A state tax ID is given to a business by the state to use when filing state taxes. Generally, states require these IDs for any business that is registered as a legal entity (LLC or corporation) or has employees. To get a state tax ID number, visit your official state tax website or use an online legal service.
How the State Tax ID Works
State tax IDs are necessary for any business that is filing business taxes or wants to hire employees. Once a business has a state tax ID, it can hire employees within that state and withhold a portion of their wages for payroll taxes. The state tax registration also identifies the business for purposes of unemployment and other state taxes.
If the business plans to hire employees from another state, it must also apply for a state tax ID there as well.
A benefit of the state tax ID is that it enables business owners to obtain a sales tax license and resale certificate. These documents let you buy inventory at wholesale prices without paying a sales tax and charge customers sales tax. However, depending on the state, this license and certification may require an additional application through the Department of Revenue.
The state tax ID name varies depending on your state. It may be referred to by:
- State EIN
- State employer ID
- State tax registration number
Keep in mind, the type of state tax registration you need may differ based on your business and the type of taxes you have to pay. For example, a company selling alcohol or fireworks may have a different process.
Tip: If you’re a sole proprietor, you may not need a state tax ID number. You can file your state and federal business income under your SSN. However, many small business owners prefer to get an EIN to protect against identity theft.
State Tax Identification Number vs EIN vs TIN
Many new business owners get confused between the state tax ID number, the employer identification number (EIN), and the taxpayer identification number (TIN).
The EIN is a nine-digit number assigned by the IRS. This number is required to
- Register the business as a legal entity (non-sole proprietorship)
- File federal income taxes
- Open a business bank account
- Apply for business licenses
Overall, the EIN is an important legal step to starting a business—every business that is an LLC or corporation will need an EIN. To get this number, visit the IRS EIN website to get it for free. Or for a small fee, an online legal service can obtain it for you.
A tax identification number (TIN) is an umbrella term that covers all identification numbers used to file taxes—it is not specifically for business. This term includes the SSN for individuals, a federal or state EIN for businesses, and the individual TIN (ITIN) for foreign individuals paying taxes in the US.
Do You Need a State Tax ID?
Whether you need a state tax ID depends on several factors. For example, if you’re a sole proprietor and don’t have employees, you may not need a state tax ID.
However, if you plan to hire employees for your business or sell goods or services, you will need to obtain the state tax ID number. In general, you should apply for a state tax ID if you:
- Sell goods or services: If your business sells products or services that are subject to state taxes, you should obtain a state tax ID—whether you plan to hire employees or not. Depending on your state, you may not need a state tax ID to pay business income taxes but will need to register for an ID to pay state sales and use taxes.
- Plan to hire employees: Businesses with employees are required to have a state tax ID to withhold employee income taxes and pay unemployment. If you plan to hire employees in multiple states, you’ll need a state tax ID for each of those states.
- Are a sole proprietor: Sole proprietors have the option of using their Social Security number as a tax ID. However, many business owners prefer not to use their SSN for this purpose because of the risk of identity theft. Utilizing a state tax ID instead can provide protection against these risks.
State Tax ID Costs
Most states do not charge businesses for a state tax ID. However, some states may charge as much as $100. In general, state ID requirements and application processes vary substantially. We recommend visiting your state’s Department of Revenue or another appropriate office to determine the cost and process of obtaining a state tax ID.
How to Get a State Tax ID Number
The process for getting a state tax ID number is usually pretty simple, but it varies by state. Also, the ID application process may differ based on the type of business you have and the type of taxes you need to pay.
- When starting a business, begin by getting a federal EIN from the IRS website.
- Then, visit your state’s Department of Revenue (DOR) website. Typically, the state tax information falls under the DOR’s website. However, it may differ for your state. If you get lost in your search, your state’s Secretary of State’s website can often point you in the right direction.
- Once you find the correct department website, follow the process to obtain a state tax ID.
Regardless of which department handles state tax IDs, most states offer a quick application process that can be completed online. To complete, you’ll need your EIN and basic business details.
State Tax ID Providers
If you find the process above confusing, or your state’s website cumbersome to navigate, consider using an online legal service.
For a fee, LegalZoom assists with obtaining the State Tax ID. Basically, it has experts who navigate the complicated local government websites to get you your state tax ID. Also, consider LegalZoom to help with other legal aspects of your business that may be confusing such as the state sales permit or business registration.
Frequently Asked Questions (FAQs) for the State Tax ID
Do I need a state tax ID number for my business?
Not every business needs a state tax ID number to operate. However, if you’re registering your business as a legal entity (LLC or corporation), you’ll need one. Or if you plan to hire employees for your business, you’ll need a state tax ID—or in some states called a withholding account ID—to properly withhold employee income taxes.
Is the EIN the same as the state tax ID?
An EIN (employer identification number) is a federal tax ID number that identifies businesses. This number is used to file taxes, open a business bank account, and conduct other business-related activities. This number must be obtained from the IRS and is also required for businesses to hire employees.
On the other hand, a state tax ID is a unique number issued by a state to a business. It also lets a business owner withhold an employee’s state income taxes. Keep in mind that you have to have a federal EIN before you can apply for a state tax ID.
How do I find my state tax ID number?
To obtain a state tax ID for the first time, contact your Secretary of State’s office to determine which state agency issues the relevant number. Then, visit the department’s website to request a new state tax ID.
If you were already assigned a state tax ID but can’t find it, contact your state’s relevant regulatory agency—the Department of Revenue or Office of Taxation —to retrieve the number.
How do I find my state tax ID to sell online?
If you’re selling goods or services online, you’ll still need a state tax ID to pay sales taxes and buy materials or inventory at wholesale prices.
For example, suppose you sell jewelry on Etsy. In that case, you’ll need to buy tools, raw materials, and shipping materials to create and sell your products. You won’t pay sales tax on those transactions. When you sell an item, you’ll collect sales tax as part of the transaction. A state tax ID number lets you buy materials at wholesale prices and pay taxes at the item sale.
If you have a legal business entity (LLC or corporation) or have employees, you must get a state tax ID to comply with state tax requirements. You can likely obtain this number from the Department of Revenue website. However, depending on the state, government offices differ by responsibilities. If you find your state’s process confusing, consider using an expert at an online legal service, such as LegalZoom, for a fee.