There are many posts on the internet discussing whether Empower Network is a scam or not. Usually they argue that Empower Network is a scam due to its recruiting scheme. In this blog post I will not be discussing the intricacies of whether Empower Network and the way they recruit people is ethical or legal. Rather in this post I will be discussing if whether the way individual Empower Network members run their business is legal or not.
One thing a lot of people don’t realize is that once you start your own business, you instantly are playing by a different set of rules than just a regular w-2 employee. It is your responsibility to know these rules and play by them, whether or not you are even aware of them. One of the major set of rules you need to learn about and play by is the tax code on both the national, state and local levels.
Unfortunately, this is one area where the entire make money online marketing niche falls flat on their faces, including Empower Network. Almost all internet marketing training courses solely focus on is how to make money. I’ve yet to find a single internet marketing training that says more than you should open a separate bank account and have a separate credit card to track expenses. In fact, I’ve only come across one training course that even said that.
What most internet training programs don’t tell you is that once you start making money online, then that income that you are making has the potential to be taxable income. Even more, is that depending on how much money you are making you might have to make estimated tax payments throughout the year. If you don’t then you risk accruing penalties for not paying them on time.
Recently in the case of Empower Network, I’ve seen several members utilizing Facebook to try to recruit new members and enhance their down line. Most of the time their pitch is that they are going to show you how they used a method to generate up to “$XX,XXX in one month” or “$X,XXX in 30 days”.
When I saw these posts I became intrigued. I know that they are based out of Hawaii. One of the interesting things about Hawaii, is that when you start any kind of business you are required to get a basic business license and general excise tax license even if you are just a sole proprietor. Another interesting fact is that you can do a general excise tax search and search by taxpayer name or business name.
Me being the curious guy that I am, I decided to do some research to see if some of these people who are claiming to be making all this money were even complying with their local tax laws. I was actually shocked to find that a lot of them didn’t have a general excise tax license.
What follows is solely by personal opinion and personal interpretation of Hawaii general excise tax rules. They may be correct or incorrect, but I’ve tried to make it as accurate as possible.
People promoting Empower Network might be mistakenly thinking that even though their business is all online this means that they don’t have to have a business license. If they were a resident of a state other than Hawaii I might accept that argument(assuming they were complying with the other state’s tax laws), however they are a resident of Hawaii. As such they still need a general excise tax license and they still need to report the income even if the income is excluded from the general excise tax. The last time I checked the general excise tax guidance books, it said that non-tangible items were excluded from the general excise tax, so the internet marketing items would fall underneath that exclusion.
Things get really interesting when they started promoting a local event called the Hawaii Internet Alliance. Basically, what they do is hold events at the Blaisdell with the intent of trying to get you to sign up for the Empower Network. Now, when they were doing all of their marketing online, all of their income could have been excluded because they didn’t have a presence in Hawaii. Now that they have started having this event in Hawaii they have a physical presence. As such, they should be paying general excise tax on their earnings that resulted from these events. As you can imagine that could get really tricky in trying to pay the general excise tax on the income that was generated at the events and exclude it from the income that was generated online.
I guess the whole point of this post was just to warn you that just because someone is making a lot money online, doesn’t mean they are savvy when it comes to all the other things that come along with running a business such as tax reporting requirements. If they aren’t complying with tax requirements then they are in essence running an illegal business. Be careful, if you start making money in a part-time business be sure to consult with an accountant to make sure you are complying with local tax laws.