Philly’s Taxing Bloggers … on $11 Profits?

When the city’s not shutting down cupcake trucks, they’re shaking down bloggers who earn pennies per word

Did you hear that the city of Philadelphia wants to tax bloggers? Philly’s been in the news this week because of a kerfuffle prompted by City Paper’s story about bloggers who ran up against one of the city’s nastiest tax surprises: the Philadelphia business privilege tax. The story focused on two Philly bloggers who earned blog income in the low double digits. These meager earnings were nevertheless subject to the BPT, a cost-of-doing-business tax that requires Philly earners to pay $50 a year (or $300 for a lifetime license) for the privilege of making dough in our fair city.[SIGNUP]

The BPT mostly applies to businesses, but it also comes into effect when individuals earn money outside of their salaries. Freelancers and consultants are always hit with the BPT, and now bloggers are discovering that their online earnings are subject to the BPT as well.

As I see it, the problem isn’t just that bloggers are being taxed. Income is income, and if you make money blogging it makes sense that you would have to pay taxes on it. The much bigger problem is that most bloggers don’t make very much money. Individual blogs tend to be hobbies, not profit centers. Even bloggers for hire don’t make that much. Online writing rates currently hover around $0.01 a word, compared to $1 or $2 a word at many print magazines. The Huffington Post, the runaway success story in the blogosphere, uses 6,000 unpaid bloggers (myself included) and has a paid editorial staff of only 88 people.

Philadelphian Sean Barry, who writes a music blog called Circle of Fits, claims he has made only $11 over two years from ads on his blog. However, he never even collected the money from his advertising partner, Google AdSense. In a recent post, he wrote: “I don’t even know how to GET that 11 dollars that I’ve made … it’s out in the digital ether somewhere.”

Like everyone else, I’m aghast that someone earning less than $50 in passive income should have to pay $50 a year (or $300 for a lifetime) for the “privilege” of earning money in Philadelphia.

I’m also a little horrified at the idea that Google has a probably-giant slush fund of uncollected ad earnings from millions of people like Barry who’ve inadvertently “invested” $11. That money is sitting somewhere, earning interest, and bloggers aren’t going to see a penny of it.

Clearly, something needs to be done. We could easily start by revising Philly’s tax regulations. Shouldn’t you be exempt from the business privilege tax if you pull in less than $1,000 a year from blogging or freelancing or baking custom cupcakes or whatever you do on the side?

In her original City Paper article, Valerie Rubinsky wrote that City Council members Bill Green and Maria Quiñones-Sánchez will propose a bill in September that will allow people and businesses to earn up to $100,000 in profit without paying the BPT.

This would help out double-digit earners, sure. But I call bullshit on the notion that eliminating the BPT on the first $100K will prompt more people to start small businesses in Philly. A $300 one-time fee is not getting in the way of anyone with a solid business plan. Philly has excellent microlending programs; if you can’t get together a couple hundred bucks from investors or loans in order to pay your business licensing and startup fees, you probably shouldn’t be starting a business. The city’s wage tax, on the other hand—getting rid of that will definitely jump-start small (and large) business development.

Ironically, now that his blog has been featured on NPR and Fox News and on a variety of international news bulletins, Barry’s ad revenues are certain to go up. Media coverage for your blog means more eyeballs, which means you can increase your ad rates and earn more money.

This tax bill may actually increase Barry’s blog profits. If so, the City will certainly want its share.

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  • http://mowersgarden.blogspot.com/ Jason Chambers

    I would imagine Google has a pretty big fund of unpaid accounts. I have about forty bucks in my Google account and at the rate I earn I should hit the one hundred dollar payout mark in 2015. Many people like me put ads on our blogs just learn how to do it and see how it works. Their is money to be made, but you need large amounts of traffic that are interested in your subject.

    It is not uncommon for sites to large numbers of unpaid accounts because you have to reach a certain minimum payout amount. Often these accounts can be reset to zero by the site admin for various reasons. You can have 37.50 in a web site account for three years and then have it removed for inactivity.

    I would be curious to no who this effects the Taxes of the site who have large numbers of unpaid users. The number of sites offering small amounts of money for tasks is growing, but often you can make a couple bucks and then it hard to get to the payout level and if you do payments that go through PayPal get hit with large fees in relation to the amount.

    Quirky.com, has this issue as well, but since it is the best website ever, I don’t mind.

  • djc

    Question: is that $100k revenue? A lot of small businesses will make that much money in revenue, but will only come out with a meagre salary in the end after all expenses are paid. I feel that $100k in PROFIT would be very different than $100k in revenue. Perhaps the demarcation should be closer to $30k in revenue.

    Still, the biggest problem I see is that the city is hitting small businesses three times:
    1. Net profit tax
    2. Business privilege tax (which is really more than this $50/300 expressed in the article)
    3. A one-time license (I believe that is what the $50/300 in this article refers to) to do business in Philadelphia

    And we wonder why folks are setting up shop right outside the city limits….

    There are better ways to draw revenue for the city. A native New Yorker, I am shocked every time I see how little cigarettes cost in Philly. They’re DOUBLE the price in New York. That generates an enormous amount of revenue for the city, and it also discourages unhealthy practices. Just one suggestion, but clearly it’s time to get more creative without putting out the small businesses that this city needs.

  • jenn

    While people should pay taxes if they have in fact earned income, the story regarding the bloggers $300 licensing fee is false. One blogger quoted in the story did not receive any bills from the city and the other blogger received a tax payment due notice based on what they file with the IRS. Additionally, the cupcake lady needs to be licensed with a vending permit to sell her cupcakes! It is not only health issue but a fairness issue as well.

  • William Holtzman

    A hobbyist does not need to file a BPT tax form. If the city picked up the information from the federal schedule C, then hobbyist probably over stated their expenses for federal purposes. The true problem is that people don’t forecast the costs of their activity. To pay $50.00 a year with a business plan to make a living with a blog is cheap. If you make less than $100.00 in a year, you don’t have a business and you need not file a BPT. However, you need to know how to properly file the Federal Return. If you err in filing that return, you must file the Philadelphia BPT Return.

  • http://howtostartablogx.com Bob Daigle

    You really make it seem so easy with your presentation but I find this topic to be actually something which I think I would never understand. It seems too complex and extremely broad for me. I’m looking forward for your next post, I’ll try to get the hang of it!