Sales Tax ID vs EIN: What's the Difference? [2026 Guide]

“Do I need a Sales Tax number? What about an EIN? Are they the same thing?” — these are some of the most common questions new sellers ask, usually followed by “…and, um, what exactly are they for?”

If you’re just getting started selling handmade products, all these tax ID numbers can feel overwhelming. The short answer: a Sales Tax ID and an EIN are two different numbers, issued by different agencies, for different purposes. Most small businesses need both.

In this post, we’ll break down exactly what each number is, how they differ, and how to apply for each one.

Sales Tax ID vs EIN: Key Differences

Here’s a quick comparison to clear up the confusion:

Bottom line: Your EIN is like a social security number for your business at the federal level. Your Sales Tax ID is your state’s permission to collect sales tax from customers. They work together, but they’re not interchangeable.

What is an EIN?

An EIN (Employer Identification Number) is a nine-digit number issued by the IRS to identify your business for federal tax purposes. Think of it as a social security number for your business — banks, the IRS, and other financial institutions use it to identify your company.

EINs were originally used by the IRS to identify employers, but their usage has expanded to cover all types of businesses. Once assigned, your EIN stays with your business for its entire lifetime and should be provided on all quarterly and annual tax documents, as well as any payments you make directly to the IRS.

What is a Sales Tax ID?

A Sales Tax ID (also called a Seller’s Permit or State Tax Number) is a number issued by your state government that authorizes your business to collect sales tax on taxable sales. Without this number, you technically can’t collect sales tax from customers — and in most states, selling taxable goods without one can result in penalties.

The terminology varies by state: some call it a Sales Tax Permit, others a Resale Certificate or Retailer’s License. Regardless of the name, it serves the same purpose — registering your business with the state to collect and remit sales tax.

Who needs an EIN?

You will most likely require an EIN if you:

• Have started a new business, trust, corporation, or LLC
• Are about to open a business bank account
• Need to create a line of credit
• Have a Keogh Plan (retirement plan)
• Have hired or are about to hire employees (including household ones)
• Have changed the structure of your business (e.g., switched from sole proprietorship to incorporated)

Do sole proprietors need an EIN?

If you’re a sole proprietor or partnership, it’s usually not absolutely necessary to have an EIN. With these business structures, you file business activity directly through your personal tax returns (i.e., 1040 & Schedule C) — this is known as a “pass through” structure.

Not exactly sure if you are a sole proprietor or something else? We break down the most common small business structures here: Choosing the right structure for your small maker business

That said, there are a few situations where you will need an EIN as a sole proprietor: if you plan to have employees, have a Keogh Plan, need to withhold wages to non-resident aliens, or need a business bank account that requires one.

Here’s the thing though — any business can apply and be granted an EIN, and it’s a good idea to have one anyway. The biggest reason? You can use your EIN on paperwork instead of your SSN, which helps protect your personal details. There’s no cost to apply and it takes almost no time, so you might as well get one.

How to apply for an EIN

You can apply for an EIN online for free via the IRS website: Apply for an EIN Tax ID Number. You’ll receive the number instantly.

One (annoying and quite frankly bizarre) thing to note: the EIN application form is only available Monday to Friday, 7 a.m. to 10 p.m. Eastern Standard Time. If you try outside these hours, you’ll see a message asking you to come back later (hey, what did you expect from the IRS?).

Gather up your documents before you start — you’ll need to complete the whole form in one session and it times out after 15 minutes of inactivity. The process requires:

• The business owner’s social security number
• The reason you’re applying for the EIN
• Your estimated annual earnings

At the end, you’ll receive an email with a printable document containing your EIN. You can start using it immediately for tax filing, opening a bank account, or any other business purpose.

How to apply for a Sales Tax ID

Applying for a Sales Tax ID varies by state, but the general process is similar everywhere:

1. Visit your state’s Department of Revenue website — search for “[your state] sales tax permit application”
2. Complete the registration form — you’ll typically need your EIN (or SSN), business address, and expected sales volume
3. Receive your permit — some states issue it instantly online, others mail a physical certificate

Important: If you sell in multiple states (including online sales that meet economic nexus thresholds), you may need a Sales Tax ID in each state. Most states have simplified this process through the Streamlined Sales Tax Registration System.

Once you have your Sales Tax ID, you’re responsible for collecting the correct sales tax rate from customers and remitting it to the state on a regular schedule (monthly, quarterly, or annually depending on your sales volume).

Do I need both an EIN and a Sales Tax ID?

If you’re selling physical products — which most handmade sellers are — you likely need both:

• EIN: For federal tax filings, opening a business bank account, and hiring employees
• Sales Tax ID: For legally collecting sales tax from customers in your state

Even if your state doesn’t have a sales tax (like Oregon, Montana, New Hampshire, Delaware, or Alaska), you’ll still want an EIN for federal purposes. And if you sell online to customers in other states, you may need Sales Tax IDs in those states too depending on economic nexus laws.

Frequently Asked Questions