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Let the Blogger (and Bagel Eater) Beware

When the going gets tough, the tax collector gets creative—or so it would seem, given two recent developments that border on the bizarre.

Amateur bloggers are suddenly discovering that, unbeknownst to them, they have been running a business—and

September 27, 2010

When the going gets tough, the tax collector gets creative—or so it would seem, given two recent developments that border on the bizarre.

Amateur bloggers are suddenly discovering that, unbeknownst to them, they have been running a business—and the City of Philadelphia wants its cut. The City has informed a number of bloggers that they owe $300 for business privilege licenses, as well as wage tax, business privilege tax, and of course taxes on any profits their sites bring in. The concept seems logical when applied to high-trafficked, well-known blogs, but the application of the business license tax—due to the provision that a license is required whether or not the business actually makes a profit—has angered some people who blog for fun, not profit, and earn only negligible amounts of cash in the process. One Philadelphian was required to purchase a license and pay tax on a blog that had made $11 in two years, another for a blog that made $50 in three. The City’s argument is that selling advertising space in hopes of profit qualifies a blog as a business, regardless of whether it succeeds and even if the author views the blog as merely a hobby. But one can reasonably question the propriety of forcing bloggers to pay the City $300 for the privilege of earning $11.

Similarly, New York State is using its imagination to help ease Albany’s financial pain. The State has recently begun to enforce an obscure provision that levies the State sales tax on “sliced or prepared bagels (with cream cheese or other toppings).” The tax also applies to any bagel eaten in a store, even if the bagel maintains its bodily integrity and stays topping-free. The tax does not, however, apply to unprepared bagels purchased to go. Thus far, only Bruegger’s Bagels (a national chain that operates in upstate New York) has received an audit, but there may be more to come. Meanwhile, franchise owners and customers alike are a little baffled. That the tax applies to sliced bagels but not to other sliced bread products is perplexing. To help mitigate this problem, at least one franchise owner has posted signs in his stores explaining that the new tax is a result of a government mandate, not a decision by Bruegger’s to charge for slicing services. The sign also hints at the owner’s frustration with Albany, informing customers that the stores “apologize for this change and share in your frustration on this additional tax.”

So to slice, or not to slice? Whether it is worth incurring the additional charge is up to the New York consumer; just don’t blog about it in Philly.

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Elizabeth S. Cha, Associate
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