EIN, Sales Tax, Oh My

Hey, you, it's Thursday, and it's Coffee Chats with Candice. Grab your cup of coffee or beverage of your choice, no judgment here, and that includes your businesses, too, and let's chat EIN and Sales Tax Numbers. 

So for those who don't know me, my name is Candice Montgomery. I'm the founder of Beginner's Guide to Budgeting and Monetize Your Dream – a course to master business basics. I help new and aspiring women entrepreneurs master business basics so that they can achieve personal and financial freedom. If you're new to me, I own three businesses. The first one my husband and I started in 1996 and is now in its 27th year. We've paid off over $450,000 in seven years! And since 2022, we have been completely debt-free in our personal and business lives. I'm passionate about business and budgeting and sharing that with you. So, we're going to talk about EIN and tax sales tax.

The SBA website states that your state tax ID and your federal tax ID numbers are also known as “Employer Identification Numbers” and they work like a personal social security number for your business, they let your small business pay state and federal taxes. How nice of them. They let us so what's an EIN and do I need one. So, the purpose of an EIN as described by the IRS is issued for the purpose of tax administration and is not intended for participation in any other activities. So, tax lien, auction or sales lotteries, etc. 

 All businesses must have an EIN with the exception of a sole proprietor or a subcontractor, so a partnership S Corp, LLC, or any of those, have to have an EIN. Your EIN is a permanent number, and it can be used immediately to open a bank account, apply for business licenses, or even file a tax return by mail; can't do it electronically because it takes a little bit of time, but you can do it by mail. 

You must obtain a Texas sales and use tax permit if you are an individual, Partnership, Corporation, or other legal entity engaged in business in Texas. You sell tangible personal property in Texas, lease or rent tangible personal property in Texas, sell taxable services in Texas, sell or lease tangible personal property or taxable services to customers in Texas from an out-of-state business, and have revenue from taxes of $500,000 or more in the past 12 months. 

As a permit holder (sales tax permit holder), you're required to post your permit; you'll see that a lot of times in the businesses, like I have mine posted and it's an all-black frame and you'll see it, and it has your name, and as your sales tax number, and it just shows that you have permission to charge sales tax. You got to post it, you got to collect sales tax on all taxable sales. You have to pay sales and use tax on all taxable purchases. Time timely reporting and paying sales tax and use tax and keep adequate records. You can submit an application for a sales and use tax permit without having a federal identification number on the application.

So to recap, the difference between an EIN and a sales tax number is going to depend on your state, so look into your local laws. The EIN is a 9-digit number assigned by the federal government to track things like taxes and employment forms. In some states, this is also used as a sales tax number. In other states, a separate sales tax number is needed. In the state of Texas, for example, you need an EIN for, like I said, anything other than a sole proprietor, or subcontractor, and you also need a sales tax number. You have to have both, as long as selling the things that qualify to charge sales tax. 

 My three businesses are three different things: one business pays monthly, and charges sales tax, one business pays quarterly, and another business is not required to have a sales tax number, so no sales tax is reported. So, a sales tax number is a number that allows a company to collect the sales tax within a state. The company will collect the sales tax at their point of sale, and then return sales tax forms, and the sales tax money to the state; usually monthly or quarterly, depending on the volume. So, like I said, I have a business that's monthly, I have one that's quarterly, and then I have one that doesn't have to file because it doesn't have a sales tax, not that I'm exempt from anything. 

The other thing, too, is that it says, “and the sales tax money.” So, the sales tax money is not your money. When you charge sales tax, that money is going to go to the state when you file, so it's best to have a tax savings account so that you can pay your taxes. Some states don't collect sales tax at all, so a sales tax number will not be necessary. Some states do require that your company have a state sales tax number, while others use the state tax ID in place of a separate sales tax number. In the state of Texas, we have a separate sales tax number, we don't have a state tax. Regardless, a business will almost always need an EIN to hire employees and pay federal taxes and may need a sales tax number depending on its state.

I hope that you have found value in this video today. As always, if you found value, I hope that you like, share, and comment on my videos, so it's seen by more eyes and get my message out to the universe, specifically to the women in the universe!

So, when it comes to starting a business, I've been where you are, I know how you feel. It can be a lonely journey, but it doesn't have to be. When we started it was before Google and Facebook existed. I sage era, I know… Way long before the Taylor Swift era! I know it's confusing, but I can help so if you or someone you know needs business help send them my way. I do one-on-one coaching and soon we'll be launching a new group program. I can't wait to share more in the coming weeks, and it's going to be very soon! So, thank you for taking the time out of your day to be here with me, or catching the replay. I hope you have a fabulous Thursday and a fabulous weekend. See you next week. Same time. Same place for Coffee Chats with Candice.