In 2016, 25 million Americans were running their own business or were considering starting a business. If you’re in the same position, you might be wondering about getting a sales tax number vs. EIN.
But what are the differences between the two? Choosing the right one ensures that your business will run smoothly and help you be successful.
Keep reading to learn about which option is the best choice for you and your business.
What Is a Sales Tax Number?
A sales tax number is also sometimes referred to as a TIN, and it’s a nine-digit number that the IRS gives you. Every company that is doing business in the United States needs to have this tax ID.
There are some businesses in the United States that have different names, so the tax ID is what helps to separate them. However, the state, local governments, banks, vendors, and creditors can identify your business through this ID.
You’ll also need it in order to open a bank account for your business. You’ll also need it to hire employees, obtain licenses, and fill out any taxes.
But how do you know if you need a tax ID? If you have employees, then you’ll need one of these IDs. You’ll also need it if you’re running your business as an LLC, limited partnership, or corporation.
You’ll also need it if you don’t want to use your own social security number (SSN) for your business. The sales tax number will act as your sales tax number.
How to Get a Sales Tax Number
If you qualify to get a sales tax number, then you’ll need to fill out the IRS form W-7. You’ll need to confirm your identity and your citizenship status. You also have to have a federal income tax.
There are acceptance agents out there who can help you file this report with the IRS to speed the process along.
However, keep in mind that you can’t claim any earned income tax credit if you’re going to use this number to file your taxes.
What Is an EIN?
An Employer Identification Number (EIN) is a unique number that is assigned to businesses for tax purposes. This is similar to the tax identification number, but instead of being used by individuals, it’ll identify a business as a whole for tax purposes.
You’ll need this in order to have a legal business in the United States. You’ll also need this number to open up any bank accounts for your business, apply for licenses, and file any tax returns.
Regardless of what type of business you are in, if you have any employees, you’ll also need to have an EIN. The IRS also has a quiz on their website to help you determine if you truly need it.
Even if you aren’t required to get the EIN, it’s still recommended that you get one. When people’s identities are being stolen, someone could steal your business from you and apply for their own EIN.
When this happens, it’ll be very difficult to get your business back. It’s always best to file for one anyway. ”
How to Get an EIN
Getting an EIN is very easy to do, and you can go on the IRS website and get it for free. There’s no downside to getting one, even if you don’t really need it.
When you apply online, your application should be completed and reviewed in a day or two. You’ll just need to complete an SS-4 Form. They will validate your information and then issue you the EIN.
This is open to any business that has a legal residence in the United States.
However, there are also options to apply by fax, phone, or mail. If you apply through the mail, keep in mind that this process could take up to four weeks. You’ll need to get the Form SS-4, fill it out, and file it at the IRS office in your state.
After they verify all of your information, they will mail you the EIN to the physical location that you listed on your application.
So how do you know which number you need to get for your business? One of the main differences is that an EIN can be a type of TIN. But SSNs are also a type of TIN.
You can use a TIN in all kinds of different ways, but the EIN will only be able to be used for filing business taxes. It’s also only available to residents of the United States.
The TIN is just a broader definition for different types of numbers that you can use to report tax and income.
Keep in mind that if you’re going to have employees, use a sales tax automation setup service, or be selling products and services, you’ll need to have an EIN or some other type of identification.
Learn More About a Sales Tax Number vs. EIN
These are only a few key things to know about a sales tax number vs. EIN, but there are many more differences.
If you’re starting a business, talk with a tax accountant in order to make sure that everything is set up properly. They will know all of the laws and regulations to ensure that your business is run legally so that you don’t run into any future problems.
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