Posted 10 Oct 2010
Is it always sunny in Philadelphia? Not for bloggers who recently have been told that they need a $300 Business Privilege License to operate their blog in Philadelphia. For most people it is only a warning of what might happen to any blogger. For others, like taxgirl.com who are actually operating in Philadelphia, this poses a $300 size problem.
This Business Privilege License, which is another way of saying tax, applies to anyone who is conducting at least some business operations inside the city of Philadelphia. When the city decided that this applied to bloggers too, it opened up a whole can of worms that could end up being more than the city, or anyone else bargained for.
First of all, what makes a blog a business? Maybe it means earning income from a blog, even if it is 50 cents in Google adsense revenue or a $1 commission from Amazon. The vast majority of blogs that earn any income at all earn pennies a day.
With hosting costs, software, computer costs, time and effort, the vast majority of income earning blogs, if treated as a business, would be severely in the red, without even considering the extra $300 tax. The tax only makes it more of a money hole.
The next big problem is what activities must be carried on in Philadelphia for this tax to apply? Server location might be one business activity that would subject a blogger to the Philadelphia tax. If your website is hosted on a server in Philadelphia, I would recommend you get hosted on a server elsewhere, preferably in a country where you have no other connections.
Fortunately, you can change servers at the speed of light with the click of a button with no affect to your blog at all. A data haven country like Iceland might be a good place to look for hosting.
What if you are using better privacy practices an use an onion router, such as Tor, to access your website and you are routed through a node in Philadelphia, or you use a Philadelphia based proxy server? This may subject you to the tax theoretically but practically it is almost impossible for you to know or even to audit that presence. In fact, since your presence in any place at any time might incriminate you, it is advisable to use tools like Tor, or proxy servers or other anonymous browsing for as much of your internet use as possible no matter where you are.
There is also a danger to visitors, travelers, and people just passing through. If you happen to do some work on your website while on vacation to see the liberty bell, or while on layover at the airport, or while driving through Philly while using your ipad 3g, or even while flying overhead, uploading an article with the in flight high speed internet, do you need a Business Privilege License? It is ridiculous but I bet they would try in some cases.
The other big problem for the city is the practicality of enforcement. So far, they have been getting a lot of their information from the IRS about who is reporting this income and cross checking that with who has actually gotten the business privilege license. Some people may be wrongly accused if they list a Philadelphia PO box as their address on their tax returns but have never done any blog work while inside the city.
The opposite could also pose a problem. How do they find the people who live and work on their blog in Philly, but use better privacy practices and have a PO box or other address outside of the city limits? Some people also do work from coffee shops either inside or outside the city whenever they work on their blog which raises the cost of knowing whether a blog operates inside the city.
It all comes down to how feasible it is for a government to impose a tax on an activity that the government has no control or influence over, can't provide any services for, and can't keep track of. The city of Philadelphia might just as well require a license for everyone who reads the constitution.
A website is a few digital ones and zeros that don't really have a physical location. Sure, they are hosted on a physical server somewhere, but they might simultaneously exist on several servers at once making it completely impossible to pin them down to any one location.
Cities are going to be fighting a losing battle with these kinds of regulations. Enforcement might be so expensive that it is not worth the cost. The need for better privacy of business information will prompt businesses to use better privacy practices, making enforcement even harder.
In the mean time, while the tax is owed, it must be paid. That means, if taxgirl wants to keep selling swagg and getting client referrals while working in Philadelphia, she will need to pay the tax.
Others of you who blog for fun or for profit might wish to avoid incriminating yourselves by using an anonymous New Mexico LLC to register your domain name, use a ghost address in a place that does not regulate internet business, and use better privacy tools to access the internet with anonymous browsing.
