Philly requiring bloggers to pay a $300 Business License Fee if they show any profit

[RamboLiberal]

It looks like cash hungry local governments are getting awfully rapacious these days:

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.



Read more at the San Francisco Examiner: http://www.sfexaminer.com/opinion/blogs/beltway-confidential/philly-requiring-bloggers-to-pay-300-for-a-business-license-101264664.html#ixzz0xRP3uyOj

Oh good grief!

[Xenotime]

1. Good. There are a lot of other ways people are profiting without taxes...

It's time to start going after them.

[Orrex]

3. They'll just incorporate in Delaware.

Or the Caymans.

[TZ]

22. Heh.

I used to work for a Maryland company that was incorporated in Delaware. AFAIK, no one really worked in DE.

[RamboLiberal]

4. What the hell Philly services is a blogger using?

Sorry but I can't agree with you on this one. There ought to be a profit limit before you have to get a business privalege license. I'd bet any small profit blogger within the city confines already has a real job & is paying other city taxes i.e. local income tax.

[blogslut]

6. Self employed people already pay taxes

Self-employment in the US

In the United States, a person is considered self-employed for tax purposes if that person is running a business as a sole proprietorship, independent contractor, as a member of a partnership, or as a member of a limited liability company that does not elect to be treated as a corporation. In addition to income taxes, these individuals must pay Social Security and Medicare taxes in the form of a SECA (Self-Employment Contributions Act) tax.
US Taxation

The self-employment tax in the United States is currently set at 15.30% which is the equivalent of the combined contributions of the employee and employer under the FICA tax. The rate consists of two parts: 12.4% for social security and 2.9% for Medicare. The social security portion of the self-employment tax only applies to the first $106,800 of income for the 2009 tax year. There is no limit to the amount that is taxable under the 2.9% Medicare portion of the self-employment tax.

Half of the hypothetical self-employment tax is allowed as a deduction against self-employment income so only 92.35% of the self-employment income is taxable at 15.30%, an effective tax rate of about 14.13%. However, this benefit disappears if self-employment income exceeds $105,577, since the entire applicable amount of $97,500 will be taxed at 15.30%...

[Xenotime]

7. Who said anything about being self employed?!?

You get a check from Google Ads...people don't pay taxes. You sell something on Ebay...people don't pay taxes. It's happening more and more and the government is seeing revenues drop because of it.

[blogslut]

8. That is self employment income

It's supposed to be declared. Whether or not individuals are honest on their tax forms has nothing to do with where the money comes from.

[Raineyb]

It's only 50 bucks. The threshold is 400 dollars before the IRS considers

it a business rather than a hobby.

[drm604]

10. If they have a net profit then they should be paying income taxes,

local, state, and federal, for Google ad profits. That's different than a business license fee. It doesn't seem fair to me that someone who makes a profit of $50 should need to pay $300 for a license. Especially when the "business" puts no burden of any kind on city services.

[Sheepshank]

30. net? Really?

So IAG and CITIBANK and Gm need not pay for a business license until they are in the black?

[drm604]

42. Apples and oranges.

I'm talking about an individual, working out of her house, making $50 toward server costs. You're talking about huge corporations that make heavy use of city services.

[thatgemguy]

2. Bloggers.... Profit?!?!?!?! n/a

[Fleshdancer]

5. If it's just a hobby for her...

then why bother accepting contributions in the first place?

[northzax]

9. what's the problem?

she has a business, right? she sells something for money. so she needs a license to do that. if she doesn't think she'll make enough to cover the cost of the business license, she should not take money. I don't really see what's so bad about this.

[blogslut]

12. Should all authors that live in Philly pay for a business license?

A blogger is a writer.

[tinrobot]

13. Writers have to pay taxes, too.

Doesn't matter if they write a best selling novel, magazine articles, or blog posts.

If they make money writing, then they gotta pay taxes.

[blogslut]

14. That's not what I asked

I asked if you think that all writers living in Philadelphia should have to pay a business license fee.

I'm not talking about income taxes. I'm talking about whether or not this business license fee should apply to all writers that live in Philadelphia.

[uncommon]

16. All writers making money from writing should, yes.

I fail to see how this is even a question. If you are engaged in business, and receive money, you pay taxes. Businesses are legally required to be licensed by the governing body under which they are doing business.

[blogslut]

17. What governing body requires writers to have a license?

She is already required to pay income taxes to the Federal government her state. She is not a physical vendor selling tangible goods. By advertising through Google or affiliate marketing through Amazon she is working as a contract employee.

You're telling me that all authors that live in Philadelphia are supposed to be paying a business license fee? I find that hard to believe.

[uncommon]

18. IF she is receiving money for her work, then she IS selling "tangible" goods and she is

running a business.

Just because something is written on a piece of paper or on a screen doesn't mean it is suddenly intangible.

It's not like she is engaged in selling good "vibes" or something.

Ask JK Rowling if she had to pay taxes for all of her intangible writing.

If she is working under the auspices of another business, and receiving payroll checks from them, then she should be having taxes withheld from her payroll.

If she is a vendor on Amazon, that is like being a vendor on Etsy or Ebay - the individual is responsible for licensing and taxes.

[blogslut]

19. Perhaps I'm not making myself clear

I don't dispute that the woman should pay taxes. I dispute that she should have to pay the city for a business license fee. Do you understand the difference?

[uncommon]

23. Yes, I have run a very small business and had to get a license.

If she is legally running a business, then she needs one.

It sounds like there is a question of whether or not she is a business owner in the first place, which is the only grey area I see here...

[blogslut]

24. Perhaps...

Except you deal in tangible goods. She is creating intellectual property and making her money as a contract employee for Google and/or whoever else she's promoting via affiliate programs.

[uncommon]

27. I would argue that written works are tangible so that argument doesn't wash.

If she is "employed" by Google, then they will withhold taxes or sign her on as an independent contractor in which case she wouldn't need a business license, but if she is her own employer and sells her products on a freelance basis to larger companies, then of course she should need a license to conduct her business.

If she was making money from Adsense or whatever, she is collecting money from advertisers, not working for Google.

[yawnmaster]

34. you might argue that, but there are legal definitions of what is tangible...

and most likely her work is intangible as is most digital content.

[uncommon]

36. It's the same as a book or a newspaper.

[yawnmaster]

37. the book or newspaper are tangible, the words and ideas in the book or newspaper are intangible...

if you are writing in a digital medium your work is intangible.

[Sheepshank]

32. Goods or services...two different things, both are businesses

one is tanglible, the other is sometimes intellectual, some other services are simply a servicce (think Doctor, attorney, landscaper etc).

Definition of a business does not rely on the sale of tangible goods.

If she is making a buck and it's not as an employee of another licensed company, she should have her own license. Personally I think the license fee is a little high. I think her efforts would serve her and hundereds of others by petitioning the City to implement some sort of tiered systems for very small businesses.

But there is no doubt that she falls under the defn of a business and unless there are ordinances providing for her for a specific exemption, she needs a bus lic.

[tinrobot]

26. I make money writing. I pay taxes.

I've written books, articles, scripts, and various other things. Most of it is done freelance, so I am a sole proprietorship in the eyes of the state, feds, and city tax authorities.

My city makes me buy a business license, state and feds make me pay taxes, and I also pay my own social security. But I get to deduct things like computer equipment, movies, books, and all sorts of other things. In other words, I'm a business.

To address your points :

Yes, writers do sell tangible goods - words and ideas. Those can be words on paper or words saved to a computer, but they are tangible.

Google and Amazon are not hiring you as a contract employee. You approach them and buy a service they offer. Amazon offers a service where they sell your books and take a percentage. Google provides a service where they find advertisers for your blog/web page, and again, take a percentage.

Not all authors require a business license, only those who make their money freelance. When I've written on staff at a company, I pay my taxes as W2, and the company pays the business license fees. When I work for myself, I'm responsible for the business license.

Same goes for any profession - a doctor working for a hospital doesn't need a business license, a private practice physician does...

[blogslut]

35. Maybe that applies in your state

However, I live in Texas, which has no state income tax and the town in which I reside requires no business license for authors.

As for Google and Amazon, I was not referring to authors selling their own books. I was referring to their affiliate programs. Those are most absolutely contract employee arrangements - the publisher (blog owner) displays an ad and receives a commission on purchases made via their affiliate link. These sponsor companies require that their affiliates submit either a SS# or tax ID for the purposes of IRS W-9/1099 forms:

https://www.google.com/adsense/static/en_US/TaxInfo.html#us

[tinrobot]

39. I'm an Amazon affiliate as well

The agreement is absolutely not a contract employee agreement.

Yes, you submit a SS# or tax ID so you can get a 1099, but it's a 1099-MISC, which is different than what you get for contract income. It's the same as what publishers use for royalties (which I also get) and what you use to report rental income. The income counts on your federal and state tax, but does not count towards social security.

If your town doesn't require writers to get business licenses, then good for you. The laws of Texas, however, do not overwrite the laws of Pennsylvania or any other state.

[krabigirl]

11. Ridiculous..she already pays self-employment taxes on whatever she earns from her blog.

[uncommon]

15. Um, anyone running a business has to do this. Blogging for profit is a business.

Just like selling t-shirts I screen print in my kitchen is a business.

[Bonhomme Richard]

21. +1 n/t

[Xithras]

20. The problem is that, overall, these leads to a reduction in federal taxes.

If you make $50, spending $300 on a business license may seem outrageous, but that $300 is a deductible business expense on your schedule C, so everything comes out even at the end of the year.

When cities make tax grabs like this, what they're REALLY doing is yanking tax dollars from the federal government. If Philly hadn't demanded that $300, the $50 profit would have been taxed as miscellaneous income on her federal return, buoying the federal budget by a few pennies. Because of Philly's tax grab, she can now show, and deduct, a $250 operating loss for the year from her taxes.

It's not a big deal for one person, but as more and more communities try this, it could start to have a detectable effect on federal tax revenues.

[w4rma]

25. I see there are idiots here saying she should pay $300 in taxes on $50 profit. (nt)

[uncommon]

28. That isn't what people are saying at all.

"Idiots" here are saying that someone who runs a business needs to be licensed by the appropriate licensing authority in the area in which they do business.

The amount of profit is irrelevant.

[tinrobot]

29. I agree, but there should be minimum amounts

If a business grosses less than $1000, perhaps, then the fee should be waived.

[uncommon]

31. But how will they know until after the business has been operational?

Do they refund it back at the end of the year if the business doesn't make any money?

[tinrobot]

41. Good question.

One remedy could be to waive the fee for the subsequent year.

[Sheepshank]

33. using "profits" as a guide makes one just as big of an idiot.

Many many companies write off a littany of things, including license fees. Many well to do companies show losses year after year. CitiBank comes to mind. No profit there for several years....how about BP? Looks like little to no profit this year....they are exempt from licenses?

[tinrobot]

40. My city taxes gross income

Pain in the rear, if you ask me...

[JoeyT]

38. I'd claim my business was in whatever city the server was in.

And tell Philly to fuck off.

How obnoxious cities and utilities generally are to actual small businesses is another problem entirely, but it does dovetail with this one. If they get a business license, they're going to get to deal with all the headaches of having one. Even if that license cost them more than they'll make.