What is the difference between an EIN and State ID Number?
Most often asked question by our callers is the difference between Employer Identification Number (EIN) and State Identification Number or also known as (Sales Tax Number).
- EIN assigns by the Internal Revenue Service to a corporation, LLC, partnership or any legal entity registered with the secretary of state to file taxes or to open a bank account..
- The Internal Revenue Service assigns an EIN to sole proprietor if hiring employee(s).
- The state assigns a tax id number to collect sales tax from the end-user or buying products from suppliers to re-sell to end users.
- An EIN is used to file business taxes and State ID Number is used to file Sales Taxes.
- To cancel EIN, you have to send a request to the Internal Revenue Service and to cancel state ID Number, you have to send a request to the state along with the last return.
Sales tax id number or sales tax exemption certificate is a legal document issued by the state. This certificate of authority gives your business the authority to collect the required sales and use taxes, and to issue right sales tax exemption documents, including resale certificates used for purchasing inventory.
Sales tax id number, also known as:
- Reseller permit
- Sales tax vendor id number
- Sales tax registration
- Reseller tax id
- Sales tax permit
- Reseller certificate and
- Sales tax exemption certificate
- Certificate of authority
- Sales tax ID number
- CRS Number
- County vendor license
- General excise tax
A sales tax or a retail sale is a tax on the end-purchase of a good and provision of services including internet sales. Normally sales tax is levied on 'tangible personal property'; it has to be movable. Intangible property (e.g. stocks and bonds) are excluded.
Sales taxes can be applied to tangible goods like food (in some states), clothing, cars, furniture, household items, and other goods. By comparison, the sales tax does not generally apply to landscaping services, attorney fees, private school tuition, stocks and bonds, real estate investments, and other purchases more typically made by higher-income families.
A seller has to charge sales tax if it has 'nexus' where it is located. Nexus, or physical presence, is established if a business maintains a temporary or permanent presence of people (employees, service people or independent sales/service agents) or property (inventory, offices, warehouses) in a given locality. There is no over-arching definition of nexus, so each taxing locality may define it differently - and many do, leading to endless problems for businesses which have operations in multiple states.
“Bottom Line Employer identification Number and State Identification Number are two separate documents assigned by the federal and state respectively”