Comparison of a Federal Tax ID and a State Tax ID

Federal tax identification numbers (EIN) and state identification numbers are similar in that they are both needed by businesses to file their taxes and make tax deposits. Beyond income and employee taxes, they are used for different reasons.
Federal and state tax identification numbers are both used to file corporate income taxes, but each are used for filings unique to the state or federal government. State requirements vary from state to state.

If you have employees for whom you must make income tax withholding deposits, you need both a an EIN and a state tax identification number, if the state in which the business operates has an income tax.

The EIN is used to report excise taxes and Alcohol, Tobacco and Firearms taxes. The state identification number is used to report sales tax.

The EIN is used for reporting required of administrators of Keogh accounts, pensions, trusts and farmer’s cooperatives. There is no similar function at the state level that requires a state identification number.

The EIN is also required if you make non-cash payments to non-resident aliens. There is no such function at the state level that would require identification.