Though it was never intended initially, Consumerism Commentary and my writing is a business. I pay fees every year to ensure that the state in which I operate, New Jersey, is aware of my business. Business registration with the state is just one out of many possible fees governments charge entrepreneurs and small business owners. Some businesses require local licensing as well, for an additional fee usually paid to a city or a county.
Philadelphia requires freelancers to register with the city for an annual fee of $50 or a lifetime fee of $300. This fee, as many who are reporting on the issue misunderstand, is not an income tax, but some taxpayers who indicated on their most recent tax return they earned income from a blog, no matter how small, have received notices from the city. The letters inform them of the obligation to pay this licensing fee. Even those who were diligent to report as little as $11 in additional income from a website received a request for $50 or $300.
The city’s position is that bloggers who run advertising, or writers who provide freelance services for a site that carries advertising and share its profits, intend to earn income. Even if your blog hosting service publishes advertising by default, you could fall into the category of people targeted by the city’s licensing fee if you live in Philadelphia.
For the city, the delineation is obvious: if a blog includes ads, it’s a business; if not, it’s a hobby. There are other ways for blogs to generate income other than blatant advertisements, but the city is likely not sophisticated enough to sniff out most paid content unless the income is reported on a tax return. The solution is clear. If you intend to blog as a hobby, remove the advertisements or pay the licensing fee and admit your goal is to earn money, even if it is a negligible amount.
Another option is to call the city council and lobby for a change in the law. There may be an income tax exemption for the first $100,000 of profit from blogging income if a new law passes, but the licensing requirement and its $50 or $300 fee will not likely go away.
Should bloggers who see a profit of less than the fee for licensing be required to obtain the license as a freelancer? Is blogging different than any other business once the first cent is earned? Some businesses, even those that don’t exist solely online, lose money year after year, yet the licensing is still required.
Updated March 18, 2012 and originally published August 23, 2010.