Do You Know Enough About the Employer Identification Number (EIN)?

Employer Identification Number (EIN) which is also known as Taxpayer Identification Number is used by the United States Department of Labor and the Internal Revenue Service for the purpose of identification and tax collection from all kinds of existing businesses and vendors. The EIN is a nine digit sequence which is specifically created for each business or vendor.


Vendor Accounts


Many business institutions and retailers purchase various products and services from vendors. Most of these vendors have contracts for regularly providing their products and services on a recurring basis. The account departments of the purchasing businesses usually create vendor accounts for paying the vendors for the purchases. The EIN of the vendor is used to set up the exclusive account and to identify all the deliveries of products and payments related to that specific vendor. The software of the accounts identifies the vendor through his EIN and can also be used to make year-end statements of accounts easily.

Purchasing from Wholesalers or Distributors

Small businesses including vendors operate their businesses by purchasing products from the wholesalers at cheaper rates and then selling them to customers at a profit. The EIN is a requirement for making wholesale purchases from wholesalers or wholesale distributors. Government agencies and departments use the EIN to verify the legal standing and the accuracy of tax returns filed by that particular business or vendor.  


Your Employer Identification Number (EIN)

When you are going to start a new business, you can apply for a new Employer Identification Number (EIN) at the website of the US Internal Revenue Service by filling out the EIN form. Another method of getting the EIN is by requesting a paper form through mail which can be filled and returned to the local IRS office.
 If you are already operating a business and do not know your EIN, it can be located by contacting the IRS office and making a request for a copy of EIN.


When EIN is Not Required

There are some business conditions where the EIN is not needed. If the vendor is operating the business outside the United States of America, he is not legally bound to obtain an EIN. A few other situations where Employer Identification Number is not required include businesses which make purchases through petty cash, accounts between the university and the students, etc.