What is a Tax ID Number?
A Tax ID Number is a unique nine-digit identification number assigned to a business entity for tax purposes. It is used to identify the entity when filing tax returns, opening business bank accounts, and reporting employee wages.
The most common types of Tax ID Numbers are:
Employer Identification Number (EIN): This is the federal Tax ID assigned by the Internal Revenue Service (IRS). Most businesses, including corporations, LLCs with multiple members, and any business with employees, must obtain an EIN.
Social Security Number (SSN): A sole proprietor or single-member LLC without employees may use their SSN as their Tax ID.
The Tax ID (usually the EIN) is the master identifier used to establish all other state-level accounts, including the one for the Certificate of Authority.
What is a Certificate of Authority?
A Certificate of Authority grants a business the legal permission to perform a specific action within New York State. As discussed previously, there are two main types:
Sales Tax Certificate of Authority (DTF): Issued by the NY Department of Taxation and Finance, this document grants the authority to collect and remit sales tax. It is a permit, not an identifier.
Application for Authority (DOS): Filed with the NY Department of State, this document grants an out-of-state (foreign) business the authority to legally transact business within New York.
The key distinction is function: a Tax ID is an identifier used for filing, while a Certificate of Authority is a permit used for operating.
Why You Need Both
Before you can apply for the Sales Tax Certificate of Authority (DTF) or register your foreign entity with the DOS, you must first have a valid Tax ID Number (EIN or SSN). The Tax ID is a mandatory piece of information on the Certificate of Authority application forms.
Need help determining which ID numbers and certificates your business needs to operate compliantly in New York? Contact Dimov NYC CPA today for expert advisory services.
