A state tax identification number is required of businesses that have employees, charge sales tax or pay unemployment or disability insurance premiums for their employees. Requirements vary by state, so if you operate a business, check with your state for its requirements.

Function

A state tax ID number is needed to file taxes with your state, whether they are sales taxes or employees' withholding taxes. If your state requires an ID and you don't have one, you risk your business charter being rescinded.

Tax Permit

To charge state sales tax on what you sell, you must have a tax permit issued by your state. This is the number you use to send the taxes to the state to keep your business in good standing. It is also called a state sales tax permit.

Income Taxes

Depending on how you structure your business, you may need a state tax ID to file your income tax. Different taxation methods apply to corporations and sole proprietorships, for example.

Employment Taxes

All states require that business owners pay state unemployment insurance and state worker's compensation insurance. You need your state tax ID to identify you with your state when you pay these taxes.

Excise Taxes

Excise taxes are taxes paid on the manufacture or sale of a commodity such as cigarettes or alcohol. It is sometimes called a luxury tax. It is typically based on a number of units or a specific value. If you buy or sell items subject to excise taxes, you need a state tax ID.

Source:

Illinois taxpayer answer center

Links to state business tax resources

Emploer and tax id numbers

Resource:

Excise tax definition