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Identifying Tax & Accounting Requirements For Online Course Companies

You probably want your online course company to produce high-quality educational content. This may mean you don't have tons of time to spend on your online course company tax planning, bookkeeping, and accounting.

Sales tax may be the biggest online course company accounting challenges you face. Sales tax for those selling digital products is in a constant state of flux. Even if you are based outside of the United States but offer your course to students inside the United States, the United States tax laws may impact your online course company tax planning.

How the Wayfair Decision May Impact Your Online course Company Accounting

On June 21, 2018, the United States Supreme Court ruled in a five-four decision that states can force businesses that do not have a physical presence in the state but that engage in more than 200 transactions or $100,000 in-state sales to pay sales tax in that state.

So, if you sell your online course in multiple states, your online course company CPA may be responsible for helping you pay sales tax in those locations. Additionally, some states, like Connecticut, New Jersey, Minnesota, and Washington, have created marketplace facilitator laws. Under the requirements of these laws, online marketplaces you may use to sell your products or courses will need to collect sales tax on your behalf.

If in addition to using an online course service you have your own website and sell products or services through your website in a state like New Jersey or Washington, you may be responsible for collecting sales tax on those transactions. Fusion CPA has a team of online course company accountants who are experts in state tax regulations and who can help you keep your online course company in compliance with the law.

How Do You Know If Your Online Courses Are Taxable?

If your course includes downloadable materials, if it’s automated, or it's prerecorded, then generally it is taxable. However, each state has its own nuanced rules with some exceptions. The Streamline Sales and Use Tax Agreement, which has been adopted by many states, is working to standardize state tax policy to the extent possible. Still, your online course CPA should be familiar with state and local tax laws to make sure that you are not caught off guard by any variant of the law.

  • A large number of states follow the SSUTA guidelines state that if you present a course or seminar in real-time, then it is not taxed
  • If multiple participants connect with each other or with you in real-time, then the course is not taxed
  • If an actual human evaluates students, then according to the SSUTA guidelines, it’s not taxed

However, just because your business course is not considered taxable, it doesn’t mean that you won’t have to charge sales tax. Whether or not you have to charge sales tax depends on an online course company accounting principle called sales tax nexus.

A sales tax nexus can be defined as a physical presence, affiliate nexus, or click-through nexus. Physical presence is easy to understand. Wherever you or your business is physically located, you have to collect and pay sales tax. Affiliate can be defined as when you are affiliated with an individual or business in the state and you get students to sign up for your course by means of this connection. For example, if you use referrals, you might have a nexus in different states. A click-through nexus means that you receive business or students by sales on a website that is located in the state. For example, if you run ads on the website of a company located in California and those ads result in new sign-ups, your online course company accountant may need to file California state taxes.

How to Grow With Financial Stability and Tax Compliance Precision?

Tax planning for your online courses can be complicated. So, you or your online course company CPA needs to be up-to-date with federal and state tax laws everywhere you may do business. Here at Fusion CPA, we specialize in helping small to medium-size online course companies like yours with their tax planning, bookkeeping, and general accounting. Our team of online course company financial advisers is familiar with federal and state tax laws, and we can help you create a strategy to minimize your tax liability. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!

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This blog article is not intended to be the rendering of legal, accounting, tax advice, or other professional services. Articles are based on current or proposed tax rules at the time they are written, and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.