Contrary to popular belief, becoming legal for your business is actually easier than expected. In my experience, obtaining a tax ID number and making your business official doesn’t require much time or money.
Using Shopify for Sales Tax
Shopify uses default sales tax rates, which are updated regularly. You can override them whenever necessary. Shopify doesn’t file or remit your sales tax. You are responsible for reporting and paying sales tax to the appropriate state and local tax authorities.
Importance of a Tax ID
One crucial reason for obtaining a federal Tax ID is that it’s often a legal requirement for businesses. Your Employer Identification Number (EIN) is your federal tax ID. You need it to pay federal taxes, hire employees, open a bank account, and apply for business licenses.
A Taxpayer Identification Number is a 10-digit number issued by the IRS to individuals and businesses who don’t have an SSN or EIN. It’s used for tax purposes.
As your business grows, you may need to formally register your company and get an EIN. This identification number allows the IRS to track your business for tax purposes.
You can easily apply for an EIN online in just a few minutes. Once approved, you will instantly receive your EIN to provide to Shopify when setting up your account.
It’s often recommended you test your online business idea first before obtaining licenses and permits. This allows you to see if it’s viable before investing time and money into legalities.