Is a Resale Number the Same as an EIN?

Business identification numbers like Employer Identification Numbers (EINs) and resale numbers can seem complex. Understanding these identifiers is fundamental for any business to ensure tax compliance and smooth operations. While both are crucial, they serve separate purposes and are issued by different governmental authorities. Clarifying their roles is important for business owners.

Understanding the Employer Identification Number

An Employer Identification Number (EIN) is a federal tax identification number, like a Social Security Number for individuals, but for businesses. The Internal Revenue Service (IRS) issues this nine-digit number to identify businesses for federal tax purposes. Businesses use their EIN for filing federal income tax returns, managing payroll taxes, opening business bank accounts, and establishing business credit.

Most businesses require an EIN, particularly if they have employees, operate as a corporation or partnership, or file certain tax returns like employment or excise taxes. Sole proprietors without employees may also obtain an EIN to separate personal and business finances or protect their Social Security Number from identity theft. Applying for an EIN is free and can be done online through the IRS website, with immediate receipt upon successful submission.

To apply online, the business must be located in the U.S. or U.S. territories, and the responsible party must possess a valid Taxpayer Identification Number (SSN or ITIN). The online application process requires details like the business’s legal name, address, entity type, and reason for applying. While online application is the fastest, businesses can also apply by fax using Form SS-4, which takes four business days, or by mail, which takes four weeks.

Understanding the Resale Number

A resale number, also known as a seller’s permit, sales tax ID, or resale certificate, is an identifier issued by state governments through their Department of Revenue or equivalent. This number is primarily for state sales tax purposes. Its main function is to allow businesses to purchase goods intended for resale without paying sales tax, preventing items from being taxed multiple times through the supply chain.

This exemption ensures sales tax is collected only once, at the final sale to the end consumer. Possessing a resale number also authorizes a business to collect sales tax from its customers on taxable goods or services and then remit those collected taxes to the state. Terminology for this identifier varies across states; it might be called a “sales tax license,” “vendor’s license,” or “certificate of authority.”

Businesses that sell tangible personal property or provide taxable services are required to obtain a sales tax ID number from the state where they operate. The application process involves registering with the state tax authority online or through mail. Required information includes the business’s legal name, address, business activities, and sometimes the federal EIN. Once approved, the sales tax ID number allows the business to engage in sales tax collection and reporting.

Distinguishing the Two Identifiers

The fundamental distinction between an EIN and a resale number lies in their issuing authority and primary function within the tax system. An EIN is a federal identifier, issued by the IRS, identifying a business for federal tax obligations, including income and payroll taxes. It is a broad identification tool used across federal agencies and for business administration, such as opening bank accounts.

Conversely, a resale number is a state-issued identifier, provided by state tax agencies, and is tied to state sales tax compliance. Its purpose involves the collection and remittance of sales tax from customers and exempting businesses from paying sales tax on inventory purchased for resale. This prevents the cascading effect of sales tax, where the same item might be taxed multiple times before reaching the final consumer.

A business may need both an EIN and a resale number because they address different layers of tax responsibility—federal and state. For example, a corporation with employees selling taxable goods requires an EIN for federal income and payroll taxes, and a resale number to collect and remit state sales tax. While some states might use a business’s EIN on their sales tax license, the underlying purposes and issuing bodies remain distinct. Understanding these differences helps businesses navigate their tax obligations and maintain compliance at both federal and state levels.