Tobold's Blog
Thursday, August 26, 2010
Taxing blogs and hurting Google

The Paypal donation button on the top right of my blog is more a social experiment than a serious attempt to make money. I learned a lot about donations and blogs since I have it, for example that if I really wanted to make more money from it, I would have to write posts regularly that ask for money. I recently mentioned that I hadn't received any donation for months, and promptly got two donations. This post might also cause a few donations, although that is not the purpose. Instead I would like to discuss the future of the general idea of making money with a blog.

Last week the Philadelphia Citypaper reported that the city of Philadelphia slapped a $300 tax on all bloggers with any income, even if one of the taxed bloggers could prove that his total income over the last two years was $11. City officials squelched all protests with the advice to "hire an accountant", which of course isn't feasible, because it costs more than the tax. A blog with *any* form of income is considered a business, and thus has to pay $300 for a "business privilege license". It is easy to see how that idea could spread. Most places have some sort of business license, and could easily apply that to bloggers with some sort of income from ads or donations without even having to change any laws.

Now making $300 with a blog is not easy, and the large majority of blogs with Google ads or a Paypal donation button is making less than that. Thus faced with the choice of either paying $300 or removing the ads / donation button most people would choose to "go out of business". I would. While in principle one could try to get out of paying such a tax by declaring ones blog a non-profit organization (hey, I spent my donations on the games I write about), the administrative effort and cost involved will probably again be higher than the potential income from the blog.

Now a blogger with $11 income being asked to pay a $300 business license sounds very much like a funny little fringe story with no further importance. It's not even a "freedom of speech" story, as nobody would be forced to stop blogging, they'd only have to remove their source of small income. But in the long term that means that the only sites with ads or donation buttons in the future will be those which are certain to make more money from that than the cost of the business license. And one company is going to lose millions of dollars over this: Google.

Google makes a lot of money with Google AdSense on all sorts of blogs and small website. Not only do they take a large cut from what the advertiser pays, they also only pay out money when the accumulated income exceeds $100. Which means there are a lot of sites out there which never saw a cent for their Google ads, while Google at least got a handful of dollars for each of those sites. To the owners of such unprofitable blogs, removing the ads will make no difference. To Google it is a threat to a major part of their business model. The internet advertising business is all about making a few bucks each from millions of websites, not making large amounts of money from a single website. Threatening each of those millions of websites with a $300 business tax will kill the internet advertising business as we know it. Depending on your political leaning you might consider that a good thing. But for Google and all those bloggers who made a small amount of money on the side this certainly isn't good news.
Seems like a last desperate flailing out by the print journalism industry to me.

I doubt it will catch on anywhere else.

Where I live (UK) all income should (in theory) be taxed so if you have a salary and make £100 per year from a blog you're supposed to send a cheque. People don't of course but they run the risk of being charged with tax evasion.
The interesting thing for me is how many people think you can make money on a WoW blog. There is a serious lack of understanding in the community about how pathetically little money you make from ads.

I'm tempted, maybe I'll do this, to run an experiment of ads on pwnwear for a week and report the income I get. It'd be between $2 and $4 for the week, I reckon, at most.

For that pathetic financial gain (compared to my hosting costs of nearly $100 a month), I would also get ugly-looking ads on the site, sometimes about gold-selling services which I would not appreciate or agree with but would have trouble blocking. It'd cheapen the site in my opinion, make it look like a sell-out.
Agreed, Gravity. Exactly the arguments why I don't have ads and tried out the donation system instead.
how can the "city of philadelphia" (a town in the US) tax a non material business that can be located anywhere in the world?

You mean they intend to tax the blog owners that reside in philadelphia? it sounds very unlegal to me...
I wonder how they're gonna enforce that. Online you can cover your tracks pretty well if you know what you're doing. Of course, these days Google is reporting your income based on your SSN.

Maybe the great city of Philadelphia should consider taxing all eBay and Craigslist proceeds as well.
The article says they track you by your IRS, and tax is 50$ a year. (to answer my own question)

If it spreads, it'd be a major hit to some business models, true. Time to lobby! :)
I doubt this will last. Google will withhold payout there until it crosses the threshold of profitability at $300 to prevent repeated taxes. Or sue the city. Or just offer to release search records from city council members.
Hmmmmm, my problem with all of this is that a donations button strongly implies that it is, wait for it...

A Donation!

Not exactly the same thing as a business in some cases. Now some businesses do use a donation model which muddies the waters some bit but what about charities and religious organizations that us it? I have given money to a convent that was trying to raise a little extra to purchase a new heating system. I would be a bit upset to find out that there city decided that they must be a regular business that needed a license to operate simply because they put a paypal button on their website.

I really hope that this silliness doesn't negatively impact legitimate but small charities. I could see taxing a website that makes money from advertising or selling but they should really lay of any site that simply uses a donation button. Do they tax the guy on the street corner who leave his guitar case open while he plays? I know a lot of localities do, but that is why we call those local officials a$$h01e$.
Perhaps the residents should simply ignore the city and wait for them to decide if it is worth spending a few thousand dollars to sue a guy for $300 who made $11 off the activity question.
So, why not wrap your donate button with code that looks at the domain of the current viewer and if it ends in ".gov" then don't display the button?

That is laughably simple and you'd be amazed how effective it could be. Government people aren't all that smart (I meant that in a technical sense, of course)...

And corporate employers aren't much better. No boss will make a point of going home to surf their company website to look for anomalies like that.

In government (I am) the adage "out of sight out of mind" is highly effective. :)
they dont scan your website, they check your IRS. If you don't declare that $11 income from paypal (or whatever), you're evading tax. And the money could come from selling drugs, you know :)

Beware the FBI!
Why run lame AdSense ads that look like garbage and make you little to no cash when you can put in a bit of legwork and work out some sponsorship arrangements for your blog?

TechCrunch charges companies $10,000 per month for a 125x125 pixel ad in a prominent location in their sidebar. Sure they get craploads of traffic but if they replaced those sponsorships with an AdSense block they'd be making 5% of that at best.
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What a ridiculous law. I would move if a law like that ever affected me. It's a scary thought to think that it even could catch on.

Just out of curiosity, why are there no ads on this site? I see several million page views for this blog; Certainly even a simple square ad would have made you a decent sum of money.

It is surprisingly hard to find a *respectable* ad for a MMORPG blog. The large majority of e.g. Google Ads are for gold selling or power leveling services, or various gold or leveling guides. And I really don't want to advertise those.
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