Key Takeaways:

  • SEIN is essential for California payroll tax compliance.

  • You need both EIN and SEIN to meet federal and state requirements.

  • SEIN registration is completed through California’s EDD portal.

  • Maintain compliance with SEIN to avoid penalties and audits.

If you’re starting a business in California, securing the necessary identification numbers is essential for ensuring compliance with payroll and tax obligations. One essential component for California employers is the State Employer Identification Number (SEIN), which is issued by the California Employment Development Department (EDD). 

While both the SEIN and the EIN have certain similarities, they essentially serve very different purposes. To help you stay legally compliant, we are going to guide you through the basics of the SEIN, how it differs from the EIN, and the steps to obtain and maintain it.

Why Your Business Needs a California State ID Number

The California State ID Number, or SEIN, is crucial for businesses operating within California that have employees because it can track an employer’s compliance with California’s payroll tax requirements. 

This includes unemployment insurance (UI), employment training tax (ETT), state disability insurance (SDI), and personal income tax (PIT). Without a SEIN, a business cannot fulfill these payroll tax responsibilities, which they are legally required to do if they have one or more employees.

Failing to secure an SEIN can lead to severe consequences, including fines, back taxes, and potential legal issues. Thus, obtaining this state identifier keeps your business compliant and helps you ensure your employees have the protection they are entitled to. 

While both the SEIN and EIN are essential for tax and business identification, they serve different purposes. 

To start with, the EIN is issued by the IRS and is used mainly for federal tax reporting. The SEIN, however, is issued by the state of California and is specifically used for state tax and payroll obligations.

Businesses must obtain both an EIN and SEIN to comply with federal and state regulations. The EIN acts as a unique identifier for your business at the federal level, while the SEIN tracks your compliance with state employment taxes. 

In most cases, having an EIN is often a prerequisite for obtaining a SEIN, as it establishes your business’s federal tax identity.

Steps to Obtain a California State ID Number

Once you understand the differences between a SEIN and an EIN, you should prepare to obtain these identifications. Applying for a California State ID number is a relatively simple process that can be completed online. Below are the steps for registering for a California State ID number.

Step 1: Obtain a Federal EIN

As mentioned before, one of the prerequisites for SEIN is that you must have an EIN from the IRS. 

You can apply for a federal EIN by going to the IRS website and accessing the EIN Assistant. During the EIN application, you’ll need to provide basic business information, including the type of business entity, the principal officer’s details, and the business’s primary purpose.

Receiving an EIN typically takes only a few minutes if done online, and once issued, it serves as your business’s federal identifier for all tax-related matters. Once you have an EIN, you’re ready to proceed with the SEIN application.

Important Note: Make sure to check the EIN hours of operation before starting your application as the portal is only available during those hours.

Step 2: Register with the California EDD

To obtain a SEIN, you must register your business with the California Employment Development Department (EDD). Here’s a step-by-step guide:

  1. Access the EDD e-Services Portal: Start by visiting the EDD’s e-Services for Business portal. Create an account if you don’t already have one.

  2. Complete the Registration Form: Fill out the required details, including your business name, EIN, type of business, industry classification, and contact information.

  3. Submit Verification Documents: Depending on your business structure, you may need to provide additional documentation for verification purposes. This step ensures that the information provided is accurate and that the EDD has all necessary data on file.

  4. Processing Time: The EDD typically issues the SEIN within a few business days, although processing times can vary. 

Once issued, the SEIN enables your business to comply with California payroll tax obligations.

How to Find or Recover a Lost SEIN or EIN

There may be situations where you need to search for a SEIN or EIN. For example, you might want to look up the SEIN or EIN of another company. 

Or, you may have lost your own SEIN or EIN, in which case you should take immediate action to recover them. Below are some ways you can look for a SEIN or EIN.

Finding a SEIN or EIN for Another Company

In certain situations, you may need to verify the SEIN or EIN of another business, such as when entering into partnerships or contracts. While this information is generally considered private, you can contact the company directly to request the identification number, as long as you have a legitimate reason and the business agrees to disclose it. Alternatively, some information can be accessed through the California EDD or IRS for verification purposes.

  1. Recovering Your Own SEIN or EIN

If you’ve misplaced your SEIN or EIN, there are several ways to recover these identifiers:

  • For EIN Retrieval: Contact the IRS helpline or refer to Form CP-575, which is the confirmation notice sent when your EIN was initially issued.

  • For SEIN Retrieval: You can contact the California EDD directly. They will verify your business details and provide your SEIN if you meet the necessary requirements. Keeping these numbers securely filed and accessible can prevent delays in tax reporting and payroll processing.

Common Questions and Considerations

While it may be daunting for a new business owner to fully understand the purposes, use cases, and importance of having a SEIN, having clarity about when and how a SEIN is used can help you navigate these complexities. Below are some common questions people have regarding the use of SEIN.

Can SEIN Be Used for Personal Tax Identification?

No, the SEIN is strictly used for business purposes related to state payroll tax compliance. Unlike a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN), the SEIN is exclusively intended for businesses to fulfill their California tax obligations. It should not be used for personal tax filings or identification.

Importance of Maintaining SEIN for California Tax Reporting Compliance

Once issued, the SEIN is essential for all state payroll tax filings and payments. Employers must consistently use this number when reporting employee wages, withholding taxes, and submitting payments to the EDD. Neglecting to maintain SEIN compliance can lead to penalties, interest charges, and potential audits. It’s crucial to keep the SEIN current and active to avoid disruptions in business operations or fines for late tax payments.

Differences in State Compliance Requirements

Each state has unique tax and payroll requirements, and California’s regulations are among the most comprehensive. The SEIN is central to adhering to these requirements, which include timely payroll tax submissions, unemployment insurance contributions, and income tax withholdings. Failing to register for a SEIN when required can lead to significant penalties and backdated tax liabilities, making it essential to stay compliant from the outset.

Common Penalties for Non-Registration

Businesses that fail to register with the EDD and obtain a SEIN may face fines, interest on unpaid taxes, and potential audits. In severe cases, the EDD may even take legal action to recover unpaid payroll taxes. By registering promptly and maintaining compliance, businesses can avoid these costly penalties and focus on growth.

Where to Seek Assistance

Navigating California’s business tax obligations can be challenging, especially for new business owners unfamiliar with SEIN requirements. It is always recommended to consult with an attorney to understand these processes and stay compliant with the laws in your state.

If you choose to seek assistance, UpCounsel has countless resources for you. Consider reaching out to tax attorneys and business formation experts who specialize in California’s tax and employment laws through UpCounsel today.

FAQs

Can I use someone else’s SEIN for my business? 

No, each business must have its own SEIN for state tax compliance.

Do I need to renew my SEIN? 

Typically, SEINs do not require renewal, but maintaining compliance with payroll taxes is essential.

Are SEIN and California Tax ID Number the same? 

Yes, they are often used interchangeably, both referring to the state employer identification number.