When you’re an up and coming business owner, you are going to be asked about two different forms of identification: the Employer Identification Number (EIN), and the Tax Identification Number (Tax ID #). Both of these forms are for identification purposes, and used to establish that you are a member of the trade, which qualifies you to work with dropship and wholesale suppliers.


Many people do not know the primary differences between these two forms of identification, and it is often a source of confusion. With that in mind, we’re going to walk through the primary differences between the two to help clarify things and alleviate some of the confusion.


The Employer Identification Number is a Federal number, which is used to identify your business, primarily for tax purposes. It shows that you are a valid, registered business with the United States federal government, but it does not necessarily show that you are qualified to be exempt from sales tax, or anything like that. You can typically obtain an EIN number from your state government website, and it is usually available for free, or for a very nominal fee. This identification form is sometimes accepted by a supplier when establishing an account with them, but many will request additional information as well.


That additional information is the State Tax Identification Number. This is a number assigned by the state government, rather than the federal government, and its primary purpose is to prove that you are a member of the trade, and therefore do not need to be charged sales tax when working with a supplier. As the legality or necessity of sales tax is very important to a supplier, this is the the most commonly requested form of identification when creating an account with a supplier. A Tax ID number typically comes with a higher fee to establish than an EIN number, and the fee can vary from state to state. When establishing a new business, this is the most important piece of documentation to obtain, as it is almost universally required by suppliers in order to work with them.


The suppliers require this information for legal and tax purposes; if you are not a member of the trade, they can actually lose their contract with a manufacturer to carry their products, and if they don’t charge you sales tax, although they should be, that will also cause problems for the supplier. It is for this reason it is of paramount importance to get things set up legally as you move in to starting your business, or else risk hitting a wall very early on.


It takes a little time, and it takes a little money, but in the long run, it is vitally important that you set your business up correctly, right from the get go, or risk running into legal troubles down the road, which will in turn cost more time, and more money that you don’t want, or need, to spend.

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