foolishness.

    But you’re probably right that the PA legislature won’t care. It’s just not that big an issue considering how few people it would involve and the relatively small individual amounts we’re talking about.

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