If you are to sell on Amazon, you probably ask yourself, “Do I need an EIN, an Employer Identification Number, to sell on Amazon?” The short answer: your situation determines whether or not you’ll need to obtain an EIN. Let’s dive into the details and see if it applies to selling on Amazon as well.
What’s an EIN?
Before you dive into all the details of selling on Amazon, it is essential to first understand what an EIN is.
What is an EIN?
An Employer Identification Number is a nine-digit number assigned by the Internal Revenue Service. It is your business’s version of a Social Security Number. It is that number by which the IRS identifies your business for tax purposes.
Why does my business need an EIN?
Many business activities necessitate an EIN, including but not limited to:
- Filing of taxes: An EIN aids in tracking your business tax obligation by the IRS.
- Opening a bank account for business: Most banks require an EIN to open a business account.
- Hiring employees: An EIN is required for reporting pay and withholding taxes.
- Obtaining business licenses: Many local and state authorities require an EIN to secure business permits.
- Reporting of payroll taxes: It is highly needed for all businesses that employ people.
Do You Need an EIN to Sell on Amazon?
The short answer is no; you don’t necessarily need an EIN to start selling on Amazon. However, the specifics can vary based on how you choose to set up your selling account. Let’s break it down:
Selling on Amazon as an Individual vs. a Business
When you register to sell on Amazon, you can choose to register as an individual or a business.
Selling as an Individual
For those applying individually, you do not usually need to possess an EIN. Amazon would ask for your SSN or TIN for purposes only because you are accounted for in the IRS as a sole proprietor; and the IRS allows that on the part of a sole proprietor, the SSN can be used.
Advantages of Using an EIN for an Individual Seller:
- Separation of Finances: An EIN keeps your personal and business finances separate.
- Privacy: Using an EIN instead of your SSN adds a layer of privacy.
- Future Expansion: If you plan to expand your business, having an EIN can make expansion from a sole proprietorship to a more formal business structure easier.
Selling as a Business
If you sell on Amazon as a business entity, like an LLC, Corporation, or any other type of formal business setup, you would need an EIN. The IRS requires every business entity to have an EIN for tax reporting.
How to Get an EIN
Step 1
- Visit the IRS Website: Go to the IRS website and locate the area where the EIN application can be accessed.
- Fill Out the Application: Fill in your business name, form, and address.
- Apply for the Application: You can apply online. In most situations, you’ll have your EIN at the end.
When Should You Get an EIN?
Even if you are a sole proprietorship, sometimes there are situations where it will be easier to apply for an EIN sooner rather than later:
- Expanding Your Business Planning: If you think you are going to grow your business exponentially, obtaining an EIN will make the process smoother when converting to a business structure.
- Opening a Bank Account for Your Business: Most banks require an EIN to open a business account.
- Do you think you will need employees? If that’s the case, you will be required to provide an EIN to pay them payroll taxes.
- Building Business Credit: An EIN develops business credit that can work for your business in loans and credit cards.
International Sellers
If you are an international seller, Amazon may request that you fill out a W-8BEN form as proof that you are not a U.S. citizen and, therefore, exempt from withholding U.S. taxes. Although an EIN is typically not required for international sellers, it is helpful to have one should you ever want or need to:
- Open a U.S. bank account
- Work with U.S. suppliers or other U.S. businesses
Conclusion: Do You Need an EIN to Sell on Amazon?
Do you need an EIN to sell on Amazon? It depends. If you are just a beginner individual seller, your SSN may work fine. However, if you are selling as a business entity or even just planning to scale up, obtaining an EIN is advisable.
Even though you might not really need an EIN right away, it’s going to be useful for you, such as keeping your personal and business finances separate, protecting your personal identity, and preparing for the possible future when things start booming.
Are You Ready to Get Started?
Whether you start from the SSN or get the EIN, the most important thing is getting things moving in your pursuit of selling on Amazon. As your business scales, an EIN will prove to be a great instrument for the effective running and scaling of your operations.
For further assistance with EIN applications, check out our EIN page. Also, you can check for more information on the IRS.
Want to know more about the process? Throw your questions in the comments below!