Honest to blog!

August 23, 2010 11:30 AM

Pay Up! "Got a blog that makes no money? The city (Philadelphia) wants $300, thank you very much." [...] "After dutifully reporting even the smallest profits on their tax filings this year, a number — though no one knows exactly what that number is — of Philadelphia bloggers were dispatched letters informing them that they owe $300 for a privilege license, plus taxes on any profits they made."
posted by Fizz (95 comments total)

Brilliant! I can see no drawbacks in this plan.
posted by sonic meat machine at 11:33 AM on August 23, 2010 [2 favorites]

To clarify for those who aren't reading the article itself: Philadelphia has a licensing fee levied on all businesses. The issue is that the city uses a definition of "business" that doesn't match that of the IRS, or most people's definitions: If you pay $50/year for hosting, and make $20 off of some Google AdWords, that's a hobby as far as most people and the IRS are concerned - but Philadelphia is apparently deeming it a business.
posted by Tomorrowful at 11:34 AM on August 23, 2010 [1 favorite]

I expected to read about John Gruber of Daring Fireball blaming this on Google.
posted by kingbenny at 11:34 AM on August 23, 2010 [4 favorites]

And from Canada:

Question: I make a few bucks from my hobby. Do I have to declare this income?
Answer: Yes! The money you make from your hobby is considered to be business income. You may not consider that you actually run a business, but you do according to the government. The Canada Revenue Agency defines a business as "any activity that you do for profit".

They go on to say that the definition of business includes a profession, a calling, a trade, a manufacture, an adventure or concern in the way of trade, and an undertaking of any kind.

As you are selling a product or services you are definitely conducting an activity for profit. The Canada Revenue Agency doesn't care that you are only selling "a few" or that you consider your activity to be a hobby.

You must report the money you make from your hobby as business income by completing Form T2125, (Statement of Business or Professional Activities) which is included with the T1 income tax return package.

http://sbinfocanada.about.com/cs/taxinfo/f/hobbybiz.htm

---

That being said, I know people who make a ton from a multitude of different hobbies and I guarantee they aren't declaring that income. I personally make a little from my small website (usually about $100/month) and do declare it to Canada's federal money-grubbers, though I don't also pay for a municipal (district in my case) business license. They provide absolutely nothing to my web-based business so I feel ethically justified, although I doubt I'm technically legal.
posted by swimming naked when the tide goes out at 11:39 AM on August 23, 2010

It all makes sense when you understand that no good deed goes unpunished in this world.
posted by mullingitover at 11:40 AM on August 23, 2010 [2 favorites]

Gonna go ahead and quote someone on LJ about this:

I see some of you are posting that story about how Philadelphia is now charging bloggers $300 for a business license.

No. This is incorrect.

The blogs in question are making the users money. Technically, they are a business of sorts. Philly is being draconian on forcing home businesses to actually buy the legally required permits.

Guess what? The internet is not the great big lawless place you Etsy users might think it is. If you decide to make some money on the side, and have a website for it, your city may require you to get a damn business license. Yes, that is how it works. Yes, Mel and I have a business license in the state of TX, and one for CA as well. No, they are not cheap. No, it is not simple.

Guess what? That's what happens when you run a home business. You can't just throw some shit on ebay and say you have a home business. Someone somewhere is going to want their pound of flesh if this is true, and they don't give a fuck if your profits are less annually than the cost of a value meal at Wendy's.

Don't like it? Vote.

OR

Move somewhere that doesn't have such strict business laws.

OR

Don't have a home business in the first goddamn place.
posted by kafziel at 11:41 AM on August 23, 2010 [2 favorites]

Don't like it? Vote.

OR

Move somewhere that doesn't have such strict business laws.

OR

Don't have a home business in the first goddamn place.

OR

Complain about it an an attempt to get our local government to change its policies.

"Petitioning the government for redress of grievances" has a long and honorable history in this country and it's a perfectly legitimate option.
posted by Tomorrowful at 11:43 AM on August 23, 2010 [25 favorites]

(I say this, incidentally, as a resident of Philadelphia; I have a lot of friends who are freelancers, and pay the business licensing fee without much complaint because, hey, they make a living - but who are simultaneously incensed that a $10/year 'profit' off a hobby blog requires a $300 fee as a "business."
posted by Tomorrowful at 11:45 AM on August 23, 2010

It all makes sense when you understand that no good deed goes unpunished in this world.

And there is no deed more noble than putting Google Adwords on your blog.
posted by DU at 11:46 AM on August 23, 2010 [20 favorites]

Factor in the cost of your home office expenses (electricity, broadband connection, heat, equipment costs, software etc) and it's very easy for your "business" to be declared to operate in the red for tax reasons. This is a shakedown, pure and simple.
posted by Scoo at 11:49 AM on August 23, 2010

Does google or any other ad-based source of revenue (or e-bay for that matter) supply the blogger with a 1099? How does the city know about it in the first place?
posted by werkzeuger at 11:49 AM on August 23, 2010

Seems the easiest solution is to simply not list your location on the blog.

DIABOLICAL!
posted by Civil_Disobedient at 11:54 AM on August 23, 2010

Or not put ads on your blog, so it's no longer a business giving you taxable income.
posted by kafziel at 11:56 AM on August 23, 2010 [2 favorites]

I make absolutely zero money from my blog. If I did profit from my blog, I would only declare if it was my primary source of income. I'm not going to feel bad about making some cash on the side and I don't think bloggers should either.
posted by Fizz at 11:57 AM on August 23, 2010

How does the city know about it in the first place?

I'm picturing dozens of government-paid office drones trawling through Xanga webrings.
posted by shakespeherian at 12:02 PM on August 23, 2010 [1 favorite]

If your blog generates income, even if it's less than expenses, then it's a business and you should pay the fee. If your income exceeds your expenses, then you should pay taxes on those profits as well.
If you're progressive enough to see taxes as a good thing then this should be simple.
posted by rocket88 at 12:07 PM on August 23, 2010

In Rhode Island, any kind of corporation (LLC, etc.) pays a $500 income tax even if it makes nothing. I've always thought this is ridiculous. As complex as the IRS tax code is, it always seems to make sense in some rational way. Local governments, on the other hand, seem not to be bound to any kind of rationality.
posted by knave at 12:12 PM on August 23, 2010

Possibly a dumb question here, but couldn't an argument be made that it's the location of the server, not the blogger, that determines where the activity takes place?
posted by jbickers at 12:14 PM on August 23, 2010

So.... in Philadelphia, if you have a garage sale, you have to buy a business license? Or if you have a one-day-only table at a flea market to sell homemade jam, but aren't there the other 52 weeks of the year?

Not everything that people do that brings in a little income is a "business".
posted by hippybear at 12:14 PM on August 23, 2010 [2 favorites]

Shhhhhhh....Philly.. Don't let Chicago know about this......

It'll be a cold day in hell before I allow my Geocities Model Rocketry Blog to subsidize some goddamn rooftop garden of Mayor Daley's.
posted by KevinSkomsvold at 12:18 PM on August 23, 2010 [5 favorites]

Why does this sound like a plot from It's Always Sunny in Philadelphia? It's probably be titled:

"Frank Invents the Blog and The Gang Exploits the Internet"

I can just see DeVito's Frank cackling about porn and his newest creation for tracking his favorite dirty sites; the Frank Log for "Flog", and the rest of the gang decide to start collecting "taxes" from local bloggers, and hijinks ensue.
posted by quin at 12:21 PM on August 23, 2010 [2 favorites]

rocket88: "If you're progressive enough to see taxes as a good thing then this should be simple."

I'm actually so progressive that I see taxes on earned income as a bad thing. Getting money for breathing should be taxed to hell, but punishing people for working is one of the nuttier ideas that government has come up with imho.
posted by mullingitover at 12:25 PM on August 23, 2010 [2 favorites]

If you're progressive enough to see taxes as a good thing then this should be simple.

You see no problems with businesses at the margin like this being shut down (or more likely, never created)?

Even if you're a self-styled progressive, the case for taxing and regulating businesses like this is very weak. The cost of calculating and paying taxes is not negligible for the blog owner. The cost of processing those taxes is not negligible for the municipal government. It's not remotely clear that taxing a business that makes $10 in a year is beneficial for anyone.

If your definition of progressive means "charge blog writers $300 for no real reason, likely reduce the number of people writing in their spare time, then tax miniscule amounts of income at no benefit to anyone", then this is simple. Otherwise, not so much.
posted by ripley_ at 12:29 PM on August 23, 2010 [5 favorites]

Even if you're a self-styled progressive, the case for taxing and regulating businesses like this is very weak. The cost of calculating and paying taxes is not negligible for the blog owner. The cost of processing those taxes is not negligible for the municipal government. It's not remotely clear that taxing a business that makes $10 in a year is beneficial for anyone.

If your definition of progressive means "charge blog writers $300 for no real reason, likely reduce the number of people writing in their spare time, then tax miniscule amounts of income at no benefit to anyone", then this is simple. Otherwise, not so much.

Once again. Take the ads off your blog, and it stops being a business. If you want to turn your blog into a source of income, expect it to be treated like any other source of income.
posted by kafziel at 12:35 PM on August 23, 2010

This would be a boon for the newspapers.
posted by Back to you, Jim. at 12:36 PM on August 23, 2010

Does google or any other ad-based source of revenue (or e-bay for that matter) supply the blogger with a 1099?
Yes, they do. Well, Google does anyway. I believe the requirement is they need to issue you a 1099 if you earned at least $600 annually from them--and it could certainly be the case that you earned $600 in revenue but didn't turn a profit--but a number of places will just send 1099s to everyone who earned any money from them at all.
posted by phoenixy at 12:37 PM on August 23, 2010

PS I just saw the title for this thread and now I want to punch.
posted by shakespeherian at 12:37 PM on August 23, 2010

This doesn't seem egregious. Haven't we been saying all along that we shouldn't be making new laws and awarding new patents just by adding "on the Internet!" onto existing ones?
posted by ODiV at 12:42 PM on August 23, 2010

So.... in Philadelphia, if you have a garage sale, you have to buy a business license? Or if you have a one-day-only table at a flea market to sell homemade jam, but aren't there the other 52 weeks of the year?

Not everything that people do that brings in a little income is a "business".

Actually, those activities are taxable, and pretty much everywhere, not just in Philadelphia. I've heard it referred to as "grey income", and put in the same category as "under the table" dealings - technically it's illegal to not report this income when you do those things, but no-one does, and with things like garage sales, the tax evasion goes unenforced. The tax departments of the world have a bad enough PR challenge as it is.
posted by -harlequin- at 12:45 PM on August 23, 2010 [1 favorite]

Take the ads off your blog, and it stops being a business. If you want to turn your blog into a source of income, expect it to be treated like any other source of income.

How would you feel about requiring a business license for selling an old bike tire on Craigslist? Or watching your neighbour's cats for $10?

The costs of maintaining and enforcing a regulatory framework are not zero. Do you really think it's beneficial to tax and regulate tiny interactions like these? Maybe in some model where transaction costs are ignored, but not in the real world.
posted by ripley_ at 12:48 PM on August 23, 2010 [6 favorites]

couldn't an argument be made that it's the location of the server, not the blogger, that determines where the activity takes place?

I Am Not A Tax Attorney. But it seems to me that the revenue-generating activity is the writing of the blog posts. [No posts, no readers. No readers, no ad revenue.]
posted by Joe Beese at 12:49 PM on August 23, 2010

Does google or any other ad-based source of revenue (or e-bay for that matter) supply the blogger with a 1099? How does the city know about it in the first place?

Google will send a 1099 (to both you and the IRS) when required by law, yes. Apparently you need $600 in earnings for this to kick in.
posted by baf at 12:49 PM on August 23, 2010 [1 favorite]

Actually, those activities are taxable, and pretty much everywhere, not just in Philadelphia.

Yes. Nobody at all is arguing that, for example, income from a flea market is not taxable income. The issue is this: Does it qualify as a business for which a business license is required? If I sell some old DVDs at a garage sale and make $10, does that qualify as a business? According to this logic, it is, and requires a $300 license. Which is A) pretty stupid and B) is not how the city operates - nobody's going after garage sales.

I'm starting to get kind of frustrated at the failure to separate the issue of "is it taxable" from "is it a business that should require a license." The former is not in dispute. The latter is. In fact, the bloggers in question were 'caught' by the city because they reported their income so it could be taxed.
posted by Tomorrowful at 12:54 PM on August 23, 2010 [21 favorites]

Actually, those activities are taxable, and pretty much everywhere, not just in Philadelphia.

I didn't say anything about the income being taxable. I asked, do you have to buy a business license? Because that's what the larger implications of this thread seem to be.
posted by hippybear at 12:57 PM on August 23, 2010

If you set up a booth in a flea market every weekend, I would consider that a business. If Google is paying you money on a regular basis to deliver eyeballs to their advertisers, that's a business too.

Whether it's a business that should require a $300 license to earn a two-figure income, that's a separate question.
posted by Joe Beese at 12:59 PM on August 23, 2010 [1 favorite]

If you set up a booth in a flea market every weekend, I would consider that a business.

Every weekend? Yes. But that wasn't my hypothetical example above. Not even close.
posted by hippybear at 1:00 PM on August 23, 2010

You think that's bad? I have to pay taxes on every single box of cigarettes I buy, and I don't make a penny in profit on those things.
posted by straight at 1:06 PM on August 23, 2010 [1 favorite]

I agree with you that a one-time garage sale is not a business. You agree that a weekly booth in a flea market is a business. So the question becomes: At what threshold does it cross over?

To my mind, if you're receiving regular payments for contributing to the revenue stream of the 150th largest corporation in the country, you're running a business.
posted by Joe Beese at 1:14 PM on August 23, 2010

I know people who make a ton from a multitude of different hobbies and I guarantee they aren't declaring that income.

The problem is that there is a grey area between being a "recognized business" and a hobby - I can almost guarantee that the IRS would put the smack down on any small-time blogger who tried to write off their expenses, just as they regularly smack down small-time knitters that sell a pattern or two on their blog and try to write off the yarn and needles used to formulate the pattern, or the pdf software or whatever.

So on one hand, the federal gov't has declared "X level of profits is a hobby, not a business", and on the other hand local governments have determined that the same level of profits is a business, not a hobby...
posted by muddgirl at 1:19 PM on August 23, 2010 [4 favorites]

So.... bloggers earning $10 in a year should have to pay $300 for a business license. That seems to be what you're saying.
posted by hippybear at 1:19 PM on August 23, 2010

So.... bloggers earning $10 in a year should have to pay $300 for a business license. That seems to be what you're saying.

If they want to post ads, even if those ads only end up earning them $10 for a given year, then yes. They should pay the $50 for a 12 month business license, or the $300 for a lifetime business license. If they don't want to operate a business, then they are by all means free not to - just take down the ads.
posted by kafziel at 1:27 PM on August 23, 2010 [1 favorite]

Philidephia, showing everyone that the Internet is serious business.
posted by wcfields at 1:38 PM on August 23, 2010 [1 favorite]

The issue is this: Does it qualify as a business for which a business license is required? If I sell some old DVDs at a garage sale and make $10, does that qualify as a business? According to this logic, it is, and requires a $300 license. Which is A) pretty stupid and B) is not how the city operates - nobody's going after garage sales.

A blog is an ongoing revenue generating venture and therefore is a business. A one-off garage sale isn't. If you sell items out of your garage on a regular (daily, weekly) basis, then it's a business.
posted by rocket88 at 1:40 PM on August 23, 2010

Does Philadelphia require high school babysitters to purchase a business license? Or $7/week tutors? I was a tutor (in California) and I certainly did not have a business license. Just curious if anyone has differing first-hand experience.

Clearly there is a level at which they say "pursuing this is not worth it/bad publicity". I wonder who decided that going after chump-change bloggers fell on the "worth it" side of that line?
posted by muddgirl at 1:40 PM on August 23, 2010 [1 favorite]

Sorry...missed the italics on the quoted first paragraph above.
posted by rocket88 at 1:41 PM on August 23, 2010

When did the United States become so perversely hostile to entrepreneurship? It's not just that a business license should be free, there should be rewards for getting one. I can't believe anyone in their right mind is defending this system.
posted by mullingitover at 1:41 PM on August 23, 2010 [8 favorites]

If they want to post ads, even if those ads only end up earning them $10 for a given year, then yes.

Why? If you genuinely believe that requiring a license for a tiny transaction (Google ads, garage sale, craigslist post, watering neighbour's plants, etc.) is good policy, then please explain your reasoning.
posted by ripley_ at 1:42 PM on August 23, 2010

A blog is an ongoing revenue generating venture and therefore is a business.

The IRS absolutely disagrees. Of course, this is nothing new when it comes to our fucked up state vs. federal regulatory systems.
posted by muddgirl at 1:45 PM on August 23, 2010 [1 favorite]

It's much simpler if the municipality mandates a blanket requirement that all businesses be licensed, and the onus is on the business owner to decide if their "chump change" generating hobby is worth shelling out the cost. If you're only making a few bucks a year, then lose the ads and make it a true hobby.
posted by rocket88 at 1:47 PM on August 23, 2010 [1 favorite]

How do you make "$10 a year" from Google Ads? Google doesn't cut you a check until you accumulate $100. Therefore, Google Ads do NOT fall into the same category as "garage sale, craigslist post, watering neighbor's plants". So where did this blogger earn $50 over X years and how did the City find out about it? I smell a fraud here. Sounds like a glibertarian finding a new way to bash local government AND earn big money on the internet.
posted by oneswellfoop at 2:02 PM on August 23, 2010 [1 favorite]

There may be some intermediate solution for small time profits, ironically via the IRS. You place google ads on your blog but make google pay some charity directly, so the charity makes money, and you'll get good records for taking the tax deduction. Btw, the ACLU and EFF have foundations to whom donations are tax deductible.
posted by jeffburdges at 2:04 PM on August 23, 2010

How do you make "$10 a year" from Google Ads? Google doesn't cut you a check until you accumulate $100. Therefore, Google Ads do NOT fall into the same category as "garage sale, craigslist post, watering neighbor's plants". So where did this blogger earn $50 over X years and how did the City find out about it? I smell a fraud here. Sounds like a glibertarian finding a new way to bash local government AND earn big money on the internet.

Profits and revenue are not the same thing. Also, thanks for bringing insults into what's been a relatively civil conversation until now.
posted by ripley_ at 2:06 PM on August 23, 2010

Huh, in Australia there's a minimum amount you need to hit before your income is taxed (about $6000). And getting an Australian Business Number is free.
posted by divabat at 2:06 PM on August 23, 2010

If you want to turn your blog into a source of income, expect it to be treated like any other source of income.

But surely we could also have a more progressive taxation structure for business licenses, right? $300 isn't insignificant. Couldn't the license cost be pro-rated if your total revenue (never mind profits for the moment) is under some amount, like say $1000? This seems pretty win-win: Philly would at least get $20 out of the AdWording bloggers, whereas under the current scenario they'll probably just go free; the bloggers would still have the potential to make a few extra bucks.
posted by en forme de poire at 2:07 PM on August 23, 2010

How does the city know about it in the first place?

These bloggers reported their two digit incomes on a tax form as income.

This provision also really only has a real-world impact on any blogger who reports their blogging income on their individual income tax return. The city will send notices to users who claim income from AdSense or other blogging-related streams, but it isn’t like they are doing full-scale audits for every person in Philly who runs a blog with ads.

Keep in mind, Google AdSense has a payout threshold of $100. The bare minimum to even obtain an AdSense Tax ID number is $10. If your blog has made less than that you can’t file it on your income taxes anyway.
-source

And I'm not really sure why (or how) they reported it on some tax form, if they really only earned a two digit amount from Google, because Google doesn't pay out in small increments ... so seems to me they didn't really "earn" it yet anyway (as in not having the actual $11 or whatever in their hands).

On the face of it, it feels outrageous, but if I were to put ads on my blog and my city had a tax law saying I needed to get a $300 lifetime license, because that made it a business, I'd either get the license or take the ads down ... or maybe not report a two digit income on a tax form.
posted by Orb at 2:09 PM on August 23, 2010

How do you make "$10 a year" from Google Ads? Google doesn't cut you a check until you accumulate $100. Therefore, Google Ads do NOT fall into the same category as "garage sale, craigslist post, watering neighbor's plants".

That's just wrong. Making $100 from Google ads on your blog could very well be in the same category as garage sale - I'm pretty sure I could sell enough stuff in a garage sale to make over $100.
posted by kingbenny at 2:10 PM on August 23, 2010

The city found out about it because the bloggers reported the income. They weren't trying to get away with not paying taxes--in fact, it was the act of paying taxes that got them caught. Says so right there in the FPP--you don't even need to RTFA. Philadelphia now wants the bloggers who reported their income to pay for a business license, and be taxed on a different business tax scale.

And, yes, by that logic (not my logic, but the city of Philadelphia's), watering the neighbor's plants, having a garage sale, etc., would be business ventures: "the city requires privilege licenses for any business engaged in any 'activity for profit.'"
posted by MrMoonPie at 2:11 PM on August 23, 2010 [3 favorites]

How do you make "$10 a year" from Google Ads? Google doesn't cut you a check until you accumulate $100.

If you close your AdSense account with at least $10 of earnings accumulated, you get paid for your accumulated earnings, even if it's less than $100.

AdSense is also not the only revenue stream for blogs--Amazon's affiliate program, for example, has only a $10 threshold before you get a payout.
posted by phoenixy at 2:12 PM on August 23, 2010

It would be fair to consider the penny-ante bloggers as more akin to non-profits than small businesses. They may try and take in a little money to cover their expenses, but they clearly aren't out to get rich. As much as I believe in paying taxes to keep our infrastructure lurching along, it does seem like it would be reasonable to set a floor below which no license fees are required - like, say, make less than $50 a year and you're in the clear.
posted by blacksmithtb at 2:16 PM on August 23, 2010

Or not put ads on your blog, so it's no longer a business giving you taxable income.

This is the big takeaway from this, I think. Unless you have a blog that's drawing zillions of hits, there's not very much money you'll get from putting adsense or whatever on your blog. That's my understanding, anyway.

Philly is dysfunctional in so many other ways (although I do love my new home) it seems sorta weird to get worked up about this.
posted by angrycat at 2:37 PM on August 23, 2010

If you're progressive enough to see taxes as a good thing

Not all taxes are progressive. Some terminology to clarify for you:

A tax whose rate as a percentage of income increases with increasing income: "progressive tax".

A tax whose rate as a percentage of income is constant: "proportional tax".

A tax whose rate as a percentage of income increases with decreasing income: "regressive tax".

And some terminology that needs to be clarified for me:

An income tax which is still imposed even when expenditures exceed revenues and net income is negative: ?

Anyone? I guess technically it's still a subclass of "regressive", and a superclass of "poll tax"/"head tax". It would be nice to think that this concept is so widely reviled and so rare that nobody thought it even needed a name.
posted by roystgnr at 2:54 PM on August 23, 2010 [5 favorites]

Yeah, it's a tax that you pay for the privilege of reporting income.
posted by muddgirl at 3:04 PM on August 23, 2010

It's a "repressive" tax.
posted by telstar at 3:06 PM on August 23, 2010 [1 favorite]

This is sooooo philly. Gawd, that city was messed up...
posted by ph00dz at 3:06 PM on August 23, 2010

Scoo wrote: "Factor in the cost of your home office expenses (electricity, broadband connection, heat, equipment costs, software etc) and it's very easy for your "business" to be declared to operate in the red for tax reasons. This is a shakedown, pure and simple."

That's exactly why the IRS considers chronically money-losing small scale endeavors to be hobbies. They don't want you deducting your "business losses" when you're not actually running a business.
posted by wierdo at 3:08 PM on August 23, 2010 [1 favorite]

When did the United States become so perversely hostile to entrepreneurship? It's not just that a business license should be free, there should be rewards for getting one. I can't believe anyone in their right mind is defending this system.

If it's not user-pays free-market economics, it's communism, which is anti-american. (I'm exaggerating to the point of silliness, obviously, but it illustrates another side - that the paperwork costs money and some people do not think they should be taxed and that money handed to people seeking to make a profit.

Another other thing I've noticed is that a lot of cases of red tape getting the way to doing good things, seem to have been implemented by necessity because someone was an asshole in such a way as to make that regulation necessary to protect people. It wouldn't surprise me if this was just another regional nickle-and-dime tax, but it also wouldn't surprise me if it was implement to stop assholes causing some kind of problem. ("Asshole" also includes good-intentioned-idiots, such as snake-oil salesmen who falsely but genuinely believe their product works)

I agree it should be free, but I don't know if it's stupid that it isn't. :-/
posted by -harlequin- at 3:32 PM on August 23, 2010

"So.... bloggers earning $10 in a year should have to pay $300 for a business license. That seems to be what you're saying."

If they want to post ads, even if those ads only end up earning them $10 for a given year, then yes.

This is just fascinating!

So why do you believe the answer is yes?

Do you think this is somehow fair?

Do you think that this encourages business growth? Or that this will provide a significant revenue source for the government? That it some discourages some socially unpleasant activity (a "sin tax")?

Or that the regulations are so stringent that any activity that makes money makes you a business? (But then we're back to garage sale == business, aren't we?)

Bizarre!

I'm curious as to what your feelings are about the Bush tax cuts for the wealthy - for or against?
posted by lupus_yonderboy at 3:45 PM on August 23, 2010 [2 favorites]

"the city requires privilege licenses for any business engaged in any 'activity for profit.'"

It seems pretty clear to me that this license isn't required if you engage in an activity but do not seek to recoup costs. Total shakedown.
posted by muddgirl at 3:45 PM on August 23, 2010

Or something - I don't know the exact language. But it's basically the same thing as the IRS definition of a hobby - if you're really only breaking even, and you're not doing anything to "fix" that (such as blogging more, or narrowing the focus, or switching to a cheaper server, or closing the blog altogether), then how is it an "activity for profit"?
posted by muddgirl at 3:47 PM on August 23, 2010

home office

No, getting a home office deduction is absolutely not like that. You need an area in your house that you can prove is entirely and only used for business, and yes, the IRS does check up on this. You can't just take your small home-based business, deduct the cost of your living room, and be in the red.
posted by lupus_yonderboy at 3:48 PM on August 23, 2010

I am possibly down with the idea of a tax that discourages people from littering the internet with google ads, especially if they're only going to make pocket change off them. That might be $10 the world is probably better off not seeing monetized.
posted by Casuistry at 3:56 PM on August 23, 2010

It would be fair to consider the penny-ante bloggers as more akin to non-profits than small businesses.

It is a non-trivial exercise to get an organization recognized as a tax-exempt non-profit by the IRS.
posted by DevilsAdvocate at 3:59 PM on August 23, 2010 [1 favorite]

Seems to me the City found out about this from people including the income on their tax filings. Woops!

The City is probably legally correct. It's a shame that the $300+ exceeds the actual income, but there you have it.

Cities shaking people down is Standard Operating Procedure. An architect friend of mine has a residential client who got socked for $270 in "unpaid" permit fees. When they went to apply for a permit to construct a room extension, the City tacked on another $270. Why? The house was just over 30 years old. The building and safety department saw that there had never been any permits pulled for water heater replacements, and decided to hit them for three $90 permits, based on an average life expectancy of ten years for a water heater. Permits are required for water heater installations or replacements.
posted by Xoebe at 4:36 PM on August 23, 2010

Lame. The City of Los Angeles harasses me about business tax too, but once you tell them you made less than $50k or whatever the minimum is, they leave you alone.
posted by drjimmy11 at 5:26 PM on August 23, 2010

Construction permits are value-added (they may not seem like it, but they really are). I can't see what value a "privilege license" adds to the clients of a high school kid who tutors for picket cash.
posted by muddgirl at 5:29 PM on August 23, 2010

"and with things like garage sales, the tax evasion goes unenforced."

Can someone please rationally explain to me how selling something at a loss can be considered "income"?

I don't know about you, but I'm pretty sure I've never bought something at a garage sale that was higher than the price the seller originally paid for it.
posted by barc0001 at 5:34 PM on August 23, 2010

"This is a shakedown, pure and simple."

Business licences and related fees are always a shake down. They are put in place so that when some busy body complains about the local strip club/7-11/daycare/barber the cost of harassing those business is born by the business community and not the people doing the complaining. I can't think of a single thing that buying a municipal business licence has ever gotten me or my business besides the fancy sheet of paper the licence comes on and guaranteed harassment if I forget to pay up the next year.

"It'll be a cold day in hell before I allow my Geocities Model Rocketry Blog to subsidize some goddamn rooftop garden of Mayor Daley's."

I've got bad news for you; GeoCities was shuttered by those bastards Yahoo! quite a while ago. Hope you have a backup.
posted by Mitheral at 5:50 PM on August 23, 2010

No, getting a home office deduction is absolutely not like that. You need an area in your house that you can prove is entirely and only used for business, and yes, the IRS does check up on this. You can't just take your small home-based business, deduct the cost of your living room, and be in the red.

This is exactly what I do in Canada...I declare that 50% of 15% of my home is work-related. A chartered accountant does my taxes and I've not had any complaints from Revenue Canada.
posted by swimming naked when the tide goes out at 5:59 PM on August 23, 2010

I don't know about you, but I'm pretty sure I've never bought something at a garage sale that was higher than the price the seller originally paid for it.

On the other side of this, I have sold items at garage sales, flea markets, eBay, etc. for a dollar amount higher than I paid for it. In some cases, I got something free (no, not stolen!) that I later sold an infinite-% profit. :)
posted by swimming naked when the tide goes out at 6:02 PM on August 23, 2010

I don't know about you, but I'm pretty sure I've never bought something at a garage sale that was higher than the price the seller originally paid for it.

You're not considering depreciation. Most stuff at garage sales is stuff that is otherwise heading to the junkyard or donation bin. Therefore, a sale is income above and beyond what would be expected...
...from a certain point of view... :-)
posted by -harlequin- at 6:32 PM on August 23, 2010

A sale is income regardless of the price paid. It may or may not be profit, but you don't pay a profit tax.
posted by kafziel at 6:37 PM on August 23, 2010

Or that the regulations are so stringent that any activity that makes money makes you a business? (But then we're back to garage sale == business, aren't we?)

Taking devil's advocate again, maybe replace "stringent" with "simple".

There is a company that injects water into a wind tunnel during tests. The tunnel is sterile - when the water emerges, it is the same good clean sterile water that went in, but the company has to pay to dispose of it as contaminated waste water, because the regulations say that if water is used in any industrial process, it cannot be send down the drain, and must be disposed of as waste.
This is INSANE to many people - what a stupid piece of regulation throwing commons sense out the window. It's perfectly clean water - you can drink it - not contaminated waste!

I felt this rule was actually really cool. Instead of tomes and tomes of laws and rules and clauses regarding what I must do under which circumstances, requiring lawyers to decypher for me, the regulations were so simple it was just one sentence: if the water goes through ANY industrial process, you can't dump it down the drain.
Every now and then, there would be a case (like the one above) where it seemed stupid, but for every case like that, there would be a hundred - or a thousand cases - where the simplicity of the rules saves countless people time and money and headaches, and makes everything clear and simple for everyone.

Along similar lines, it may be that tax and business regulation could benefit from more of this kind of stupidity, not less. And sometimes the simplicity results in weirdness, but perhaps the streamlining of the economy will more than make up for that?
posted by -harlequin- at 6:45 PM on August 23, 2010

this is exactly the kind of nonsensical government tax policy and lack of responsiveness that is responsible for the tea party

i remember that someone my brother knew in battle creek township (which no longer exists) wanted to move a small house - the permit to do so was 75 bucks - the fine for failing to do so was 25

guess what he did?
posted by pyramid termite at 8:48 PM on August 23, 2010

Absolutely. Any activity you engage in for the purpose of generating revenue is a business.

Do you use those leave-a-penny, take-a-penny trays? Business. Why you're making 1¢ loans. It ought to be regulated by the SEC!
posted by XMLicious at 9:54 PM on August 23, 2010

> I felt this rule was actually really cool.

Your idea works only because the cost of running the wind tunnel is very large, and the cost of throwing the water away is very small.

It also only works because there are very few such wind tunnels and it's not worth making a special case for.

I'd claim, conversely, that most households actually perform some systematic operation that makes them a small amount of money - whether it be "selling your old shit on ebay" or "running a blog" or "garage sales".

I'd also say that the economy would be streamlined a heck of a lot more if regulators completely ignored organizations/projects/etc that earned under, say, $100 a year.

Your idea that the regulations would be streamlined if our elected officials spent their time trying to get a small amount of cash out of the very large number of people who were earning tiny amounts from informal activities like blogs and garage sales is... very strange to me.

If you wanted to effectively maximize revenue, why not concentrate enforcement on the ultra-rich? If you charge someone $300 for their $20 blog, they'll go out of business and you'll never get a penny again; if you manage to find that some ultra-rich person is getting 1% of their income hidden, that could be millions of dollars in tax money, and unlike the $10 blog guy, the rich person doesn't find a tiny marginal tax to be a strong incentive to get out of the game.

If you want to boost the economy, why shit on seedlings?
posted by lupus_yonderboy at 9:57 PM on August 23, 2010 [1 favorite]

A sale is income regardless of the price paid. It may or may not be profit, but you don't pay a profit tax.

Capital gains?
posted by atrazine at 4:25 AM on August 24, 2010

The revenue generated from Google Ads minus the hosting cost isn't profit. It's income. It's reported on income taxes, but it's still not profit.
posted by muddgirl at 6:45 AM on August 24, 2010

Well, at some point it turns into profit I guess, if the blogger is making above and beyond a reasonable wage for the hours she's putting in.

I'm guessing, though, that it's usually not the case.
posted by muddgirl at 6:50 AM on August 24, 2010

> Do you think that this encourages business growth? Or that this will provide a significant revenue source
> for the government? That it some discourages some socially unpleasant activity (a "sin tax")? Or that
> the regulations are so stringent that any activity that makes money makes you a business? (But then we're
> back to garage sale == business, aren't we?)
> posted by lupus_yonderboy at 6:45 PM on August 23 [1 favorite +] [!]


> It seems pretty clear to me that this license isn't required if you engage in an activity but do not seek
> to recoup costs. Total shakedown.
> posted by muddgirl at 6:45 PM on August 23 [+] [!]

...and many others along these lines, criticizing this particular bit of outragefilter.

The core issue, which everyone seems to be missing, is the difficulty of writing laws and regulations that cover all the edge cases logically and fairly. The boundary between cases a given law should cover and ever-so-slightly-different cases to which it should not apply is fractal in nature. The closer you examine the boundary the wigglier it gets, forever. If you seriously try to write your law or reg so that it really tracks the boundary, the process of writing it goes on forever also and it never comes up for a vote.

At some point lawmakers are forced to say "enough, that's the best we can do" and put the law on the books in an imperfect state that's absolutely definitely guaranteed to have crazy, damaging effects in some edge cases. How many people does Philly have writing business licence requirements? How smart and hard-working are they? Have they ever heard of blogging? Week-end Cat Minding: Business Or Not Business? How many meetings did they devote to that question? How many do you want them to devote to it?
posted by jfuller at 6:51 AM on August 24, 2010

I agree with you, jfuller. I mentioned it in a previous comment that you did not quote. I don't have a problem with the Business Privilege license as a concept (well, I have a problem with the flat fee, but whev). I DO have a problem with inconsistent enforcement.

If blog ads to cover the cost of blog hosting is a "for-profit" enterprise, then they should be treated as a business at all levels of government, not just at the local level. Furthermore, those cute kids selling lemonade should also be shut down.
posted by muddgirl at 7:16 AM on August 24, 2010

The articles on this seem to be written a little deceptively, since the Business Privilege License is only $300 for a lifetime license, otherwise it's $50 a year.

The city is currently owed about $500 million from a variety of taxes. They have started getting information from the IRS to locate people who paid federal taxes but not their city taxes. They sent out 30,000 letters to people they found who might owe.

If they thought their $11 or whatever was worth reporting to the IRS, why wouldn't it follow that it was worth reporting to the city? If the licenses costs more than the expected profit, maybe your plan isn't so great. Even aside from the license why have ads if they make you all of $11? It makes me wonder if they were trying to write off "home business" expenses with the IRS.
posted by sepviva at 9:35 AM on August 24, 2010

If they thought their $11 or whatever was worth reporting to the IRS, why wouldn't it follow that it was worth reporting to the city?

In the article, it mentions that they DID pay their local and state taxes. That's how they were tracked down.

If the licenses costs more than the expected profit, maybe your plan isn't so great. Even aside from the license why have ads if they make you all of $11?

It's wrong to conflate income and profit. That's why I think this "business license for income-only businesses" is bogus - they are by definition NOT for-profit. Maybe we should make it easier to declare a business not-for-profit?
posted by muddgirl at 9:39 AM on August 24, 2010

If you're progressive enough to see taxes as a good thing

Not all taxes are progressive. Some terminology to clarify for you:

A tax whose rate as a percentage of income increases with increasing income: "progressive tax".

Some terminology to clarify for you: progressive.
posted by rocket88 at 11:03 AM on August 24, 2010

If you're progressive enough to see taxes as a good thing... Some terminology to clarify for you: progressive.

But clearly not all taxation schemes are supported by an American progressive ideology. "Taxes, without exception, are a good thing" is not a progressive platform. For example: American progressives do not support a poll tax.
posted by muddgirl at 11:07 AM on August 24, 2010

This is why I'm glad to live in one of the many jurisdictions in the US that has no general business license requirement. When I sold shirts on CafePress it was the first thing I checked up on. I wouldn't have started if I had needed to get a license to do it, because at the time I was living on very little income and had no idea if I'd sell any shirts. Kind of like how I'm not going to borrow $70k to go to law school when I have no idea if I'd get enough money after to make it worth it.

This kind of rule is, on the best of days, counterproductive. And yeah, I paid taxes (something like $12 total to the feds, state, and city) on what I made on CP.
posted by SMPA at 12:33 PM on August 24, 2010