Notwithstanding a few exceptions, it's generally not possible to automatically validate and reconcile whether a state sales tax identification number provided on a resale or tax-exemption certificate matches that of the purchaser name provided on the document. The key word here is "automatically".

The reason for this is that unlike the verification of employer identification numbers (EIN) done at the Internal Revenue Service (IRS) data level, there is generally not an open application programming interface (API) at each individual state level that supports end-to-end automatic validation.

Most states that allow for the online verification of tax IDs do so in a manner that requires individuals to bypass security protocols including CAPTCHAs, limit and track user sessions, and in certain scenarios require users to sign up for mandatory online accounts.

There are also certain states where verification of this information is not supported online, and verifying tax IDs for certain tax scenarios typically requires an individual to speak with a representative of the respective state's tax department on a customer service phone line.

We know that some competitors in our industry claim to "automate" this process, but their promises often overlook important details. This can lead to serious tax audit issues down the road.

For example, it may be possible in certain states to automatically "validate" that the sales tax identification number provided on the document is a valid number. However, this is a severely misleading claim. Sure, the number itself can be perfectly valid, but if that number does not belong to the named legal entity as written on the certificate, the claim can be meaningless.

This could happen because of something as simple as a typo on the tax ID provided in the exemption document, which accidentally matches another company’s ID. In more serious cases, the customer might intentionally use a valid tax ID found online, attempting to fraudulently pass it off as their own to avoid paying sales tax.

Another common situation that can lead to issues especially when dealing with larger companies, is that certificates and tax ID's may be provided for the parent entity, but the actual transacting party as outlined on the accounting documents such as invoices may be that of a different affiliate entity. 

In these situations, it is almost always necessary to validate and reconcile multiple sources of data including customer master records, as most state governments do not offer integration logic (nor are they incentivized to do so) to support the tax ID matching requirements for many business scenarios. 

At EXEMTPAX we offer various customization and configuration options in our services to help streamline and automate where possible, and allow for self-service approaches to assisted tax ID validation that we refer to as authentication. We also provide Managed Services options, where EXEMPTAX's team of analyst can handle the heavy lifting of the validation process on your behalf. 

If you have additional questions about this topic and you are a prospective customer, our sales team can provide additional feedback as to solution options on a demo (schedule here). Otherwise, if you are an existing customer and have questions about this topic including potentially offloading this process, please reach out to our support team by creating a support ticket and a member of our team will be happy to assist you.