A Taxpayer Identification Number is an identifying number used for tax reasons in the United States and other countries under the Common Reporting Standard. A tax ID is used as a person’s security number. You do not need a tax ID to sell in the US but it is necessary to have a tax ID to identify a business, individual, or any other entity in tax returns and other filed documents with the IRS (internal revenue services)
A TIN (Tax Identification Number) is typically either a Social Security number or an employer identification number (EIN), depending on the entity that it is being issued to.
How a Taxpayer Identification Number (TIN) Works
Social Security numbers are the most popular tax ID numbers, but four different other types are popular too: the ITIN, EIN, ATIN, and PTIN. You will need an EIN to apply for a business license and file your tax returns, as a business owner.
Most individuals use their Social Security Number as their Taxpayer Identification Number. Businesses and any other company that cannot use a Social Security number as a TIN must acquire a TIN from the IRS. When you start your first job, you are required to apply for your SSN, and it stays with you from then on!
All employees and employers are required to pay Social Security taxes. The money raised from these taxes primarily goes to providing help for those who have reached retirement age or are otherwise currently eligible.
Business Structure
Your business can be established without a Tax ID number, however, you are limited to the kinds of business that you can operate. You must have an EIN for your business if you have a partnership. Business people have advantages like; protection of the owner’s assets from the business debt and liability as in the case of a corporation. When a partnership is the chosen business structure, the owners enjoy advantages such as pass-through tax, partners are then permitted to pay their taxes at the lower, personal rate. Without an EIN, neither a corporation nor a partnership would be a possible choice when structuring a business.
Register a “Doing business as” name
If you are doing business registering a DBA is important. You can register with your local government agency.
Get a sale tax ID
The state you are in will matter if you are selling products online. It is a must for you to collect sales tax from every state that you do business.
Get a Federal Tax ID
If you do not have an EIN you can not open a business bank account, unless you are running as a sole owner then you don’t need a business bank account.
Taxpayer information is provided once Amazon assigns anyone who is a professional seller. Once the Amazon requirements are met to file a form, then you can be given information by Amazon’s self-guided consultation process. All the taxpayer information has to be detailed and factual. The file won’t be filed if there are any mistakes made. Such a case will lead to auditing and penalties from the IRS. I think the form will be filled but will it be accepted?
Amazon ensures that it tracks the number of transactions and gross earnings from your sales, removing any need for you to manually give this information. As a result, you will automatically receive a form by mail once you meet either of the requirements.
What Needs to be Reported?
You will need to report both the gross annual amount that you made in that calendar year and the gross amount per month, once you file your taxes. The gross amount you make per month must be provided. This information determines discrepancies when filing.
The total amount customers pay for your products, in the calendar year, is the gross annual amount. This total amount includes sales tax, gift wrapping, and shipping charges.
Sales taxes are complex, mainly because of the differences in practices from state to state. But, also based on whether you directly sell on Amazon or are an FBA (Fulfillment by Amazon) seller.
State taxes must be collected by Amazon sellers and reported to the suitable local government. FBA sellers collect based on the location of their warehouses and report them accordingly.
Reporting sales tax is determined by the state issuing your sales tax license. The regularities can be monthly, quarterly, or annually.
Business Accounts
An important benefit of having an EIN for your business is that this will allow you to open a business checking account and apply for credit apart from your accounts. As long as you open your business account with an EIN, your accounts are secured. By building a business credit file, you can illustrate your business’s creditworthiness, this enables you to apply for massive loans if needed.
Here are 5 benefits of having an EIN
1. File business taxes and avoid tax penalties.
2. Avoiding identity theft
3. Speeds up business loan applications
4. Open a business bank account
5. Establish business credit
Does your EIN change?
Once your IRS form is obtained, it’s effective immediately. You can instantly start using it right away to open a bank account, to apply for loans, or to give to a seller.
However, if the structure or ownership of your business changes, then you will need a new EIN.
TIN( Taxpayer Identification Number) is an umbrella term that may imply any of the five primary types of taxpayer-identification numbers:
Social Security number (SSN)
This is a nine-digit number issued to U.S. citizens, permanent residents, and temporary (working) residents.
Employer identification number (EIN)
An Employer Identification Number (EIN) is an outstanding number appointed to a business for easy IRS identification for tax reporting reasons.
Individual taxpayer identification number (ITIN)
An Individual Taxpayer Identification Number (ITIN) is a tax processing number.
Adoption taxpayer identification number (ATIN)
An ATIN(Adoption Taxpayer Identification Number) that is issued by the Internal Revenue Service(IRS) as a temporary taxpayer identification number for the child in a domestic adoption where the adopting taxpayers do not have and/or are unable to obtain the child’s Social Security Number (SSN).
Preparer tax identification number (PTIN)
A preparer tax identification number is an Internal Revenue Service identifier implemented in 1999 that has required all paid federal tax return preparers to register with the federal government.
Employer identification numbers (EINs) are one type of TIN. EINs are also sometimes referred to as federal employer identification numbers. The IRS requires businesses, including corporations and partnerships–as well as some trusts and estates–to use EINs. To track taxpayers, theIRS uses tax identification numbers. Filers must include the number of tax-related documents and when claiming benefits.
Conclusion
You do not need a seller’s license to sell on Amazon because you are running an online business and not selling anything federally regulated. You simply just sign up and begin to sell.