Every business has a number of unique identification numbers that allow different agencies to identify and track them. Businesses might have multiple tax ID numbers, tax exempt numbers, and more. A tax ID number, specifically a federal tax ID number, is necessary before getting a tax-exempt number. But it isn’t the same thing.
Here are some important definitions:
- State Tax ID Number. This is a tax ID number that you use to pay state taxes, and get licenses and permits within your state.
- Federal Tax ID Number. This is a tax ID number that you use to pay federal taxes, get business bank accounts, hire employees, and more.
- Tax Exempt Number. This is a number given to you on a tax exemption certificate, which allows you to purchase products without paying sales tax.
- Sales Tax Number. This is a number that you use to pay state sales taxes, which may or may not exist in your state.
Many of these might occasionally be referred to as a “tax ID number,” and because of that, it can be confusing. But they are all different numbers, even if there is some overlap.