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Sales Tax for Teacher Sellers with Katherine Tucker | Selling on Your Site (Ep 24)

Sales Tax for Teacher Sellers

More and more teacher sellers are beginning to expand their offerings by opening website stores, selling physical products, or creating courses and memberships. If you fall into this category, there’s a very important topic that you need to know about – sales tax for teacher sellers.

We need to know the ins and outs of sales tax so that we can ensure we’re doing what’s necessary to keep our business in compliance with the laws around sales tax. This can be kind of a scary topic, so I’ve brought in sales tax expert, Katherine Tucker. 

Katherine Tucker is giving us all kinds of crucial information on sales tax for teacher sellers. She’s diving into all the important details like when we should start worrying about sales tax, what to do if we find that we need to be collecting sales tax, and most importantly…what in the world do we do if we discover that we should have started collecting sales tax a long time ago?

If you are completely overwhelmed by this conversation on sales tax for teacher sellers, here is Katherine’s 5-step approach for how to take action on sales tax:

  1. Determine in which states your business has Nexus
  2. Based on those states, determine which ones tax digital goods or digital products. This will let you know where you need to register and file.
  3. Determine if you have the capacity within your business to handle sales tax or if you should hire it out.
  4. Choose a sales platform that integrates with Avalara or Tax Jar.
  5. Register and then start collecting sales tax on your sales to the states where you have Nexus.

3:40 When teacher authors need to start worrying about sales tax

6:20 What Nexus is, and what it means for you as a teacher seller

11:39 What to do if you find out that you have Nexus in your state, plus tools you can use to stay sales tax compliance 

21:52 Advice on what to do if you already have a store, course, or membership and haven’t been doing anything with sales tax yet

24:10 The first step you should be taking if you want to open up a website store and are concerned about sales tax

Our Guest on This Episode:

sales-tax-for-teacher-sellers-katherine-tucker Katherine Tucker is a spunky accountant who helps TpT sellers with two important pieces of their business: bookkeeping and sales tax.  Katherine believes it is imperative for all Teacherpreneurs to understand the financial state of their businesses, and with the rise of TpTers selling courses, memberships, and digital goods on websites outside of TpT, sales tax is more important than ever.

Katherine has been working with TpT sellers since April 2021 and is the creator of the online, self-paced course “The Teacherpreneur’s Sales Tax Roadmap”.  She is a Certified Public Accountant (CPA) with bachelor’s and master’s degrees in Accounting from Clemson University.  She worked in the corporate world for five years as a tax accountant and then a financial analyst before she took the entrepreneurial leap.  She enjoys being an entrepreneur because it allows her to combine her experience and knowledge in accounting with her passion for people.

You can connect with Katherine on Instagram @kpt.cpa or on her website. Download her freebie on sales tax for teacher sellers here.

Kristen
Hey y’all thank you so much for tuning into this episode of the Savvy Teacher Seller.

Kristen
Today, I have a special guest with me for this second episode in our series on selling on your own website. Katherine Tucker is an accountant who helps TPT sellers with two very important pieces of our business that we probably all hate thinking about bookkeeping and sales tax. And today we’re talking with her about sales tax. Because with more and more TPT sellers branching out starting to sell our resources on our own websites, and even selling courses and memberships.

Kristen
Sales tax is an important topic that we all need to know a little bit about, so that we can decide what we need to be doing to keep our business in compliance with the laws around sales tax. In today’s episode, Katherine is sharing with us when we as TPT sellers need to start thinking about sales tax, what we should do if we discover that we need to be collecting sales tax. And then the big question, what should we do if we discover that we should have been collecting sales tax for a long time, and we haven’t been doing that on our website. So let’s dive in. I know you’re going to enjoy this interview, and you’re going to learn so much because I learned a lot from her just in recording it.Let’s get to the show.

Kristen
Hey, TPT sellers ready to seek growth in your business? You’re in the right place. Welcome to the savvy teacher seller. I’m Kristen Doyle. And I’m here to give you no fluff tools and strategies that will really make an impact on your sales. Let’s get started y’all.

Kristen
Hello, Katherine, I’m so excited to have you here today to talk all about sales tax. Thank you so much for being here.

Katherine
Hey, Kristen. Thanks for having me.

Kristen
I’m so pumped to be here. So can you just tell us a little bit more about yourself?I know you are an accountant. And you did not start out working for teacher others obviously. So tell us a little bit more about how you got into this specific kind of niche.

Katherine
Yeah, so I have a really good friend here in my hometown, who sells on TPT. And she started telling me about her side hustle, probably, I think it’s been about six years now. And she would work on it, you know, nights and weekends. And after a baby went to sleep just like you hear a lot of TPT sellers do. And so I started learning about it then. And in the spring of 2021, I started doing some bookkeeping on the side of buy them full time job for a TPT seller. And I really enjoyed it.

Katherine
So I just started doing that on the side of my job, before I left my job. And then one TPT seller led to another which led to another and started bookkeeping, but then one seller in one of the TPT Facebook groups said, Did you help with sales tax, and at the time, I was not doing any sales tax. But then I thought, well, somebody needs to. So that’s how I got into the sales tax specifically.

Kristen
So cool. And it does just spin kind of the wheels just start rolling and one thing leads to another and suddenly here you are, right.

Katherine
I know here we are. Yeah, it’s crazy to think it’s been over a year and a half now working with TPT sellers, but it’s so fun learning about just all that everyone is doing in the teacher-prenuer world. It’s amazing.

Kristen
It really is. I think we have some of the most interesting client base as far as who we were able to work with. So lots of TPT sellers right now are talking about opening up their own stores and things and let’s talk a little bit about sales tax for teacher sellers. When did teacher authors TPT sellers need to start worrying about sales tax?

Katherine
Okay, so yes, this is a big topic right now, like you said, if TPT sellers are planning to sell their digital resources, or a course or a membership, or anything really outside of TPT, that’s when they need to start thinking about sales tax. I’ve met a couple of TPT sellers who are selling physical goods, and they would definitely need to start thinking about it. But even if you’re just selling digital resources, the second that you start selling them anywhere outside of TPT, which is handling the sales tax for you, that’s when you need to start figuring out what you need to do.

Kristen
Right. So if we’re only on TPT, we can bury our head in the sand a little bit. But if we’re selling on our own site or courses or membership, then thinking about sales tax.

Katherine
Exactly. One thing to keep in mind if you are selling on TPT only is that that’s kind of where that commission money is going when you’re paying TPT a percentage is they’re doing a lot of that legwork for you which is awesome because you don’t have to worry about sales tax.

Kristen
Yeah, it is super helpful. So one thing that I originally thought and I’m pretty sure that it is not true. Do we only need to collect sales tax in the state where we live That is not true anymore, correct?

Katherine
Yeah, that’s not true anymore. So there was a big, like, if you’ve been selling in TPT, for four or five years, you probably remember what happened in 2018, when everyone kind of started freaking out for lack of a better term over sales tax and what to do about sales taxes. Yes. And so that came about because Wayfair was shipping goods all over the country and South Dakota basically said, Hey, wait a minute, you need to you’re shipping things into our state, we need to be collecting sales tax on those sales. So that’s kind of what led to now the reason why we have to worry about sales tax, not only where we live, because sales tax, for the most part actually follows the buyer.

Katherine
So yes, it is really important to pay attention to the state in which you live and whether or not you need to collect sales tax on your sales to customers in your home state. But you also have to look out to where your sales are happening around the world. Because depending on how many sales you have, in each state, you may have an obligation to collect in other states as well.

Kristen
Right. And obviously deciding if we’re responsible for collecting sales tax, and then if so, which states are responsible for? Obviously, that’s a really important part of setting up a store or membership or anything like that off of TPT. And I know that that has to do with something called Nexus, can you just kind of quickly explain to us what that is? And what it means for us as sellers?

Katherine
Yes. So Nexus is pretty simple. It’s basically when you have enough of a relationship with a state and a presence in that state, whether physically or economically, that the state says you have nexus here, which means you need to collect and remit sales tax to your sales, which are made in our state. That’s what Nexus is.

Kristen
So basically, it’s the state saying you sell enough of your products to people in our state that you need to pay us sales tax.

Katherine
Exactly. Or you may have someone working in that state who is making sales on your behalf. And that can also trigger it, but mostly with TPT sellers, we’re looking at sales volume. Yes.

Kristen
So then how do we find out if we have nexus in certain states? Yes.

Katherine
Okay. So how you figure out if you have nexus in certain states is kind of a two prong test to simplify it for purposes of this conversation. You first want to look at your physical presence. So that’s where you are located, where your employees are your contractors. And then I mentioned earlier if you happen to sell physical tangible goods, like if you have swag T shirts, with your company name on them, or something like that, and you have inventory, so any of those people or inventory or storefronts. Which storefronts are also uncommon with TPT sellers, mostly people is what’s going to trigger physical presence in a state.

Katherine
So that’s the first test. The second is economic presence. And this is where I spend the majority of my time helping TPT sellers is around economic presence, which is your total sales in a state. And some states have just $1 threshold of sales, which can trigger Nexus by economic presence. But what really gets TPT sellers the most is the states which have a transaction count threshold in their state. So the ones that have that it’s a 200 count transaction threshold, which when you think about TPT sales, especially for sellers who have small dollar items, like your $3 items, those can really quickly add up to 200 transactions in the state.

Katherine
But yeah, so you have physical presence, and then economic presence. And one big thing to keep in mind is physical presence is going to trump economic presence. So let’s say for example, if you live in North Carolina, which does tax digital goods, and you operate your TPT business from North Carolina, but then you had zero or you might have had $50 in sales or 50 transactions there last year, you would still have nexus there, because you’re located there. Does that make sense?

Kristen
Yeah. And then the same would be true for employees or possibly even contractors?

Katherine
Yeah, possibly contractors. So the employee and contractor criteria is a little bit has a little bit of gray area. Because these rules and laws were built, for the most part before all of this remote work started happening, and which is true of most of the virtual assistants in the TPT. World. So if you had let’s go back even just 10 years ago, and you’re just a normal business, selling widgets around the country, if you had a salesperson, going into a state once a quarter for you to sell widgets on your behalf, that would trigger Nexus.

Katherine
But you can make a strong argument most of the time, if you have a contractor working in a state writing blog posts for you or doing your social media, they’re more than likely not boots on the ground making sales for you in that state. So again, gray area for sure. But you want to keep tabs on where you have contractors and employees and make sure for those states that you’ve paid special close attention to what the sales tax rules are in those states.

Kristen
Gotcha. That makes sense. And then is it true that some states count our TPT sales and then other states don’t count our TPT sales towards nexus.

Katherine
Yes, this is true. So some states require that you count your marketplace facilitator sales towards the threshold for Nexus. And of course, Teachers Pay Teachers is a marketplace facilitator. For example, I know North Carolina I keep using, I always pick on North Carolina, because I live in South Carolina, which doesn’t tax digital goods right now, but North Carolina does. But North Carolina does tax digital goods, and they do have the 200 count transaction threshold, and they do make you count your TPT sales towards the threshold.

Katherine
So you kind of want to make note, and states can change their laws literally at the blink of an eye. So I never want to say, you know, this state has this law. But as of right now, that’s what North Carolina has. So, definitely want to pay attention to the states, which do make you count those towards your threshold. Because basically, before you even open a website store, or start selling anything outside of TPT, you can already have nexus based on your TPT sales alone in those states, which do make you count their sales.

Kristen
Yeah. And so even though we don’t have to deal with the sales tax from the TPT, purchases, it can still affect whether or not we need to deal with sales tax on our website purchases.

Katherine
Exactly. And the way that would work with, again, North Carolina picking on them. But you would report let’s say you had $100 in sales last month to North Carolina, but $80 of that was for TPT, then your sales tax return would say like $100, gross sales less $80, exempt sales or marketplace sales, and then $20 of taxable sales. So that’s how it works.

Kristen
Right? So you’re not getting double taxed on it. It just counts toward whether or not you need it. So if we find out that we have nexus in a state, then what do we do?

Katherine
Okay, yes, the big question, What in the world are you supposed to do. So if you have nexus in the state, and that state collects tax on digital goods, then you will need to register for a sales tax license and begin collecting sales tax on all goods sold to customers in those states. So have to not only have nexus there, but also be in a state that collects tax on digital goods.

Kristen
So when it comes to figuring out how to collect and submit all of this sales tax, what tools do you recommend for us? I know most of us as TPT, sellers are talking about putting stores on our WordPress sites are something similar? So are there some tools or some plugins that you recommend that can help us with that?

Katherine
Yes, there are absolutely some tools that you can use within WooCommerce. And I would recommend Avalara, or tax jar. So I’ve found for whatever reason, in the TPT world, everyone’s heard of tax jar, but a lot of sellers have not heard of Avalara. But Avalara is actually older and more established and bigger than tax jar. So they do the same thing. It’s just a bigger company. But those are my two recommendations for end to end sales tax compliance. And what I mean by that is they not only help you to charge the sales tax, but those software’s help you to also file the sales tax returns.

Kristen
So when it comes to deciding which one of those to work with, I know a lot of us are also kind of exploring website platforms or selling platforms, I should say. So what platforms do you recommend? What platforms integrate with them? I guess, is the big question.

Katherine
Yes. Okay. So and I can also share links after you know, that you can put in the show notes for which sales platforms integrate with both of those software’s but the good news for you, because I know, Kristin, you like to work with WordPress WooCommerce. The good news there is that WooCommerce does integrate with both of those software’s so that is awesome news for people that are you know, already working with you. But I would say if you’re just getting started and you you don’t have a WordPress website yet, I would recommend using Shopify because it has what’s called a sales tax engine in the background.

Katherine
And what that means is that it tracks economic nexus for you, which is a pain if you have to do it manually. It also adds sales tax when appropriate. And then it makes the integration with Avalara, or tax jar much cheaper. But I do also recommend WooCommerce if you are kind of already on that track, because it integrates. But I guess the downside of just having a store outside of TPT is that neither Avalara nor tax jar integrates with TPT.

Katherine
Now this can get a little bit confusing. So you might say why would it need to integrate with TPT? If TPT is doing all the sales tax calculations for us? And the reason is just because like I was mentioning earlier, you still have to report those sales. So it gets a little bit tricky.

Kristen
Gotcha. So you would have some manual reporting, I’m assuming that you would need to do.

Katherine
Yes, exactly.

Kristen
So really, how often do you do that?

Katherine
Yeah, it depends on typically monthly Yes. And I have it down to an absolute science that i’m planning to share kind of with others so that they can follow the kind of model that I’ve set up for it. But yes, with both of the software’s you would have to upload a spreadsheet each month with your TPT sales. then it’s got to be in a certain format. But once you learn how to do it, it’s really not too bad. But yes, you do have to upload this TPT sales manually, unfortunately.

Kristen
Gotcha. So I know a lot of people just getting started look at the monthly cost for something like texture or Avalara. And they wonder like, Do I really have to have this? Is it worth the expense right now to be paying a monthly fee for this tech service on top of my store? So is it necessary to have one of those to be in compliance? Or are there some other option?

Katherine
Okay, I’m glad you asked. Because I do think people get totally overwhelmed when they start looking at the costs for Avalara and tax jar. So the good news is that you can charge sales tax and file your sales tax returns without using one of these softwares, you could either file the returns manually yourself, or you could train a virtual assistant or someone else to do it. The big key is that you just have the infrastructure in place to actually charge the tax. And so there are a couple of plugins within WooCommerce that provide a more economical solution for just charging the tax.

Katherine
I know I mentioned earlier, that Avalara and tax sharp provide end to end solutions. But if you just need help with just charging the tax, you can get a little bit of a cheaper plugin, and then file the returns yourself. But back to the big question is tax jar or Avalara. really necessary for sales tax compliance? It kind of depends on several things, including how many states you have nexus, and then how often you’ll be required to file and how much spare time you have on your hands.

Katherine
And I’m kind of joking in the last point, because I know, not many people who are teacherpreneurs have spare time. So what I really mean is do you want to? Do you want to fool with it or not? And can you afford one of the software’s or not? And if you can’t, you can always have the software later and just start out filing on your own in the beginning and see how bad it is.

Kristen
Yeah, you said that those are end to end solutions, can you kind of expand on what they do for you?

Katherine
Totally. So when I say end to end solutions, it really means from the time that someone checks out in your store. So, let’s use WooCommerce WordPress as an example, someone adds something to their cart. And as soon as they start, the plugin for either Avalara or tax jar that goes with WooCommerce would add the tax, and sales tax is a little complicated. The rates and the percentages can be all the way down to the city level.

Katherine
And the sales tax engines have Avalara, or tax jar would know exactly what percentage to add on to that sale. And then from that point, they would keep track of it within their software to tally your sales in each state throughout the month. And then at the end of the month, they filed the sales tax returns on your behalf and you have your payment accounts set up to connect it to either of the software’s. So they not only file the sales tax returns, but they pay the sales tax that you’ve collected on your behalf.

Kristen
So it’s almost a hands off type solution, aside from obviously having to bring in some TPT info.

Katherine
Yes, you hit the nail on the head, it is hands off except for uploading those TPT transactions.

Kristen
Yeah, definitely sounds like in a lot of situations, it’s probably worth the money to be able to kind of put that off on someone who’s an expert at it, and know that you’re not going to get into tax trouble.

Katherine
Yes, for sure.

Kristen
Yeah, one of my fears would be that I don’t know what I’m doing, and I do it wrong. And then I’m in trouble with different states over you know, a few pennies worth of sales tax.

Katherine
Exactly. Yeah, it can just be a few pennies. And so really, I encourage people just to, start out in compliance stay in compliance. It’s not, it is a little painful at the beginning, because there’s a learning curve. But once you figure it out, it’s really not bad.

Katherine
And I’ve got the uploading TPT sales to Avalara and tax jar, like I said, down to a science. It’s not that bad. It just takes practice in the beginning, but in my opinion, totally worth it. But I’m more cautious. I’m on the stay out of trouble side rather than, asking for forgiveness later.

Kristen
Yeah. So I know this whole conversation can feel super overwhelming for sellers. What advice would you give sellers that are just overwhelmed at the idea of sales tax? One of the comments I’ve seen a lot from sellers is I really want to start a store but I’m scared of sales tax. So what advice would you give to those sellers?

Katherine
Yes, I hear you on that it can be overwhelming. And so I would just start by saying to the TPT seller, you are not alone. Learning sales tax is no small feat. It is complicated, but just like anything else in life, I would encourage you to look at sales tax for your business just one step at a time. Okay, so I’m gonna break it down into about five steps.

Katherine
Step one would be to determine in which states your business has Nexus. Step two of those states, which ones tax digital goods or digital products, and so based on these two steps that determines where you need to register and file. So step three would be to determine if you have capacity within your business to handle sales tax, would you hire it out? Or would you do it yourself? Like, does it make sense for you at this point to move forward?

Katherine
Step four would be to choose a sales platform that integrates with Avalara, or tax jar just in case you eventually have nexus in a lot of states. So you may start out and say, I only have nexus in a couple of states, I don’t think I need one of those platforms. And that’s okay. But I would recommend go ahead and use a sales platform that integrates with those in case down the road, you have nexus in a ton of states, and you need an automation solution.

Kristen
That would keep you from having to move.

Katherine
Exactly, yes, you did not want to have to move your store, membership, or course, you don’t have to move everything over to something that integrates. Some storefronts that I would recommend which do integrate. And we’ve already talked about WooCommerce. And I think Shopify, but another one is Ecwid. It does integrate with tax jar, but not a Valera, which is fine, because tax jar is just as good as Avalara, it’s just a little bit different. So if you’re using Ecwid, I wouldn’t say you need to change. But if you haven’t started at all yet, on a store that I would recommend either Shopify or WooCommerce.

Katherine
Okay, so back to my steps, step five would be, you would have to register and then start collecting sales tax on your sales to the states where you have nexus and this is kind of a chicken egg scenario. So you can’t collect sales tax until you have a sales tax license in a state. But as soon as you have nexus, you’re supposed to be collecting sales tax. So it’s like, this is why I encourage people to figure it out. Yeah, before you start your store so that you kind of can go ahead and register and then the second that you turn on your store, like go live, you’re ready to start charging sales tax where you’re supposed to.

Kristen
That all makes sense. And we’ll make sure that those steps get put into the show notes also, so people can refer back to those. What about those sellers who maybe are listening right now and they’re thinking, Oh, no, I already have a store. I’m already selling things. I’m not doing anything with sales tax. Am I in huge trouble? What should they do?

Katherine
Okay, yes, so let me just calm everyone down, maybe take a deep breath, it’s going to be okay, you are likely not in a situation that you cannot get yourself out of, if you’ve been selling in a store for a while, and you’re not doing anything with sales tax. I would say the first step is just for you to figure out where you have nexus, you could do a big Nexus study and realize you only have nexus in a couple of states, or you could have it in multiple states. By doing that study will help you to hopefully feel relieved, so that you can figure out what you’re really dealing with. But if you do have to go back in time to file, there’s a couple of options. And you look at it and on a case by case basis.

Katherine
So if you owe a ton of money, and you were never collecting, and you feel like you can’t afford to go back and pay it, then you can go through a process with the individual state that you’re dealing with. And basically file a letter with them and ask them for forgiveness. Or you can go back in time and file the returns pay the tax, but that will come with interest and penalties. So before you panic, just figure out where you have nexus and then look at the scenario. And it’s probably not as bad as you think.

Kristen
Okay, so it’s definitely something fixable, and something that we should just start taking some steps and take it slow and figure out what needs to get solved. And just one step at a time.

Katherine
Exactly. And if you’ve been you know, if you’ve had your website shop, let’s say for two years, and you’re hearing about sales tax today, for the first time, what you do in the next month isn’t gonna matter that much. You’re already been out of compliance for a while. So they’re probably not going to show up at your door knocking trying to get their sales tax tomorrow. So I would just say, take a step back, take a deep breath, and then just start looking at trying to figure out where you have nexus and go from there. And it’ll be fine.

Kristen
Well, thank you so much for being here and talking us through all of this. I know it is overwhelming for me. So I’m sure it is for a lot of other sellers. I always like to leave people with an action steps. So what would you say is the first step that everyone should be taking? If they either have or they want to open up a website store? And they’re concerned about the sales tax part of things?

Katherine
Yes. And thank you for having me that I would say the first step is just to have a Nexus study done. Whether you find someone locally who does sales tax nexus studies, or you attempt to do a little research and figure it out yourself, the best way to try to do it yourself is within Excel. And I have as part of my course like a DIY Nexus study.

Katherine
But I’ve thought about maybe breaking it out as just a separate little mini course because it is really the first step of sales tax. But yeah, Nexus study is your first step. Whether you hire it out or try to do it yourself. That’s going to be your starting point for what you need to do from there. Awesome.

Kristen
So that is where we all need to start if we are a little panicked right now. Deep breaths and get a Nexus study.

Katherine
Yes, yes, exactly.

Kristen
Sounds good. Thank you so much. Well, you tell everybody where they can find you. And of course, we’ll put links in the show notes as well. But let everybody know where to find you and connect with you if they have other questions about sales tax or if they are looking to get your help.

Katherine
Yeah, and thanks again. Kristin. This has been so much fun doing this podcast with you. I remember someone first told me about you and they were like you have got to get in touch with her. She’s helping TPT sellers and you need help TPT sellers.

Katherine
But anyways, people can find me either on my Instagram, which is @kpt.cpa. And then also on my website, www.katherineptucker.com. Which I know you’ll put in the show notes. But yeah, that’s where I’m at.

Kristen
Thank you so much for being here. It was good talking with you.

Katherine
Yes, it’s good talking with you too.

Kristen
Thank you so much for listening to this episode. If you enjoyed it and you want to learn more about sales tax and how to keep your business in compliance. Make sure that you go follow Katherine on Instagram @kpt.cpa. And definitely take a look at the show notes to grab those steps that she laid out for us right at the end of the episode and to connect with her and download her freebie.

Kristen
Talk to you soon. I hope you enjoyed today’s episode. If you did, please share it with another teacher seller who would also find it helpful. For more resources on Growing Your TPT business. Head to Kristendoyle.co/TPT. Talk to you soon.

Ready to see growth in your business? You’re in the right place.

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About Your Host

Your host, Kristen Doyle, has a decade of experience selling on TpT and has made all the mistakes so that you don’t have to! As a web designer and the go-to SEO expert in the TpT world, she loves helping TpT sellers stand out in the crowd & grow their businesses with passive income strategies.

Tune in to hear Kristen cover all aspects of running a TpT business – from leveraging SEO, to improving product listings, to effective TpT seller strategies for your store and website.