Sales taxes are complicated. The rules are endless, they’re different across states and provinces, and they change all the time. This is true for our customers, and it’s true for us here at Thinkific.
Within this ever-changing sales tax landscape, all web platforms like Thinkific are required to ensure sales tax is collected and remitted to the relevant tax authority on most US and Canadian sales.
So we’re in this together. And as part of our commitment to compliance (and making your life easier), we are now automating tax for your US and Canadian sales with our new Sales Tax Solution.
Why Thinkific has started charging Sales Tax where it’s due
- Governments have implemented marketplace facilitator laws that shift nexus thresholds from the sum of your business’s sales to that of all businesses using a marketplace facilitator.
- Thinkific is a marketplace facilitator. Check out our quick explanation below, or you can hire a team of tax experts and ask them! That’s what we did.
- The sales tax due is NOT based on where your business is. It is based on the tax rate for the product being sold in the student’s location.
What this means:
- Nexus thresholds are based on the sales of all creators on Thinkific, not your sales
- This is a new tax obligation for your business, collected and remitted by Thinkific.
- This was not optional for Thinkific.
What Thinkific Creators need to know about how Sales Tax works
- Sales tax will only be charged when it is legally required to be. If your product is not taxable in the student’s location, Thinkific will not collect tax.
- Thinkific has automatically set product categories to determine tax rates. Check out how to update them manually here.
- Thinkific charges 0.5% of all transaction volume for determining how much tax is due on a transaction (it must be calculated for every transaction), collecting tax when it is due, and remitting it to the right tax authority, on time.
What this means:
- Tax will not be charged on your products if it’s not supposed to be.
If you sell $50,000 this year, Thinkific will completely automate your sales tax administration for $250. We feel pretty great about the value we’re able to provide there.
There is nothing you have to do to become tax compliant.
What exactly are Marketplace Facilitator laws?
From Avalara:
Marketplace facilitator laws impose an obligation on the marketplace facilitator to collect and remit sales tax on behalf of marketplace sellers. These laws are significant because they shift the obligation to collect and remit sales tax from the seller to the platform that facilitates the sale (the marketplace facilitator).
Excerpts from Marketplace Facilitator Laws in the State of New York
The rules vary across each US state and Canadian province, but this gives you a sense of the regulation by way of example:
- “A marketplace provider is required to collect and remit sales tax on all taxable sales of tangible personal property (including sales of prewritten computer software that is downloaded or remotely accessed by the customer) that it facilitates for marketplace sellers, regardless of whether the marketplace seller is required to register for sales tax purposes.”
- “A marketplace provider cannot refuse to collect tax on a marketplace seller’s sales, even if the seller is registered for sales tax purposes.”
Related: Tax on Digital Products: A Beginner’s Guide
Why Thinkific is a Marketplace Facilitator as defined by State and Provincial Governments
From TaxJar (a Stripe company):
A marketplace facilitator is a business or organization that contracts with third parties to sell goods and services on its platform and facilitates retail sales. Marketplace facilitators enable these sales by listing the products, taking the payments, collecting receipts, and in some cases assisting in shipment.
Because Thinkific does the following, we are defined as a Marketplace Facilitator:
- Facilitates sales
- Lists the products
- Takes payment
- Creates receipts
- Facilitates delivery (aka shipment)
In this world nothing is certain… Except Death and Taxes
We know that any change in business can be concerning and take time to adjust to, and this is no exception. Unfortunately this one is legally required for all of us. However we’re doing our best to ensure this is as easy as possible for you and your business, and ideally we’ll add value in the process as well.
This automated Sales Tax Solution ensures compliance with the legal requirements and alleviates the responsibility from sellers, like you. That’s one less tedious thing to worry about, so you can focus on what you do best: growing your business.
Thanks so much for sharing your knowledge with the world on Thinkific.