Tax, Licenses, and Permits

TAX Identification Number (EIN)

EMPLOYER IDENTIFICATION NUMBER (EIN)

Employer Identification Number (EIN) Corporations, most LLCs, and all businesses with employees must have this IRS-issued identifier.

Much like a Social Security Number, an Employer Identification Number (EIN) is a federal nine-digit number that identifies a business entity. The Internal Revenue Service (IRS) issues EINs and requires their use on all tax filings during the entire life of a business.

THE IRS REQUIRES THE FOLLOWING TYPES OF BUSINESSES TO OBTAIN AN EIN:

  • All corporations

  • All Limited Liability Companies (LLCs) with more than one member

  • Any business that hires employees, including sole proprietorships and single-member LLCs

Many nonprofit organizations, as well as trusts and certain co-ops, must also have an EIN. If a business has changed its formation type or emerged from bankruptcy, it is typically required to apply for a new Employer Identification Number (EIN)..

For many business owners, obtaining an EIN is one of the first things they do after incorporating or forming an LLC. Along with tax filings, businesses often need an EIN in order to:

  • open business checking accounts

  • establish accounts with certain vendors

  • Sometimes you’ll see the Employer Identification Number referred to as a Tax Identification Number (TIN) or Federal Employer Identification Number (FEIN). As a general rule, it’s good for all businesses, with the exception of sole proprietorships without employees, to have an EIN.

CALIFORNIA NEW BUSINESS BUREAU CAN HELP.

California New Business Bureau can obtain an Employer Identification Number (EIN) from the IRS on your business’s behalf. The process is fast, easy and cost-effective.

It’s important to note that along with an EIN, certain states also require companies to obtain a state tax identification number. California New Business Bureau can help you with this requirement, as well as many of your other business compliance needs.

WHAT IS SALES TAX?

Sales tax is a tax on the end-purchase of a product or a service, and is imposed on all retail sales, leases and rentals of most goods, and on some services that are considered taxable. Sales tax normally does not apply on the purchase of a product intended for re-sale or for subsequent processing. Sales tax is usually represented by a certain percentage added onto the price of a good or service that is being purchased. Your sales tax responsibilities as a new business owner, whether you start a business or buy an existing business, will vary depending on the type of organization or entity you operate. Besides state level, estimation of sales tax is also done on municipal or county levels. Payment of state sales tax depends on your sales and your state’s regulations. Sales tax is intended to be applied on the end user of the product/service, so normally it is the consumers who are burdened with it. The re-sellers on the hand are exempted from it, provided they do not use the goods on which sales tax is levied.

SOME STATES DON’T HAVE SALES TAX. THOSE STATES ARE:
  • Alaska

  • Delaware

  • Montana

  • New Hampshire

  • Oregon

WHAT IS SALES TAX VENDOR ID?

Sales Tax ID Number or Sales Tax Exemption Certificate is a legal document issued by the state. This Certificate of Authority gives your business the authority to collect the required sales and use taxes, and to issue appropriate sales tax exemption documents, including resale certificates used for purchasing inventory.

SALES TAX ID NUMBER IS ALSO KNOWN BY OTHER NAMES:
  • Reseller Permit

  • Sales Tax Vendor ID Number

  • Sales Tax Registration

  • Reseller Tax ID

  • Sales Tax Permit

  • Sales Tax Exemption Certificate

  • Certificate of Authority

  • State Tax ID Number

  • Reseller Certificate

WHEN SHOULD I GET SALES TAX ID?

When selling a product or offering a service that is taxable, you will need to collect sales tax. Your State Tax ID Number authorizes you to collect sales tax on your taxable sales. Once you receive your State Tax ID Number you are considered to be in business even if you never make a sale or never open the door of your establishment. It is therefore important that you file your sales tax returns on time, even if you did not have any taxable sales during the reporting period, to avoid being subject to penalties for not filing

CHANGING ORGANIZATIONAL STRUCTURE

If your business changes its organizational structure (for example from Sole Proprietorship to Corporation, LLC, or Partnership), the new organization must register as a new sales vendor and obtain a new organizational structure. You must also file a final return for your existing business and surrender the old sales tax permit.

DISPLAYING YOUR SALES TAX CERTIFICATE

You must prominently display your sales tax registration certificate at your place of business. If you have no permanent physical location you can attach it to your truck, cart, wagon, stand, or other vehicle or facility from which you conduct business

HOW DO I KNOW WHAT IS TAXABLE?

Nearly all tangible personal property transferred for value is taxable. In the US most goods, wares, and merchandise are taxable, as well as property purchased for lease or rent. Services associated with the sale of tangible personal property may also be taxable. Only installation and repair/reconditioning service is not taxable if it is separately stated on the invoice. Most food purchases of unprepared or uncooked food are not taxable.

IMPROVING COMMUNITIES AND CHANGING LIVES

A nonprofit, or non-profit corporation, is a company or organization formed for purposes other than making a profit. Like standard for-profit corporations, nonprofits provide limited liability protection. The personal assets of directors and offices typically cannot be used to satisfy the debts or liabilities of the nonprofit. Advantages of a nonprofit corporation.

NONPROFIT CORPORATIONS TYPICALLY OFFER CERTAIN BENEFITS:
  • Limited liability protection. Directors and officers are typically not personally responsible for the nonprofit’s debts and liabilities.

  • Tax-exempt status. Nonprofits can apply for both federal and tax-exempt status.

  • Access to grants. Some nonprofits are eligible to receive public and private grants, making it easier to get operating capital.

  • Tax-deductible donations. With 501(c)(3) nonprofits, donations made by individuals to the nonprofit corporation are tax-deductible.

FORMING A NONPROFIT CORPORATION?

Non-profit corporations follow state laws that are very different from those of standard corporations – but the business formation process is very similar. To start a non-profit organization, non-profit Articles of Incorporation must be filed with the state and applicable state filing fees paid. In order for your non-profit corporation to become tax-exempt, Form 1023 must be filed with and approved by the IRS. Some states also require a state-level taxexempt status filling.

LOCATED OUTSIDE THE U.S?
KEY BENEFITS

Outside of providing limited liability protection, non-profit incorporation can lend additional credibility to your organization, as others may feel you are “more legitimate” because you have taken the steps to formalize your non-profit with the state.

KEEP IN MIND

Incorporating a nonprofit establishes the nonprofit with the state of incorporation, but does not provide tax-exempt status. In order to have federal tax-exempt status, Form 1023 must be filed with and approved by the IRS.

S-CORPORATION ELECTION

The S-Corporation also Known as the subchapter or small business corporation is a tax code that was created and enacted into law by congress in 1958. It was created to encourage small and family business creation while eliminating the double taxation that conventional corporations were subjected to.

UNLIKE A TRADITIONAL C-CORPORATION THE S-CORPORATION MUST ADHERE TO THE FOLLOWING LIMITATIONS:
  • It may not have over 75 shareholders

  • It is required to be a domestic business entity.

  • The shareholders of the S-Corporation must be US Citizens or legal

  • Residents of the United States.

  • The S-Corporation is restricted to only one class of stock.

The S-Corporation is essentially a tax designation that is recognized by the IRS, similar to the LLC the income generated by an S-Corporation will flow through to the personal income tax returns of the shareholder meaning that the entity is not required to pay taxes on a corporate. S Corporation tax election status is obtained by the filing of IRS Form 2553 within 75 days of the filing date of the company or by filing the IRS Form 2553 by March 15 of each year.

REGISTER FOR A PERMIT, LICENSE, OR ACCOUNT

The Board of Equalization (BOE) wants to make doing business in California as easy as possible. You can register for a seller’s permit or use tax account online using electronic registration (eReg) or in person at one of our field offices. The BOE also administers several special tax and fee programs in addition to the state’s sales and use taxes.

To register for a special tax or fee program, please contact Special Taxes and Fees Registration.

YOU MUST OBTAIN A SELLER’S PERMIT IF YOU:
  • Are engaged in business in California

  • Intend to sell or lease tangible personal property that would ordinarily be subject to sales tax if sold at retail (this includes wholesalers, manufactures and retailers.)

  • Will make sales for a temporary period, normally lasting no longer than 90 days at one or more locations (for example, fireworks booth, Christmas tree lots, garage sale)

YOU MUST OBTAIN A USE TAX ACCOUNT IF YOU MEET ALL OF THE FOLLOWING CONDITIONS:

Receive at least $100,000 in gross receipts from business operations per calendar year. Note: Gross receipts are the total of all receipts from both in-state and out-of-state business operations.

  • Are not required to hold a seller’s permit or certificate of registration for use tax (under section 6226 of Revenue and Taxation Code)

  • Are not holder of a use tax direct payment permit as described in section 7051.3 of the Revenue and Taxation Code

  • Are not otherwise registered with the BOE to report use tax

The requirement to obtain a seller’s permit or a use tax account applies to: individuals; partnerships; corporations; organizations; husband/wife co-ownership; LLP’S; LLC’s If you have any question about the registration process, or being a “qualified purchaser.” Please see our Frequently Asked Questions.

REGISTER ONLINE

Register online for a seller’s permit, use tax account, or other tax and fee programs using eReg. eReg is the convenient way to apply any time, day or night – 7 days a week (the system is unavailable from Sunday at 7:00 pm to Monday at 5:00 am, Pacific time for routine maintenance). Many applicants will be able to obtain their permit immediately after they sibmit their application.

REGISTER IN PERSON

You may register for a seller’s permit or use tax account in person at one of our field offices. Registration can usually be completed the same day and help in completing the application is available. Special information packets with the appropriate registration application for specific businesses are available. Representatives are available to assist you with permit question Monday through Friday (except State holidays) from 8:00 am to 5: pm.

Person or businesses that are “qualified purchasers” may apply online using eReg. Persons or business that regularly incur use tax liabilities and are not required to have a seller’s permit or use tax account can arrange to receive Consumer Use Tax returns by online using eReg. Person or businesses that do not maintain a place of business within the state but voluntarily or by law collect tax on sales into California or businesses with sales personnel with no fixed business address can apply for a Certificate of Registration – Use Tax by registering online using eReg. Additional information is available on the tax rules for specific business, types of sales, or charges associated with sales for a number of business. The regulations relating to sales and use tax also available

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What We Offer

California New Business Bureau was founded in 2001 with one simple mission: to make starting a business as simple, fast and as inexpensive as possible. We offer the information, resources, and solutions that help small business owners understand the difference between incorporation vs. LLC, how to incorporate a small business as well as clearly outline the steps to incorporate and register a company.

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