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Monday, August 23, 2010

(Business) License to Blog

Philadelphia is now charging bloggers $300 for a business license.  One of the bloggers being charged the licensing fee made a grand total of $11 off of his blog.  Forcing bloggers to pay the fee may be penny wise from a revenue raising perspective, but it is pound foolish with regard to fostering the richness of public discourse. 

Posted by Lyrissa Lidsky on August 23, 2010 at 02:48 PM in Blogging, Lyrissa Lidsky | Permalink


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My understanding is that there is no license necessary for a blog, per se, but only for a blog that carries paid advertisements or otherwise has some revenue-generating means.

Posted by: Eric E. Johnson | Aug 26, 2010 3:24:41 PM

Which are all well and good, except I think the real question is whether Philadelphia has the power to levy the tax. It may. Then again, the tax structure of many states will likely prohibit it.

A simple example of the limitations is the power granted to local authorities to tax businesses. Some states limit this power to taxing business with their essential base of operations in the local jurisdiction. The question here is what is the situs of the business?

And no, it is not always the case that you can rely on where the money ends up to determine situs. It is as often the predominant location of the business's resources and properties.

Finally, a $300 base tax for the 'privilege' of doing business is quite different than those found in the cases listed.

Leathers v. Medlock dealt with a tax on sales receipts. A 1% tax was levied against sales receipts, including those of cable TV operators, but it exempted Newspapers. The Cable operators sued on the grounds the differentiation between two types of media outlets raised free speech implications. The Supreme Court disagreed.

The major distinguishing characteristic here is that the tax imposed was a percentage of receipts, not a flat fee requirement of entry into business. Therefore, the question is not whether Blogs can be taxed, but whether the Philadelphia privilege tax chills free speech by prohibiting expression absent a "business privilege license" that costs $300.

Cohen is distinguishable exactly because that case was whether First Amendment rights could trump general, common-law rules for contract recovery. In the Philadelphia tax, the question is not whether Blogs can be taxed if they produce income (a generally applicable law), but whether the tax goes beyond reaso and thereby chills free speech.

If, as a citizen of Philadelphia, I am barred from speaking through a Blog unless I pay a $300 business privilege tax or forego any and all money made through said Blog, then I believe there are arguments for this having a chilling effect on free speech.

Unlike Medlock, the tax is a flat fee that is not related to a percentage of income. My suspicion is that there must be exemption categories that disallow the license requirement for hobbies. If that is so, then I do not think the tax is a burden. The chilling aspect would become moot because a speaker can keep it a hobby and, thereby, not be taxed.

Otherwise, I think it is an interesting question. My knowledge of constitutional law, it's varied tests, and the specifics of free speech has become limited since law school . Nevertheless, my instincts are that the burdens imposed are enough for a willing court to find against Philadelphia.

Just as a quick example of the limits of a government to impose fees or burdens on media organizations:

In Georgia, local governments cannot impose burdensome fees or penalties on companies who produce and distribute fliers to mailboxes and car windshields. These burdens have been found to violate free speech protections by create too high a bar to speakers.

This does differ in that it targets speech, whereas the business license requirement in Philadelphia appears to target any source of revenue regardless of if it is speech or some other source.

I'd be interested to see more on Philadelphia's power to tax under the Pennsylvania constitution and the specifics of the licensing fee. It's also important to remember that cities have been known in the past to try and levy taxes where they cannot. Another quick Georgia example was an attempt by Atlanta to require attorneys to obtain business licenses. This violated Georgia's constitution, was allowed to proceed through class action, and a refund was issued to the entirety of the class.

Posted by: John Nelson | Aug 26, 2010 10:01:38 AM

Here are some possible First Amendment arguments. One argument is that the application of content-neutral, generally applicable laws to the press (bloggers) does not offend the First Amendment. Cohen v. Cowles Media Co., 501 U.S. 663, holds that "generally applicable laws do not offend the First Amendment simply because their enforcement against the press has incidental effects on its ability to gather and report the news." But is Cohen distinguishable because it dealt with a promissory estoppel claim for burning a source, and thus involved a "self-imposed restriction" by the press defendant on itself? Is it distinguishable because it involved newsgathering predominantly? Another argument is that the fee is a content-neutral restriction that imposes an incidental burden on speech, in which case United States v. O'Brien's intermediate scrutiny applies. Yet another argument is that it is a "taxation of the press case," in which case it is governed by the principles of Leathers v. Medlock, 499 U.S. 439. Since it is a tax/fee of general applicability that doesn't single out the press, doesn't target the press/speakers, is content-neutral, and doesn't appear to be a purposeful attempt to chill speech, those burdened by the tax/licensing fee don't receive any special First Amendment solicitude. (Leathers: "Differential taxation of speakers, even members of the press, does not implicate the First Amendment unless the tax is directed at, or presents the danger of suppressing, particular ideas.") See also Regan v. Taxation without Representation re selective taxation of speech.

Posted by: Lyrissa | Aug 24, 2010 4:17:56 PM

I second the First Amendment query. I do not think getting a small amount of ad revenue for blogging is worthless if it helps pay for, say, website hosting unless the business licensing fee can be levied.

My instincts are that it cannot. Or, if it can, then there must be a way to avoid it for these marginal cases. For example, if the blog can be designated as a hobby rather than a business then no fee is required.

Posted by: John Nelson | Aug 24, 2010 2:46:21 PM

Not that Philadelphia's plan is a good idea, but this reinforces something I've been saying for a while: for some bloggers, the small amounts of money you can make running ads on your blog aren't worth it.

Posted by: James Grimmelmann | Aug 24, 2010 7:53:11 AM

Not just a pound foolish; isn't there a First Amendment problem here? I think there's some case law saying that the fee for licensing a protected activity must be reasonably related to the cost of regulating the activity. Doesn't seem likely that Philadelphia is spending $300 per blogger regulating.

Posted by: Kibbitzer | Aug 23, 2010 2:56:58 PM

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