A tax exempt number is a registration number issued by your state or the IRS that lets an organization skip paying sales tax on purchases or income tax on revenue

The number itself is proof that your organization meets the legal definition of tax exempt — usually a nonprofit, religious group, educational institution, or charitable organization. When you show this number to a vendor, they don't charge you sales tax. When you file taxes, you report it to show the IRS why you don't owe income tax on money you received.

The number you need depends on what you're doing. If you want to buy things without paying sales tax, you need a resale certificate or sales tax exemption number from your state. If you want the IRS to recognize your organization as tax exempt so donors can deduct gifts and you don't pay federal income tax, you need a different number called an Employer Identification Number (EIN) paired with a tax exempt status information from the IRS.

These are not the same thing, and getting one does not automatically give you the other.

Key Takeaways

  • A sales tax exemption number stops vendors from charging you sales tax on purchases, but only in the state that issued it.
  • An EIN is a nine-digit number the IRS issues to organizations; it is required to open a bank account and hire employees, whether or not you are tax exempt.
  • Tax exempt status with the IRS (usually through Form 501(c)(3)) is a separate information that requires an EIN but is not automatic when you get one.
  • Religious organizations, schools, and some nonprofits can claim tax exempt status without filing Form 501(c)(3), but the rules vary by state and by organization type.
  • You must renew or report your tax exempt status regularly; letting it lapse means you owe back taxes and penalties.

Sales tax exemption numbers and resale certificates

If your organization buys goods to resell, donate, or use in its operations, you can register with your state's tax authority to avoid paying sales tax on those purchases. The state issues you a number — sometimes called a resale certificate number, sales tax exemption number, or tax exempt number — that you show to vendors.

This number is state-specific. A number issued by New York does not work in Pennsylvania. You must register separately in each state where you make tax-exempt purchases. The process is usually free and takes a few days to a few weeks. You register through your state's department of revenue or taxation, often online.

Vendors are not required to accept your exemption number. They can ask for proof that your organization is actually tax exempt — typically a copy of your IRS information letter or your state's registration confirmation. If a vendor refuses to honor your number, you pay sales tax and cannot get it back.

EINs and federal tax exempt status

An Employer Identification Number (EIN) is a nine-digit number the IRS assigns to any organization that needs to file taxes, hire employees, or open a business bank account. You get an EIN by filing Form SS-4 with the IRS, either online, by mail, or by phone. The IRS issues it when ready (or within a few days by mail) at no cost.

Having an EIN does not mean you are tax exempt. It is straightforward an identifier, like a Social Security number for a business. A for-profit company has an EIN. A nonprofit has an EIN. Both need one to operate.

To become tax exempt with the IRS, a nonprofit must file Form 1023 (full process) or Form 1023-EZ (simplified process) and be approved. This process takes weeks to months and costs money — Form 1023 has a $600 filing fee, Form 1023-EZ costs $275. The IRS then issues a information letter stating that your organization qualifies as tax exempt under Section 501(c)(3) or another category. This letter is your proof to donors, vendors, and state authorities that you are tax exempt.

Some organizations — churches, certain educational institutions, and some nonprofits under $50,000 in annual revenue — may not have to file Form 1023 at all, depending on state law and IRS rules. But even these organizations usually need an EIN to operate.

Who needs a tax exempt number

You need a sales tax exemption number if your organization buys goods and wants to avoid paying sales tax. This includes nonprofits, religious organizations, schools, hospitals, and charities. You explore through your state's tax authority.

You need an EIN if your organization has employees, opens a bank account, or files any kind of tax return. Nearly every nonprofit, religious organization, and charity needs one. You get it from the IRS by filing Form SS-4.

You need federal tax exempt status (a information letter from the IRS) if you want donors to deduct their gifts as charitable contributions, if you want to avoid paying federal income tax on revenue, or if you want to may have access to for certain grants and programs that require tax exempt status. You get this by filing Form 1023 or Form 1023-EZ with the IRS and being approved.

how the process works for each number

For a sales tax exemption number: Contact your state's department of revenue or taxation. Most states let you register online. You will need your organization's legal name, address, EIN (if you have one), and a description of what you do. The state will issue a number within days or weeks. Some states call this a resale certificate or sales tax permit.

For an EIN: File Form SS-4 with the IRS online at irs.gov, by phone at 1-800-829-4933, or by mail. Online filing is fastest — you get your number when ready. By phone, you get it the same day. By mail, it takes about two weeks. The form asks for your organization's legal name, address, type of organization, and the reason you need an EIN. There is no fee.

For federal tax exempt status: File Form 1023 or Form 1023-EZ with the IRS. You must have an EIN first. Form 1023-EZ is simpler and cheaper ($275) but only available to organizations under $50,000 in annual revenue with straightforward operations. Form 1023 is more detailed and costs $600 but has no revenue limit. Both require detailed information about your mission, finances, and governance. Processing takes weeks to months. You can file online through the IRS e-file system or by mail.

What happens if you lose or need to renew your tax exempt status

Sales tax exemption numbers do not expire, but you must keep your registration current. If your organization's status changes — for example, if you stop being a nonprofit or move to a different state — you must notify your state tax authority. Failure to do so can result in back taxes and penalties.

Federal tax exempt status requires ongoing compliance. The IRS requires tax exempt organizations to file Form 990 (or Form 990-N for very small organizations) every year, even if you have no income. If you do not file for three consecutive years, the IRS automatically revokes your tax exempt status. You can reapply, but you will owe back taxes and penalties in the meantime.

If your organization dissolves, you must notify both the IRS and your state. The IRS requires a final Form 990 and notification of dissolution. Your state may require you to file a final sales tax return and return your exemption number.

Common mistakes and how to avoid them

The biggest mistake is assuming that having an EIN means you are tax exempt. It does not. You must file Form 1023 or Form 1023-EZ separately and receive approval from the IRS. Until then, you owe federal income tax on any revenue you receive.

Another common error is using a sales tax exemption number in a state where you did not register. Each state issues its own number, and vendors in other states will not honor it. If you operate in multiple states, register in each one.

Organizations also sometimes let their tax exempt status lapse by missing the annual Form 990 filing important date. Set a calendar reminder for the important date (usually May 15 for calendar-year organizations) and file on time, even if you have no income. If you miss the important date, the IRS sends a notice; you have a grace period to file, but if you miss three years in a row, your status is revoked automatically.

Frequently Asked Questions

Can I use my EIN as my tax exempt number?

No. Your EIN is a nine-digit identifier the IRS uses to track your organization for tax purposes. Your tax exempt status is a separate information that requires filing Form 1023 or Form 1023-EZ and receiving approval. You need both, but they are different things.

Do I need a sales tax exemption number if I am already tax exempt with the IRS?

Not automatically. Federal tax exempt status does not give you a sales tax exemption number. You must register separately with your state to get one. However, most states will recognize your IRS information letter as proof that you may have access to for a sales tax exemption, so the process is usually quick.

What if a vendor will not accept my tax exempt number?

Vendors are not required to honor your exemption number. If they refuse, you pay sales tax. You cannot get it back later. To avoid this, bring a copy of your IRS information letter or state registration confirmation when you shop, and ask the vendor to verify your status before you complete the purchase.

How long does it take to get tax exempt status from the IRS?

Form 1023-EZ typically takes two to four weeks. Form 1023 usually takes four to twelve weeks, though it can take longer if the IRS asks for more information. You can operate as a nonprofit while your process is pending, but you will owe federal income tax until you receive your information letter.

What happens if I do not file my annual Form 990?

If you miss the important date, the IRS sends a notice. You have a grace period to file, but if you miss three consecutive years, the IRS automatically revokes your tax exempt status. You will then owe federal income tax on all revenue received while your status was revoked, plus penalties and interest.