Do you use Google AdSense or other ad services on your personal blog or website? If you live in the city of Philadelphia, you might want to rethink that decision.
Last week, the Philadelphia City Paper published an article discussing the potential impact of the city’s Business Privilege Tax on residents that engage in “activity for profit” — activity that includes blogging, provided a user’s blog runs advertisements or makes money in other ways.
The city of Philadelphia’s Business Tax Privilege requires residents to pay a privilege license for a one-time fee of $300, or $50 annually, in addition to a percentage of gross receipts and/or taxable net income, depending on the nature of the business.
The problem is that this license technically applies to any person conducting business activity in Philadelphia, regardless of that activity’s profit or loss margins. That means that Joe Blogger who makes $12 per year from AdSense ads on his blog is theoretically required to pay 6.45% in taxes on that income, in addition to the cost of the license.
We’ve reached out to the Philadelphia Revenue Department for further clarification on this issue and have also thoroughly examined the tax code associated with this tax.
How Bad Is This, Really?
Understandably, some Philly bloggers — particularly those who have received notices requesting payments for the BPT license — are extremely irate about this tax. After all, it does seem ridiculous when the cost of the license vastly exceeds the revenue generated by a blog.
Still, it’s important to note that this tax provision is not singling out bloggers. Freelance writers are also affected by this provision, as is any other contract worker who primarily operates within the city limits. The Business Privilege Tax is oft-criticized and members of the City Council are planning on introducing a bill in September that makes some changes to the program.
Additionally, although the $300 license fee is steep, it is a lifetime license. After the license is paid, the tax rate on either gross receipts or taxable net income is pretty low. If a blogger truly intends to try to earn income or revenue off his or her blog, it’s only fair to adhere to the tax policies in the city where they operate.
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.
While we think that this tax provision is pretty excessive — especially in edge cases, like those bloggers who make $11 per year off from AdSense — it’s important to remember that an easy way to get rid of any obligation to the city of Philadelphia is to stop running ads on your blog.
Perhaps the increased attention on this issue will also galvanize Philadelphians to reform the Business Privilege Tax.
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