What Is a Federal Tax ID Number (EIN)?
A Federal Tax ID Number, also known as an Employer Identification Number (EIN), is issued by the Internal Revenue Service (IRS). It’s used to:
- File federal taxes
- Open a business bank account
- Hire employees
- Apply for federal licenses or permits
This number identifies your business at the federal level, much like a Social Security Number identifies individuals.
What Is a State Tax ID Number?
A State Tax ID Number (sometimes called a state EIN or state employer number) is issued by your state’s tax authority. You may need one if your business:
- Sells taxable goods or services
- Has employees
- Pays state taxes (income, sales, or excise tax)
- Operates in a state that requires business tax registration
This number is used to report and pay state-level taxes.
Key Differences: Federal vs. State Tax ID
| Feature | Federal Tax ID (EIN) | State Tax ID Number |
|---|---|---|
| Issued By | IRS (Federal) | State tax agency |
| Purpose | Federal taxes, payroll | State sales tax, payroll taxes |
| Required For | All employers, corporations | Businesses with state tax obligations |
| Application Website | irs.gov | Varies by state |
Do You Need Both?
Yes, in many cases, businesses need both a federal EIN and a state tax ID number. For example:
- A business with employees will need a federal EIN to report payroll taxes, and a state ID to report state employment taxes.
- A retail store needs a state ID to collect and remit sales tax, even if it already has an EIN.
How to Get a State or Federal Tax ID
- Federal EIN: Apply online for free at irs.gov.
- State Tax ID: Visit your state’s Department of Revenue website.
You can also use services like FormLLC.us to simplify both processes in one place.
Conclusion
So, is a state tax ID number the same as a federal tax ID number? No—they are different but equally essential for legal and tax compliance.
