In August 2010, the city government of Philadelphia took an unusual and unprecedented move: it began claiming that for-profit bloggers in the city must purchase business licenses for their websites. Not surprisingly, waves of online critics promptly denounced the move as a "blogger tax," although in truth it was simply an extension of the existing by-laws requiring businesses operating in the city to purchase a license to operate from the city.
The Philadelphia business privilege license is, according to the city website, a requirement "for all businesses operating in Philadelphia." It is analogous to the municipal business licenses issued in most cities, and is purchased either for $50 annually or for $300 for a permanent or "lifetime" license. Incorporated businesses must also possess a federal employer identification number and a Pennsylvania state sales and use tax number (if sales tax is collected), while unincorporated sole proprietors (such as bloggers) must provide their Social Security Number (SSN).
The Philadelphia "blog tax" does, however, raise some important issues. First and foremost in the minds of most bloggers, of course, is that despite appearances to the contrary they do not really think of their sites as business enterprises. Thanks to the growth of largely automated advertising networks like Google's AdSense, it has never been easier to place a few banner ads on a blog or other personal website. This does not mean, however, that the advertising in question actually leads to substantial income. Most blogs, and most bloggers, never achieve more than a relatively minimal level of traffic. Some of those contacted by the city demanding purchase of a $300 license, according to United Liberty, had actually made only a few dollars each from their blogs. This experience is probably typical for the majority of amateur bloggers.
From the city's perspective, of course, the problem is a different one. Across the United States, state and municipal governments are succumbing to crushing debt loads. The same is true of the federal government and its skyrocketing deficit, of course, but federal and national governments in all countries always have a much easier time financing their deficits by taking on new sovereign debt. Pennsylvania's capital, Harrisburg, actually considered filing for bankruptcy protection earlier this year. All cities are desperately searching for new revenue sources to shore up their coffers - and bloggers might just be one source, Philadelphia has now decided.
At the same time, the entire affair does much to illustrate how obsolete traditional tax and regulation systems are in the face of new Internet technologies. An amateur blogger might live in Philadelphia, but at the same time she might purchase a domain name from a registrar in another state, host her website on a server in yet a third state (or even another country), and certainly receives advertising services and payments from somewhere else yet again - Google, for instance, is headquartered in Mountain View, California, and provides both the popular Blogspot blogging plaltform as well as the popular Adsense advertising network. The visitors who click on the ads, moreover, could come from anywhere all over the world. Requiring a municipal business license from Philadelphia starts to seem strangely irrelevant in the face of such a global network of operations.
Such questions are broader than just the Philadelphia "blog tax," however. In the meantime, what the tax will do is force Philadelphia bloggers to ask some hard questions about whether their sites really are making meaningful income for them - and, if they're not, whether it would be worthwhile to simply ditch the ads and run them as true non-profit ventures. This will ultimately have at least some chilling effect on blogging in Philadelphia, as people are forced to choose either to invest heavily in blogging as a secondary job, or to keep it as a purely non-profit hobby.