Taxes on Digital Products and Online Courses: A 2026 Guide for Creators

Selling what you know online has turned into a real side business for a lot of people. Skool draws about 135,000 US searches a month, Gumroad about 90,000, Stan Store about 50,000, and Kajabi about 40,000, according to Semrush (October 2026).

The tax side hasn't caught up. Most guides to "taxes on digital products" are written by sales tax software companies, and they skip the part most creators actually need first: how much income tax you'll owe and what you can deduct.

This guide covers both taxes in one place, with a platform-by-platform table built from each company's own help pages as of October 8, 2026.

Still deciding what to sell? See the best digital products to sell in 2026, ranked by search demand.

Do you have to pay taxes on digital product and course sales?

Yes. Money from selling an online course, ebook, template, Lightroom preset, Notion dashboard, or paid community is taxable income. The IRS says income from online platforms must be reported whether or not you get a 1099 (IRS Gig Economy Tax Center).

What confuses most creators is that two separate taxes are involved, and they work very differently:

If you sell regularly and intend to make money, the IRS treats you as running a business, even if it's a side hustle. You report sales and expenses on Schedule C, and pay self-employment tax if your profit is $400 or more (IRS).

How each platform handles your taxes

This table is based on each platform's own help pages, terms, and pricing pages, as of October 8, 2026. Platforms change these policies often, so check your dashboard too.

A merchant of record (MoR) is the company that legally sells to your customer. When your platform is the merchant of record or a marketplace facilitator, it collects and pays the sales tax, not you.

Choosing between platforms? Check out our guide on selling digital products.

Will you get a 1099-K? The 2026 thresholds

Maybe not, and that doesn't change what you owe.

The $20,000 rule was restored by the One Big Beautiful Bill Act in 2025. It replaced the $600 threshold that had been scheduled to start, so anything you read saying "$600 for 2026" is wrong for 1099-Ks.

Some states use lower thresholds. Etsy, for example, says it sends 1099-Ks at $600 to sellers in Maryland, Massachusetts, Vermont, Virginia, and Washington, D.C., $1,000 in Illinois and New Jersey, and $2,500 in Arkansas (Etsy). Skool and Patreon list similar state rules.

A cheap course can keep you under the 200-transaction threshold. Selling a $197 course 142 times brings in about $28,000, and you still won't hit the 200-transaction threshold. Even if you don't get a 1099-K, you owe taxes on that income!

If you sell on several platforms, each one counts separately. You might earn $45,000 in total and get no 1099-K from anyone. Keep your own running total. Keeper can pull income from every connected account into one place, so you're not relying on forms that may never arrive.

Didn't get a 1099-K? Check out Keeper's guide on what to do if you don't receive a 1099.

Your 1099-K may overreport your actual earnings

A 1099-K shows your gross sales: the full amount buyers paid before fees, refunds, and chargebacks (IRS). You should report that gross figure, and then subtract fees, refunds, and chargebacks so you don't overpay taxes.

If a 1099-K is simply wrong, ask the issuer to correct it. If you can't get a corrected form, the IRS explains how to back out the error on your return (IRS).

Do you have to charge sales tax on digital products and online courses?

Often not personally, if your platform is the merchant of record. If it isn't, it depends on where your buyers live and what exactly you sell. Work through it in this order.

Step 1: Check whether your platform already handles it

If you sell through Skool, Gumroad, Lemon Squeezy, Etsy, Payhip, Thinkific Payments, or Teachable Payments, the platform collects and pays US sales tax on those sales. You generally don't register or file for them.

If you sell through Stan Store, Podia, Kajabi, your own Stripe checkout, or a Teachable custom gateway, sales tax is your responsibility.

Step 2: Figure out where you have "nexus"

Nexus is a connection to a state that's strong enough that the state can make you collect its sales tax. You almost always have it in the state where you live and work.

You can also have it in other states by selling a lot there. Since the Supreme Court's 2018 Wayfair decision, most states require out-of-state sellers to collect once they pass $100,000 in sales into that state in a year (Streamlined Sales Tax). California, Texas, and New York set the bar at $500,000.

Some states also count transactions (often 200 sales), but that test is disappearing. Illinois dropped it on January 1, 2026 (Illinois DOR), and Kentucky on August 1, 2026 (Kentucky DOR).

For most creators and sellers doing under six figures, it's typically your home state.

Step 3: Check whether that state taxes what you sell

States don't treat digital goods the same way. Five states (Alaska, Delaware, Montana, New Hampshire, and Oregon) have no statewide sales tax. Alaska does have local sales taxes. The rest fall roughly into three groups:

• states that tax digital goods, like ebooks, audio, and video downloads

• states that tax them only in some forms, such as permanent downloads but not streaming

• states that exempt them

Online courses are the murkiest category. A common pattern:

• Pre-recorded, on-demand course content is the most likely to be taxed, because states treat it like a digital video or software.

• Live, real-time classes are often exempt.

• One-on-one coaching is generally treated as a nontaxable service.

Here's how some large states handle it as of October 2026:

If your product mixes formats, like a course with live Q&A calls and a community, the rules can treat the whole bundle as taxable. That's worth a quick check with a tax pro or your state's revenue department before you build it.

Collected sales tax is not your income. When the tax is charged to the buyer, the IRS says not to include it in gross receipts, and you don't deduct it when you pay it to the state (Schedule C instructions).

What about customers in the EU, UK, and other countries?

If you're not based in the EU, you owe EU VAT on digital sales to EU consumers from the first sale. There's no minimum threshold for non-EU sellers (European Commission). The UK works the same way (GOV.UK).

This is the best practical reason to use a merchant-of-record platform. Skool, Gumroad, Lemon Squeezy, and Teachable handle foreign VAT for you. If you sell through your own Stripe account on Stan or Podia, foreign VAT is technically your job.

How much income tax will you owe on course and digital product sales?

You'll owe two federal taxes on your profit, which is sales minus refunds and business expenses. Most states add income tax too.

• Self-employment tax: 15.3%. This covers Social Security and Medicare. It applies to 92.35% of your profit, so the effective rate is about 14.1%. The Social Security portion stops at $184,500 of combined wages and self-employment earnings in 2026 (SSA). See what is self-employment tax.

• Income tax at your regular rates. Your creator profit is added to any other income, like a day job.

Two deductions shrink the income tax part:

• Half of your self-employment tax.

• The qualified business income (QBI) deduction, which is generally up to 20% of your profit. It's now permanent (Rev. Proc. 2025-32). Selling courses isn't a "specified service" business under the QBI rules, because the IRS definition of consulting expressly excludes "training and educational courses" (Treas. Reg. 1.199A-5). That only matters if your taxable income is above $201,750 (single) or $403,500 (married filing jointly) in 2026. See our QBI deduction guide.

Let's see an example

Maya sells a $197 Canva design course on Kajabi and runs a $49-a-month community on Skool, on top of her W-2 job.

Meet Maya

She sells a course and runs a paid community on the side

Here's her 2026 tax picture.

Course and community sales$42,000

Refunds and business expenses$15,700

Day jobW-2, 22% bracket

Filing statusSingle

StateFlorida (no income tax)

Neither platform sends her a 1099-K. Her Kajabi sales were under 200 transactions, and her Skool sales were under $20,000. She still reports all $42,000.

Here's roughly how her extra federal tax adds up:

That's about 30% of her profit, or 19% of her gross sales. Because she owes more than $1,000, she should be making quarterly estimated payments or having more withheld from her paycheck.

Simplified example. It assumes all of Maya's creator profit stays in the 22% bracket and that her W-2 income already uses up her standard deduction. Subtracting her $15,700 in refunds and expenses saved her roughly $4,790 in federal tax.

Why tracking expenses reduces your taxes

Digital products have unusually high expenses for a side business. Ad spend, platform subscriptions, transaction fees, software, and freelancers add up fast. All of these expenses are tax write-offs that lower your taxable income, so each dollar reduces both your income tax and your self-employment tax.

Using the same math as Maya's example, every $1,000 of business expenses you claim saves about $305 in federal tax in the 22% bracket, or about $231 in the 12% bracket. Miss $5,000 of ad spend and subscriptions, and you overpay by roughly $1,500.

How much to set aside from each sale

How we got these: self-employment tax of about 14.1% of profit, plus income tax on profit after the half-SE-tax and 20% QBI deductions. Add your state's income tax rate. If your income is low enough that the standard deduction covers it, you'll owe less.

Not sure which bracket you're in? Try Keeper's tax bracket calculator or 1099 tax calculator.

Do you need to pay quarterly estimated taxes?

If you expect to owe $1,000 or more when you file, the IRS wants you to pay during the year (2026 Form 1040-ES).

You won't owe an underpayment penalty if your payments and withholding cover at least 90% of this year's tax, or 100% of last year's (110% if last year's AGI was over $150,000).

If you also have a W-2 job, you can raise your paycheck withholding instead, using Step 4(c) of a new Form W-4. Withholding counts as if it were paid evenly through the year, so it can catch you up even late in the year (IRS Pub. 505).

Missed a payment? See what happens if you miss a quarterly payment, and use Keeper's estimated tax penalty calculator to see what the underpayment penalty could cost you.

What can course creators and digital product sellers write off?

You can deduct ordinary and necessary costs of running the business. For anything that's part personal and part business, deduct only the business share (IRS Pub. 334).

A note on big production budgets. If you spend heavily to film a course before launch, the tax rules for when you can deduct those costs aren't fully settled for online courses. Most small creators deduct them as they go. If you're spending thousands on production before you've made a sale, ask a tax pro about timing and start-up cost rules.

Don't want to dig through a year of card statements? Keeper scans your bank and credit card transactions for write-offs like ad spend, Kajabi and Skool subscriptions, and software, then files your taxes with every deduction included.

Affiliate commissions and other creator income

Not all creator income comes from selling your own product.

Affiliate commissions. Skool pays affiliates 40% of the subscription price for people they refer (Skool). Gumroad, Kajabi, and Lemon Squeezy run affiliate programs too. Commissions are self-employment income. A business that pays you $2,000 or more directly in 2026 should send a 1099-NEC, but report the income either way.

Brand deals and sponsorships from your audience go on the same Schedule C. Our influencer and creator tax guide covers gifted products and sponsorships.

Is selling digital products a business or a hobby?

If you're actively marketing and selling, it's almost certainly a business. That's good news: hobby income is still taxable, but hobby expenses aren't deductible at all, and that rule is now permanent (26 U.S.C. 67).

The IRS looks at things like whether you run it in a businesslike way, keep records, and are trying to make a profit (IRS). Our business vs. hobby guide covers the factors.

You don't need an LLC to deduct business expenses or file a Schedule C. See do you need an LLC to deduct business expenses. An LLC can help with liability. An S corp election can lower self-employment tax once profits are consistently high, but it adds payroll and costs. Run your numbers with the S corp savings calculator.

How to file taxes on digital product and course income, step by step

1. Add up gross sales from every platform. Use 1099-Ks if you got them, and platform dashboards or payout reports if you didn't. Keeper can total income across connected accounts for you.

2. Back out what isn't income. Sales tax or VAT your platform collected doesn't count as gross receipts.

3. List refunds and chargebacks for Schedule C line 2.

4. Total your business expenses, including fees, ads, subscriptions, freelancers, and equipment. Keep receipts or statements.

5. Fill out Schedule C with your gross receipts and expenses. Choose a business code that fits. Many course creators use 611000 (educational services), and many digital product sellers use 454110 (electronic shopping). See business codes.

6. Fill out Schedule SE if your profit is $400 or more (Schedule SE instructions).

7. Claim the QBI deduction (Form 8995) and the deduction for half your self-employment tax.

8. File your state sales tax returns if your platform doesn't collect and remit for you.

9. Subtract the estimated payments you made and pay the balance by April 15, 2027. A filing extension gives you more time to file, not to pay.

Our step-by-step guide to self-employment taxes goes deeper on each form.

This article is for general education and isn't tax advice for your specific situation. Tax figures are for tax year 2026. Platform policies were checked against each company's help pages on October 8, 2026, and federal rules against IRS sources.