A nine digit employer identification number assigned by the United States Internal Revenue Service to business entities conducting business operations within the country. The number identifies your business to a variety of federal agencies tasked with the regulation of business.
The definitions can be tricky, but there are a few terms that are commonly interchanged for one another.
A Tax Identification Number or TIN is used by the IRS to differentiate the numbers it uses for tax purpose.
Numbers used for Identification are:
Any business except a sole proprietor that offers services or products that have any form of tax placed on them, then the business must acquire a Federal Tax ID number. If a business pays state taxes on personal services or pays state sales tax, then a Federal ID number is required. Typically if a business has employees and pays any taxes, it must be registered with a Federal ID.
A sole proprietor can provide their SSN number as the tax number for the business. No other number is required since the business owner files and pays taxes with their personal tax return.
Businesses that fall under this categorization of entities will use the EIN even if no employees are listed.
There is an exception to this rule. A single member LLC will use the Social Security number of the owner, NOT the Tax ID/EIN.
It is highly advisable that even tax-exempt organizations file for a Tax ID number. Regardless of whether the institution has employees, there may be circumstances when the EIN is needed.
No. A state tax ID is solely for state tax reporting. Any state that a business may have offices or employees will have to pay the state taxes there. It is feasible that a business could have multiple state tax ID’s, thus making it a difficult identifier. Only one federal ID will be issued and it supersedes that of the state.
There is no fee to apply for a Federal Tax ID, however you may be required to pay for entity classification at the time of application.
No. This number is unique to a single business. Even if a business requests a change, the number will not be re-assigned to a new business.
If you are unsure of the business entity classification and before attempting the process yourself, contact C.E. Thorn, CPA regarding our services by completing the online contact form or by calling 919-420-0092.