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The city, as you might imagine, was none too thrilled by our piece on its requirement that even small-time bloggers (and freelance writers) pay $300 for a business privilege license — and even more so after a bunch of far-right sites picked this thing up and sprinted away with it as some sort of "blogger tax" on free speech or whatever. The city's complaint, from spokeswoman Katie Martin, is presented below:
First, from the original story, Valerie writes:
Your response on Monday corrected:
"This is my bad. In the course of cutting the story to fit the page, I removed a line that had the answer: Basically, as I understand it, the city is sent letters to people who reported their earnings, no matter how meager, as income to the IRS, which the people mentioned in the story did."
The reason this individual (or any individual who) received a letter was because on her federal income taxes she claimed that these earnings not as a hobby but as a business. Therefore, for federal income taxes, an individual who claims these earnings as a business can receive deductions for their computer or web hosting as a business expense. However, these have implications for one's local taxes. That point is not stressed. These individuals claimed their blogs as businesses. There are consequences (such as receiving tax deductions as well as paying additional taxes) for making that claim.
Everyone needs to pay their taxes, and it is important for Philadelphia residents to understand when their hobbies become businesses. If you generate revenue ($1 or $1 billion) then you are a business and need to file (whether you take a loss or make a profit doesn't matter in determining if you file, just the fact that you had revenue). If whatever you are doing does not bring in any money, you are not in business.
Secondly, from the original story, Valerie writes:
"The city disagrees. Even though small-time bloggers aren't exactly raking in the dough, the city requires privilege licenses for any business engaged in any "activity for profit," says tax attorney Michael Mandale of Center City law firm Mandale Kaufmann. This applies "whether or not they earned a profit during the preceding year," he adds. 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. 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. "
Your response on Monday wrote:
2.) The city does not tax all blogs; rather, just the ones make some money or, at least, have the potential to make some money. So, in that sense, it's not really an attack on speech, per se. "The "potential to be lucrative" phrase is misleading. If I own a blog that has the potential to include ads, but I don't have any, I am not required to register for a business license or the business privilege tax. I believe a lot of the misunderstanding is because individuals blogging without ads on the sites believe they must pay a tax on it.
CP — and I, personally — regret any misunderstanding. That said, it strikes me that the city's problem isn't with the facts as presented, but rather, with issues of tone, and also what we chose to emphasize vs. what they wished we would have emphasized. And you'll note that in part two of Martin's complaint, we were referencing an, um, actual city employee.
We have no disagreement with the idea that everyone has to pay taxes. The point of the piece, and often overlooked in the surrounding hullabaloo, was to question the propriety of making people who earn practically no money have to pay a $300 fee just because they chose to report those earnings to the IRS.
Only big businesses are exempt from paying taxes in Philly.
If this is a business and not a hobby, do you get the tax breaks associated? Write off for the use of the computer, rental of your home office space, a portion of electricity, office furniture, and most importantly- write off for a small business losing money
If this is a business then I not only have my first amendment right of speech but I get the protections afforded to the members of the press, like not backing away from a crime scene. Do they have press plates in philly that allow you to park anywhere you want.
The tax credit for a small business losing money used to be 5000 dollars. Is it still?
if this is a hobby, you do not get tax breaks, you can only deduct an amount less than, or equal to your revenue from hobby. so, maybe this lady overstated her income, I wonder if she deducted any of her expenses.
[...] The $300 bill is a business privilege tax and it applies to blogs like Marilyn’s because, according to the city: Therefore, for federal income taxes, an individual who claims these earnings as a business can [...]
[...] New Blog Tax May Foreshadow Other eTaxesAmericans for Tax ReformExaminer.com -Philadelphia Citypaper (blog) -National Ledgerall 285 news [...]
[...] and in the process was blown all out of proportion by right-wing antigovernment types. The city was none too pleased with the aftermath (and, to be fair, we conceded a few points, and edited the online version of the story to clarify [...]
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