The BPT rears its ugly head ... toward bloggers
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The BPT rears its ugly head ... toward bloggers
I was amused, in a dark sort of way, to see this City Paper article about the city taxing bloggers. To be clear, Philly doesn't have some new blogger tax; rather, it's making sure that bloggers who pull in miniscule amounts of revenue pay the city Business Privilege Tax -- including a one-time $300 licensing fee.
I was amused because I've been through the shock some of the bloggers featured in the CP article are experiencing. I wasn't a blogger, at the time, but a freelancer. I'd made less than $1,000 over the course of a year, and thought I must have been misunderstanding something when the city told me I had to pay the start-up fee ($250 at the time) plus the tax to make my "business" legit. Most astoundingly, the city explained that I'd need to pay $250 even if I earned less than $250.
The tax technically applies if you're a small-time freelancer, a baby-sitter, a lemonade stand ... or a small-time blogger who, like one of the subjects of the CP story, earned $11. As long as there's some revenue coming in, you're subject, and bloggers are just a relatively new category of small-time earners (although I'm surprised this hasn't come up before).
Some commenters on the CP site have called this an attack on speech, but as Jeff Billman explains, it's not, really -- the city isn't taxing the bloggers for blogging, but for making money off the blogging. The ridiculousness here is that there's no floor for eligibility for the tax.
Note to anyone dealing with this BPT issue: Keep up with your BPT filings every year, or the city may "close" your "business," and that's a whole other nightmare.
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Is Phila's BPT analogous to the federal corporate income tax? The city is trolling federal personal income tax forms in search of filers who took deductions for having a home office. But the federal govt treats the small revenues from those "businesses" as personal income, not corporate income. The city (but not the surrounding suburbs) interprets it as revenue from a business, not as personal income. So is the BPT a local corporate income tax? The city also payroll-taxes "wages" but not other forms of income such as stock dividends (right?). As far as I can tell the city has no mechanisms for reporting small incomes, likely earned from work but not paid out in employer-provided paychecks. The city has no categories other than wages or businesses. And that is the grey zone where small, miscellaneous forms of income fall in and become subject to the BPT. And amazingly the income cam be less than the $300 start-up fee yet still be subjected to it. But even that is a blurry line (a Rorschach test for accountants, at least in my own experience). If these relationships were thought out more carefully, the fairness factors will become more clear about how the city defines taxes among incomes earned from work, incomes passively earned from investments, revenues from small business, and revenues from large corporations. The complexity of federal taxes creates a bazaar for tax payment where keener minds can game the system by playing the complicated rules. But the city's taxes are complex (and vague) to the point where you cannot even pay them, much less understand them. It defeats a lot of purposes.— MB6- This has been an issue I have commented on before in terms of tax simplification. A BP License is equivalent to a tax id from the feds. The feds give it to you for free and even let you apply online and get it in a couple minutes. Philadelphia should eliminate the $300 fee and setup an online application to handle processing. Make it easy for people to give you their information to be tracked.— Adam Lang
Comment removed.- The BPT license fee is especially distasteful in a city facing such high unemployment. It serves a punishment for those who are unemployed and do freelance work or other work that is reported on a 1099. Unfortunately, part of the message being sent here is not to disclose income on your tax returns unless necessary.— jfar86
- What is incredibly disappointing is that the city could use this as an opportunity to revisit the tax. Is it obscene to charge somebody a license fee if their income from a "business" is less than the fee? Absolutely. The city should set a reasonable floor, and exempt small businesses (or individuals with "businesses") making less than $10,000 per year.— jfar86
- Even if you pay it, you'll get a tax notice a month later saying you didn't pay it. Then spend an hour on the phone trying to clear it. I am a CPA, I see it enough.— eres
