What Is a Tax Exempt ID Number?

A tax-exempt number is an identifying number that the IRS provides to organizations that qualify for and apply for tax-exempt status. The purpose of these numbers is to exempt approved organizations from paying federal level taxes on qualified purchases, as the IRS explains.

Tax-exempt numbers and the exemption status they represent are not automatically granted to any organization. Organizations must apply with the IRS in order to receive exemption status and a corresponding number. This applies even to non-profit organizations, according to the IRS. Non-profit is a state-level status that allows qualified organizations to be exempt from some local and state level taxes, but these organizations are still liable to pay certain federal taxes, such as sales taxes, unless they specifically apply with and are approved by the IRS to be exempt.

Organizations that are approved by the IRS receive a determination letter that contains their tax-exempt number, as well as other information about their status. Having a tax-exempt number does not guarantee that all businesses forgo being charged with taxes because some businesses require additional information before approving a tax-free transaction. Tax exemption is reserved for select organizations only, and no individual person can be tax-exempt.