How to Get a Tax ID Number in Colorado: A Deep Dive

Securing a Tax ID Number (also known as an Employer Identification Number (EIN)) in Colorado is a crucial step for businesses of all sizes. It’s essentially your business’s social security number, used to identify it to the IRS and the state for tax purposes. Here’s a comprehensive guide on how to obtain one:

First, determine if you actually need a federal EIN. Most businesses operating as corporations or partnerships will require one. Sole proprietorships and single-member LLCs often only need their personal Social Security number unless they hire employees or operate as a corporation or partnership.

If you determine you need an EIN, the process is entirely online and handled through the Internal Revenue Service (IRS). Here’s a step-by-step breakdown:

1. Access the IRS Website: Navigate to the “Apply for an EIN Online” section of the IRS website (irs.gov).

2. Review the Instructions: Carefully read the instructions provided. The IRS online application is a session-based process. You must complete it in one sitting.

3. Determine Your Entity Type: Select the appropriate entity type for your business from the options provided (e.g., Sole Proprietorship, Partnership, Corporation, LLC). This is a critical step, as the information required will differ depending on your selection.

4. Provide Responsible Party Information: You’ll need to designate a “Responsible Party.” This is the individual who controls, manages, or directs the entity and the disposition of its funds and assets. For corporations, this is generally an officer. For LLCs, it is often a member or manager. You will need to provide their Social Security number and other identifying information.

5. Answer the Application Questions: The online application will guide you through a series of questions regarding your business. This includes:

   • Business Name and Address: Provide the legal name of your business and its principal address.
   • Reason for Applying: Specify why you are applying for an EIN (e.g., starting a new business, hiring employees, changing the business structure).
   • Type of Business Activity: Describe the primary business activity.
   • Date Business Started or Acquired: Indicate when the business commenced operations or was acquired.
   • Accounting Year Ending Month: Choose the month in which your business’s accounting year ends.

6. Submit Your Application: After completing the application, review all the information carefully for accuracy. Submit the application electronically.

7. Receive Your EIN Immediately: Upon successful submission, the IRS will immediately issue your EIN online. You can download, save, and print your EIN confirmation notice (Form CP 575).

Colorado State Tax ID

In addition to the federal EIN, you may also need a Colorado State Tax ID Number, also known as a Colorado Sales Tax License. This is required if your business sells taxable goods or services in Colorado. To obtain a Colorado Sales Tax License, you will apply through the Colorado Department of Revenue (CDOR).

1. Register Online: Visit the Colorado Department of Revenue’s website (colorado.gov/revenue).

2. Create an Account: You’ll likely need to create an account on the state’s online portal.

3. Complete the Application: Follow the prompts to complete the application for a Colorado Sales Tax License. You’ll need to provide information about your business, including its name, address, type of business activity, and Federal EIN (if you have one).

4. Pay the Fee (If Applicable): Colorado may charge a small fee for the issuance of a sales tax license.

5. Receive Your License: Once your application is processed, you’ll receive your Colorado Sales Tax License. This may be issued electronically or mailed to your business address.

Frequently Asked Questions (FAQs)

Here are 12 frequently asked questions about obtaining a tax ID number in Colorado:

1. Do I need both a Federal EIN and a Colorado State Tax ID?

Typically, yes, you will need both if you sell taxable goods or services in Colorado and have a business structure other than a sole proprietorship. The Federal EIN is for dealing with the IRS, while the Colorado Sales Tax License is for collecting and remitting state sales taxes.

2. How much does it cost to get a Federal EIN?

Applying for a Federal EIN directly through the IRS is completely free. Be wary of third-party services that charge a fee to obtain an EIN on your behalf.

3. How long does it take to get a Federal EIN?

The online application process is usually very quick. If the application is successful, you will receive your EIN immediately upon submission.

4. What if I lose my EIN confirmation notice (Form CP 575)?

You can request a replacement EIN confirmation notice (Form CP 575) from the IRS. You can call the IRS Business & Specialty Tax Line. You might also be able to find it on previously filed tax returns.

5. What if I made a mistake on my EIN application?

If you discover an error on your EIN application, you should contact the IRS Business & Specialty Tax Line to determine the best course of action. Depending on the type of error, you may need to submit a letter explaining the correction.

6. Can I get an EIN for a business that is not yet operational?

Yes, you can apply for an EIN even if your business is not yet operational. You will need to indicate the anticipated start date of your business.

7. What is the difference between an EIN and a Social Security Number (SSN)?

An EIN is used to identify a business entity, while an SSN is used to identify an individual. Businesses use EINs for tax reporting and other official purposes, much like individuals use SSNs.

8. I am a sole proprietor. Do I need an EIN?

As a sole proprietor, you generally do not need an EIN unless you hire employees or choose to operate your business as a corporation or partnership. You can typically use your SSN for business tax purposes.

9. How do I get a Colorado Sales Tax License?

You can apply for a Colorado Sales Tax License through the Colorado Department of Revenue’s online portal. You will need to provide information about your business and its activities.

10. Is there a fee for a Colorado Sales Tax License?

Colorado may charge a fee for the issuance of a sales tax license. It is best to check the Colorado Department of Revenue website for the most up-to-date fee information.

11. I have multiple business locations in Colorado. Do I need a separate Sales Tax License for each location?

Generally, businesses with multiple locations in Colorado do not need a separate Sales Tax License for each location. You can usually report sales taxes for all locations under a single license.

12. What happens if I operate a business in Colorado without the required Tax ID numbers?

Operating a business without the required Tax ID numbers (Federal EIN and Colorado Sales Tax License) can result in penalties, fines, and legal issues. It’s crucial to obtain the necessary IDs before commencing business operations.