A sales tax permit, business license, and EIN are three different forms of business identification or authorization. A sales tax permit generally concerns collecting and reporting sales tax in a particular state. A business license concerns permission to conduct specified business activity in a state or locality. An Employer Identification Number, or EIN, is a federal tax identification number issued by the IRS.
Having one does not automatically mean a business has the other two. A retailer might need an EIN, a state sales tax account, and one or more local business licenses. Another business might need an EIN and local licensing but no sales tax permit. The answer depends on the entity, its activities, where it operates, and the rules of each relevant jurisdiction.
Businesses preparing to register for sales tax can start with the general sales tax application information, then review the requirements for every state where they may have a registration obligation.
The three documents in plain language
Sales tax permit or seller’s permit
A sales tax permit is a state-level registration associated with a seller’s sales tax responsibilities. Depending on the state, the document or account may be called a seller’s permit, sales tax permit, sales and use tax registration, tax account, or another state-specific name. These terms should not be assumed to be interchangeable in every jurisdiction.
California illustrates the seller’s-permit concept. The California Department of Tax and Fee Administration issues a seller’s permit to businesses engaged in business in California that intend to sell or lease tangible personal property ordinarily taxable at retail. That requirement applies to individuals, corporations, partnerships, LLCs, wholesalers, and retailers.
A sales tax permit is also distinct from documentation used to make purchases for resale. A seller may encounter both registrations and resale documentation, but they serve different functions. The terminology and process vary by state, so businesses evaluating wholesale purchases can separately review the distinctions among a reseller certificate, business license, seller’s permit, and reseller permit.
Business license
“Business license” is a broad term for authorization associated with operating a business or conducting a regulated activity. It may refer to a state license, a city or county license, or an industry-specific authorization. The issuing office and requirements depend on the jurisdiction and activity.
A business license is not automatically a sales tax permit. California expressly states that its seller’s permit is not the same as a business license and directs businesses to city or county licensing departments to determine separate licensing requirements.
Some jurisdictions combine multiple registrations within one application process, which can make the distinction less obvious. Washington calls its filing the “Business License Application.” It can be used to obtain a Unified Business Identifier, tax registration, a business license, a trade name, employee registration, and various state or city endorsements. Washington requires a business license when a seller provides a product or service requiring sales tax collection; the application also produces a UBI number, business license, and Department of Revenue information concerning sales tax and business-and-occupation tax.
EIN
The IRS calls an Employer Identification Number an “EIN” and identifies it as a federal tax ID number for businesses, tax-exempt organizations, and other entities. It identifies the business for covered federal tax purposes; it is not a state sales tax permit or a local business license.
The IRS requires an EIN for businesses with employees, specified federal tax obligations, and listed entity types including partnerships, LLCs, and corporations. An entity that does not require an EIN for federal tax purposes may still request one for banking or state-tax purposes.
Short comparison
| Item | Main function | Issuing level | What it does not replace |
|---|---|---|---|
| Sales tax permit or seller’s permit | Registers a seller for applicable state sales tax responsibilities | State | An EIN, local business licensing, or activity-specific licensing |
| Business license | Authorizes specified business activity under the issuing jurisdiction’s rules | State or local, depending on the license | A separate sales tax registration or federal EIN when either is required |
| EIN | Identifies covered businesses and entities for federal tax purposes | Federal | State sales tax registration or state and local licensing |
The table describes the general roles, but labels alone cannot determine what a business has obtained. For example, Washington’s Business License Application can handle several registrations, while California treats its seller’s permit and applicable city or county business licenses as separate matters. A business should review what an account or document actually authorizes rather than relying only on its title.
Who may need each one?
The EIN question begins with the business’s federal tax status, entity type, employees, and federal tax obligations. For an LLC, partnership, or corporation being created, the IRS instructs the applicant to register the legal entity with the state before requesting an EIN. The IRS issues EINs directly without charge.
The sales tax permit question begins with what the business sells, where it conducts business, where customers are located, and whether a state’s registration rules apply. A physical location, inventory, employees, or other in-state activity can matter under state rules. A seller operating across state lines may also need to evaluate state economic-nexus and marketplace-facilitator provisions. Thresholds and the transactions included in them are determined separately by each state and should be checked against current revenue-department guidance.
Texas provides a useful example of why the seller’s circumstances matter. A Texas remote seller—defined for this rule as an out-of-state seller whose only Texas activity is remote solicitation—is not required to obtain a tax permit or collect use tax when its total Texas revenue is below $500,000 during the preceding 12 calendar months. The calculation includes taxable and nontaxable sales, resale transactions, exempt-entity sales, specified charges, and marketplace sales. That safe harbor is specifically for qualifying remote sellers and does not describe the rules for businesses with a Texas physical presence.
Marketplace activity must also be evaluated carefully. A Texas remote seller selling exclusively through a marketplace does not need a permit if it receives and accepts in good faith the marketplace provider’s certification that the provider will collect sales and use tax. That exception does not necessarily cover a seller that also makes direct sales. Businesses considering that jurisdiction can use the dedicated Texas sales tax permit and business license page for state-focused registration information.
The business-license question is separate. A business should identify each place where it has an office, store, warehouse, home-based operation, employees, or other relevant activity and then check the applicable state, city, county, and industry requirements. A sales tax registration does not by itself establish that every licensing obligation has been met.
How to determine what your business needs
- Confirm the legal entity. Determine whether the business is a sole proprietorship, partnership, LLC, corporation, or another entity. If a new LLC, partnership, or corporation needs an EIN, complete state entity registration before applying for the federal number.
- List the products and services sold. Sales tax treatment varies by state and by transaction. Identify tangible products, digital products, services, leases, wholesale transactions, marketplace sales, and direct sales separately rather than treating all revenue alike.
- Map the business’s locations and activities. Note offices, stores, inventory locations, employees, temporary selling locations, and states into which sales are made. This helps separate physical-presence questions from remote-seller threshold questions.
- Review every relevant jurisdiction. State sales tax registration and city or county business licensing may involve different agencies and applications. Do not assume that approval from one office satisfies another office’s rules.
- Examine marketplace and direct sales independently. A marketplace facilitator may collect tax on marketplace transactions, but the seller’s direct website, invoices, or other sales channels may create separate responsibilities. Any marketplace-only exception should be applied only within its stated conditions.
- Verify what each issued document covers. Record the legal name, account number, tax types, locations, endorsements, and effective date associated with each registration. This avoids confusing an EIN confirmation, sales tax account, business license, and resale document.
Fees should also be checked by jurisdiction instead of assumed. For example, CDTFA’s online California seller’s-permit application is free, although CDTFA may require a security deposit depending on the business type and expected taxable sales. That California rule should not be treated as a nationwide permit-fee policy.
Responsibilities after registration
Obtaining a number or permit is usually the beginning of compliance rather than the final task. A registered seller may have return-filing, tax-remittance, recordkeeping, account-update, and closure responsibilities under the issuing jurisdiction’s rules. Filing frequency, due dates, renewal requirements, and zero-return obligations vary, so the instructions attached to each account should be reviewed carefully.
Keep the EIN confirmation, entity records, sales tax registrations, business licenses, marketplace certifications, and resale documentation in separate, clearly labeled files. Record which legal entity and location each document covers. If the business changes its name, address, ownership, entity structure, products, locations, or sales channels, determine whether an account update or new registration is required.
Records supporting an exception can be as important as the exception itself. Under the Texas marketplace-only rule, the qualifying remote seller must retain the required marketplace-sales records for at least four years. More generally, sellers should maintain records that support how they treated marketplace, direct, exempt, resale, taxable, and nontaxable transactions according to each applicable jurisdiction’s requirements.
The central distinction is straightforward: an EIN identifies the business for covered federal tax purposes, a sales tax permit addresses state sales tax registration, and a business license authorizes activity under the issuing state or locality’s licensing rules. The documents can overlap within an application system, but they do not become interchangeable merely because one filing process produces several account numbers or approvals.
Frequently Asked Questions
Is an EIN the same as a sales tax permit?
No. An EIN is a federal tax identification number issued by the IRS for businesses, tax-exempt organizations, and other covered entities. A sales tax permit is a state registration associated with applicable sales tax responsibilities. An EIN does not replace a state sales tax permit.
Does a sales tax permit include a business license?
Not necessarily. California expressly treats its seller’s permit as different from applicable city or county business licenses. Some jurisdictions use combined applications; Washington’s Business License Application can produce a UBI number, tax registration, business license, and available endorsements. Businesses must verify exactly what their filing covers.
Do I need an EIN before applying for a sales tax permit?
The appropriate sequence depends on the business and state process. For a legal entity being created, the IRS instructs LLCs, partnerships, and corporations to register the entity with the state before applying for an EIN. State sales tax applications may request identifying information based on the entity and applicant.
Does an online marketplace seller need a sales tax permit?
It depends on the state, the seller’s activities, and whether the seller also makes direct sales. In Texas, a qualifying remote seller selling only through a marketplace does not need a permit if it receives and accepts in good faith the marketplace provider’s certification that the provider will collect sales and use tax. The seller must retain the required marketplace-sales records for at least four years.
Is a seller’s permit free?
Fees vary by jurisdiction. California’s online seller’s-permit application is free, although CDTFA may require a security deposit depending on the business type and expected taxable sales. That rule applies to California and should not be assumed for another state.
Official Resources
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