Is a Seller’s Permit Number the Same as an EIN?

New business owners often encounter various identifiers and permits, leading to confusion about their distinct roles. The Seller’s Permit Number and the Employer Identification Number (EIN) are two frequently misunderstood terms. While both are crucial for business operations and compliance, they serve different functions and are issued by separate authorities. This article clarifies these identifiers, outlining their purposes and when each is required.

What is a Seller’s Permit Number?

A Seller’s Permit Number, often known by various names such as a sales tax license, vendor’s license, or certificate of authority, is a unique identifier issued by state tax authorities. Its primary purpose is to authorize a business to collect sales tax from customers on behalf of the state. Businesses collecting sales tax act as agents for the government, responsible for remitting these collected funds to the appropriate state agency.

This permit is generally required for businesses that sell tangible goods or provide certain taxable services at retail. State agencies, such as the Department of Revenue or Comptroller’s office, are responsible for issuing these permits. The requirement to obtain a seller’s permit applies to individuals, corporations, partnerships, and limited liability companies engaged in taxable sales. Displaying a seller’s permit in a prominent business location is often a requirement.

What is an Employer Identification Number (EIN)?

An Employer Identification Number (EIN), also referred to as a Federal Tax Identification Number (FTIN) or Federal Employer Identification Number (FEIN), is a nine-digit number assigned by the Internal Revenue Service (IRS). This number functions as a unique federal tax identification for a business entity, similar to how a Social Security Number (SSN) identifies an individual. The IRS uses the EIN to identify businesses for various federal tax purposes, including filing business tax returns.

Businesses typically need an EIN for several reasons beyond just having employees. It is generally required for corporations, partnerships, and certain types of trusts or estates. An EIN is also necessary for opening business bank accounts, applying for business licenses and permits, and managing employee payroll, ensuring accurate reporting and withholding of taxes. Even single-member limited liability companies (LLCs) or sole proprietorships often obtain an EIN for professional reasons or to open a business bank account.

Key Distinctions Between Them

Despite both being identification numbers for businesses, a Seller’s Permit Number and an EIN are not the same and serve entirely different purposes. The fundamental difference lies in their issuing authority and scope of application. An EIN is a federal identifier issued solely by the Internal Revenue Service, impacting a business’s federal tax obligations and broad financial identity. It is used nationwide for federal tax matters, regardless of the state in which a business operates.

Conversely, a Seller’s Permit Number is a state-level identifier issued by individual state tax authorities. Its purpose is specific to sales tax collection and remittance within that particular state. If a business operates in multiple states and sells taxable goods or services, it may need a separate seller’s permit from each state where it has a sales tax obligation. Therefore, while an EIN is for federal tax identification, a seller’s permit focuses on state-specific sales tax compliance.

How to Obtain These Identifiers

The process for obtaining a Seller’s Permit Number varies by state, but generally involves applying through the state’s Department of Revenue or an equivalent tax agency. Most states offer online application portals, which are often the most convenient method, though mail or in-person applications may also be available. Applicants typically need to provide business details such as the business name, address, type of entity, and projected monthly sales. Some states may also require the applicant’s Social Security Number or the business’s EIN.

For an Employer Identification Number, applications are submitted directly to the Internal Revenue Service. The fastest and most common method is applying online through the IRS website, which can often provide an EIN immediately during business hours. Other application methods include faxing Form SS-4 or mailing the form, which can take approximately four to five weeks.

Scenarios Requiring Both

Many businesses need both a Seller’s Permit Number and an Employer Identification Number because their operations involve both sales of taxable goods and federal tax obligations. A retail store selling clothing or electronics, for example, requires a seller’s permit to collect sales tax. If that same store hires employees, it also needs an EIN to manage payroll, withhold taxes, and file federal employment tax returns.

Similarly, an e-commerce business selling physical products online would likely need seller’s permits in states where it has a sales tax nexus. If this online business is structured as a corporation or partnership, or expands to include employees, an EIN would become necessary for federal tax compliance and operational functions like opening a business bank account. These identifiers address distinct aspects of business operation, and needing one does not eliminate the requirement for the other.