Key highlights
- A tax ID helps businesses comply with federal and state tax laws, ensuring smooth operations and legal recognition.
- An EIN, also known as a federal tax ID, is required for businesses hiring employees, opening bank accounts or filing taxes.
- State tax IDs are separate from EINs and are needed for businesses that collect sales tax or have state-level tax obligations.
- Many business owners ask, is EIN the same as tax ID? The answer depends on the type of tax ID being referenced.
- Applying for an EIN is free through the IRS, while state tax ID applications vary by state requirements and fees.
- Understanding EIN vs tax ID helps business owners choose the right identification for tax filing, banking and compliance needs.
Introduction
Taxes may not be the most exciting part of running a business, but they’re impossible to ignore. Whether you’re launching a startup, freelancing or expanding your company, one of the first things you’ll need is a tax ID. But here’s where things get confusing—some people call it an EIN, others say tax ID and then there’s the state tax ID. So, is EIN the same as tax ID?
If you’ve ever felt lost in this maze of tax jargon, you’re not alone. Many business owners struggle to understand the difference between EIN vs tax ID and when they need one (or both). The good news? It’s simpler than it sounds. In this guide, we’ll explain everything—what a tax ID is, the differences between federal and state tax IDs, and how to apply for the right one for your business.
What is a tax ID?
A tax ID is a unique number assigned to businesses and individuals for tax purposes, including filing a personal social security number tax return. It helps government agencies track tax obligations and ensures businesses operate legally. Without the right tax ID, you might face issues with banking, hiring employees or filing taxes.
Many business owners assume there’s just one tax ID, but that’s not the case. There are different types and understanding them is key to staying compliant with federal and state tax laws. This raises a common question: Is EIN the same as tax ID? Knowing the difference between an EIN vs. tax ID helps businesses meet legal requirements and avoid penalties.
Related read: Tax Rates and Exemptions
Understanding the different types of tax IDs
Tax IDs come in various forms, depending on who you are and what your business entities do, especially regarding tax form requirements.
Here are the most common types:
- Employer identification number (EIN) – Issued by the IRS, an EIN is required for businesses with employees, partnerships, corporations and certain LLCs. Many refer to it as a federal tax ID.
- Social security number (SSN) – Sole proprietors and freelancers often use their SSN for tax purposes instead of a separate business tax ID.
- Individual taxpayer identification number (ITIN) – Assigned to individuals who need a tax ID but aren’t eligible for an SSN, such as nonresident aliens.
- State tax ID – Required for businesses that collect sales tax or have employees, this ID is issued by state tax agencies and varies by location.
Each of these tax IDs serves a different purpose. While an EIN is often referred to as a tax ID, it’s not always the only one a business might need.
Federal tax ID vs. state tax ID: Key differences
Many business owners wonder about the difference between a federal tax ID and a state tax ID. While both serve as identifiers for tax purposes, they are used in different situations and issued by different authorities.
A federal tax ID, commonly known as an EIN, is issued by the IRS. It is primarily used for federal tax filings, hiring employees and opening business bank accounts.
A state tax ID, on the other hand, is issued by state tax agencies. It is required for businesses that collect sales tax, pay state payroll taxes or have other state-specific tax obligations.
Here’s a quick comparison to clarify the differences:
| Feature | Federal tax ID (EIN) | State tax ID |
| Issued by | IRS (Internal Revenue Service) | State tax agency |
| Purpose | Federal tax reporting, hiring employees, business banking | Sales tax collection, state payroll tax, state business taxes |
| Who needs it? | Most businesses, including LLCs, corporations and partnerships | Businesses with state tax obligations (varies by state) |
| Application process | Free, done through IRS website | Varies by state, may involve fees |
| Validity | Does not expire | May require renewal depending on the state |
While an EIN is a must for most businesses, a state tax ID depends on state-specific requirements. Some businesses may need both to stay compliant.
Is EIN the same as tax ID?
This is one of the most common questions business owners ask. The short answer? Yes and no.
An EIN (Employer Identification Number) is a type of tax ID, but not the only one. Think of a tax ID as an umbrella term that includes different types of identification numbers, like a TIN number, used for tax purposes. An EIN is specifically issued by the IRS for businesses, while other tax IDs, like a state tax ID, are issued by state governments.
So, when someone asks, is EIN the same as tax ID? It depends on the context. If they mean a federal tax ID, then yes, an EIN is a tax ID. But if they’re referring to state tax IDs or other tax-related numbers, then an EIN is just one type among several.
For businesses, getting an EIN is often the first step in tax compliance. However, depending on your location and business activities, you may also need a state tax ID to handle state-level taxes.
How to apply for a federal and state tax ID
Getting a tax ID for your legal entity is a crucial step in setting up your business, especially if you require a separate tax entity. But remember, before applying, you should know the difference between EIN vs tax ID, as some businesses may need both an EIN and a state tax ID. Whether you need a federal EIN, a state tax ID or both, the process involves a few simple steps. Here’s how you can apply.
How to apply for a federal tax ID (EIN)
An EIN (Employer Identification Number) is issued by the IRS and is required for businesses that have employees, operate as a corporation or partnership or need to open a business bank account with financial institutions. If there are changes in your business name or other details, you might need to apply for a new EIN. Follow these steps to apply:
- Determine your eligibility – Your business must be located in the U.S. or its territories and the applicant must have a valid Social Security Number (SSN) issued by the Social Security Administration (SSA) or Individual Taxpayer Identification Number (ITIN).
- Apply online through the IRS website – The fastest way to get an EIN is through the IRS’s online application portal. Once submitted, you receive your EIN immediately.
- Apply by mail or fax – If you prefer, you can fill out Form SS-4 and send it to the IRS via mail or fax. This method typically takes a few weeks to process, often requiring about 4 business days for fax processing.
- Apply by phone (for international applicants) – Businesses outside the U.S. can apply for an EIN by calling the IRS.
How to apply for a state tax ID
A state tax ID is necessary if your business collects sales tax, has employees or is subject to state-level business taxes. The process varies by state but generally involves:
- Checking state requirements – Visit your state’s tax agency website to determine if your business needs a state tax ID.
- Registering your business – Before applying for a state tax ID, you may need to register your business with the state, which could involve getting a business license.
- Filing an application – Most states allow online applications, while some may require mail-in forms. Processing times and fees vary.
- Receiving your state tax ID – Once approved, you’ll get a unique tax ID for state tax purposes.
Why a professional website matters for your business
Applying for tax IDs is just one part of setting up a business. To build credibility and attract customers, you need an online presence while ensuring that sensitive information is protected. A professional website makes your business look legitimate and helps potential customers find you easily.
Once you have your EIN and state tax ID, the next step is building an online presence. With Bluehost WordPress hosting, you can easily set up a professional website, helping your business appear more credible and accessible to customers. Bluehost offers easy-to-use tools, domain registration and reliable hosting to get your website up and running quickly.
Related read: How to Create a WordPress Website in 2025: A Practical Guide
Common misconceptions about EIN and state tax IDs
Many business owners mistakenly believe “Is EIN the same as tax ID?” has a simple yes-or-no answer, but the reality depends on the type of tax obligations. Capgemini reports that approximately 40% of small businesses experience delays in compliance due to misunderstandings about federal and state tax ID The EIN vs tax ID confusion often leads businesses to apply for the wrong identification number, causing delays. Misunderstanding these numbers can lead to tax filing mistakes or compliance issues. Let’s clear up some common myths.
- An EIN and a state tax ID are the same
Many assume that once they have an EIN, they don’t need a state tax registration or state tax ID. However, these are two separate numbers. An EIN is issued by the IRS for federal tax purposes, while a state tax ID is issued by state agencies for state-specific taxes like sales tax or payroll tax. Depending on your business activities, you may need both.
- Only large businesses need an EIN
Even if you’re a sole proprietor or a freelancer, you might need an EIN. If you hire employees, plan to open a business bank account or want to build business credit, having an EIN will be beneficial.
- You need to pay to get an EIN
Some third-party services charge fees to apply for an EIN, leading people to believe it’s a paid service. In reality, applying for an EIN through the IRS is 100% free. Be cautious of websites that try to charge you.
- A state tax ID is required in every state
Not all businesses need a state tax ID. If your business doesn’t collect sales tax or have employees, you may not need one. Requirements vary by state, so always check with your local tax agency.
- EINs and state tax IDs expire
An EIN does not expire and stays with your business permanently. However, a state tax ID may need renewal depending on state regulations, especially if your business structure or tax obligations change.
Understanding these misconceptions ensures you stay compliant and avoid unnecessary confusion while setting up your business.
Final thoughts
Getting the right tax IDs keeps your business compliant and running smoothly. An EIN handles federal taxes, while a state tax ID covers state-level obligations. Having both, if needed, helps you avoid legal issues.
But tax compliance isn’t enough—you also need a strong online presence. A professional website builds trust and attracts customers.
With Bluehost AI website builder, you can easily create a stunning, professional site—no tech skills needed. Whether it’s a simple blog or a full-fledged store, Bluehost helps your business grow and stand out online.
FAQs
Not exactly. An EIN (Employer Identification Number) is a type of tax ID issued by the IRS for federal tax purposes. However, “tax ID” is a broad term that can also refer to other identification numbers like Social Security Numbers (SSN) or state tax IDs.
It depends on your business. If you hire employees or collect sales tax, you’ll likely need both. An EIN covers federal taxes, while a state tax ID is required for state-level obligations.
No, an EIN is only for federal tax purposes. State tax agencies require a separate state tax ID to track payroll taxes, sales taxes and other state-specific business obligations.
You can apply for an EIN for free on the IRS website. A state tax ID must be obtained through your state’s tax agency and requirements vary by state.
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