A sales tax ID number, often referred to as a seller’s permit number or sales tax registration number, is a unique identifier the state government assigns to businesses. This number allows a business to collect sales tax on taxable sales, and it enables the state to track and ensure compliance with tax regulations.

Businesses need to apply for this ID when they start selling goods or services that are subject to state sales tax. The requirements and processes for obtaining a sales tax ID vary from state to state, but businesses must typically register with their state’s department of revenue or similar tax authority. After registering, they can legally collect sales tax from customers, and they are required to file regular sales tax returns and remit the collected taxes to the state.

Below, we’ll describe what a sales tax ID number does. We’ll also explain how to get one, how to use it, and how it compares to a sales tax licence.

What’s in this article?

• What does a sales tax ID number do?
  
• How do you get a sales tax ID number?
  
• How do you use your sales tax ID number?
  
• Are sales tax licence numbers and sales tax IDs the same thing?
  

What does a sales tax ID number do?

A sales tax ID number accomplishes a few important things for businesses and the state taxing authority:

• Authorises a business to legally collect sales tax from customers on taxable sales

• Enables businesses to file sales tax returns and remit the collected taxes to the state

• Lets the state track a business’s tax compliance

• Helps customers and other businesses confirm a company’s legitimacy

• Allows businesses to apply for tax exemptions when purchasing goods intended for resale

How do you get a sales tax ID number?

Here’s a step-by-step guide to getting a sales tax ID number.

• Determine your requirement: First, determine whether your business needs to collect sales tax. This typically depends on whether your business sells goods or provides taxable services, and if these transactions are in a state that requires sales tax.

• Visit the state tax authority website: Go to the website of the state’s department of revenue (or equivalent agency) where your business operates. Each state has its own procedures and requirements for tax registration.

• Prepare necessary information: Before you apply, gather all required information. This typically includes the business name and address; a detailed description of what your business does; estimated monthly sales; bank account information; and government ID numbers, such as a federal Employer Identification Number (EIN) or the Social Security numbers of owners or major officers.

• Complete the application: Fill out the registration form provided on the state’s tax website, and submit online or by mail. Some states allow you to complete this process entirely online, while others might require you to mail in forms. Processing times vary from a few days to several weeks.

• Receive your sales tax ID number: Once the state has approved your application, it will issue your sales tax ID number. You’ll use this number in all communications with the state regarding collecting, filing, and remitting sales tax.

How do you use your sales tax ID number?

Here’s how businesses typically use their sales tax ID number.

• Collecting sales tax: Businesses use their sales tax ID to legally collect sales tax from customers on taxable goods and services. The rate at which businesses collect sales tax depends on the local tax rules where the business operates and where the goods or services are delivered.

• Filing sales tax returns: Businesses use their sales tax ID when they file sales tax returns with the state. This ID helps the tax authority track a business’s payments, and it ensures these payments are accurately recorded to the business’s account.

• Purchasing for resale: If your business purchases goods to resell them, you can often buy these goods tax-free by using your sales tax ID number to apply for a resale certificate. Resale certificates exempt businesses from paying sales tax on items they’re going to resell.

• Conducting audits and compliance checks: State tax authorities use a business’s sales tax ID number for identification during audits or compliance checks. This ensures that all tax-related documents and transactions are correctly attributed to the business.

• Completing business documents and contracts: A business’s sales tax ID number might be required on various official documents, contracts, or applications – especially those related to financial matters or business licences.

• Opening wholesale accounts: Many wholesalers require a sales tax ID number to open a business account. This is to make sure they are dealing with a legitimate, tax-registered business.

Are sales tax licence numbers and sales tax IDs the same thing?

Yes, “sales tax licence number” and “sales tax ID” are often used interchangeably to refer to the same thing. They both represent the unique identification number a state’s tax authority assigns to a business to authorise the collection and remittance of sales tax.

Some states use the term “sales tax permit” instead of “licence” or “ID” to refer to the permit that authorises your business to collect sales tax. Other states refer to this kind of official document as a “Certificate of Authority,” which also typically includes a sales tax ID number.

Regardless of the specific term used, the purpose remains the same: to identify your business as a registered sales tax collector, and give you the ability to fulfil your tax obligations.