You’ve picked out an awesome name, found some trending products, and scouted out the ideal niche. You’ve done your homework and you’re itching to launch. Do you need an EIN for Shopify or are you good to go?
What Is an EIN, and Do You Need One for Shopify?
An Employer Identification Number is a federal tax ID number. As a Shopify store owner, you need to apply for an EIN in the following situations:
- You pay employees
- You sell alcohol or other goods that have excise tax requirements
- You have a business partner
No employees? In that case, you can get an EIN, but you’re not obligated to.
Can I sell on Shopify without an EIN?
Shopify doesn’t require an EIN to create or run your store. Being realistic, though, there’s a strong chance you need an EIN because of state tax requirements. In many states, you can only get a sales tax ID if you have a business license. And a license usually requires — you guessed it — an EIN.
Keep in mind that the laws for every state are different. Check your Secretary of State’s website and consult with a tax professional if you need help. In addition, many Shopify sellers dropship across multiple states, making an EIN useful for tax registration.
Should You Get an EIN for a Shopify Store?
Even where an EIN isn’t required to sell products online, there are advantages to getting one:
- It’s free: The IRS doesn’t charge you anything to apply for an EIN, and you don’t need to worry about renewing it either.
- Applying is a breeze: The only requirements are your legal business name, structure (sole proprietor, LLC, etc.), and your SSN.
- Registration is fast: Processing times vary, but many business owners get their shiny new EIN in a few minutes.
- EINs make business transactions easier: In every state, an EIN is valid for opening business bank accounts, leasing property, applying for resale certificates, and getting sales tax IDs.
- LLCs need EINs: An LLC allows you to separate your personal and business finances, protecting your personal assets.
When you compare the pros and cons for startups, getting an EIN is usually the route with the fewest headaches.
How Do You Add an EIN to Shopify?
You can manage your Shopify store’s sales tax options from the admin area. Here’s how to an EIN in Shopify:
- Click on the “Settings” tab and select “Taxes and Duties.”
- Go to “Manage sales tax collection.”
- Choose a country, state, or region.
- Click on “Collect sales tax.”
- In the “Tax number” field, add your sales tax ID. For the United States, you can use your EIN. For state-based tax collection, use your state’s sales ID number instead.
- Finish by clicking “Collect tax.”
You can add multiple states or regions this way, managing the individual state sales tax IDs within Shopify. Once you set things up, Shopify handles the rest automatically, including keeping up with the latest sales tax rates for each state.
When Do You Need an EIN for Shopify?
To recap: An EIN isn’t a legal requirement for Shopify solopreneurs — in theory. In practice, you’ll probably need an EIN for Shopify so you can manage your state sales tax. At StayTuned Digital, we’re not legal professionals, but we are Shopify experts. If you need help setting up your store or choosing dropshipping suppliers, we’re happy to help. Contact us right away.