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What is a Sales Tax Bond?
A sales tax surety bond is a form of financial security ensuring a business will fulfill all applicable sales taxes due to local and state governments by the specified deadline.
The sales tax bond is purchased by retailers and other merchants as required by the state in which they operate. Retailers and merchants must post a sales tax surety bond to provide proof to the state and/or city they are financially responsible for paying the sales tax.
How Do Sales Tax Bonds Work?
Each sales tax bond serves as a legal contract, which binds three entities together.
- The principal is the business owner or professional purchasing the bond as a way to guarantee appropriate tax payments will be made in the future.
- The obligee is the local or state government agency requiring the bond as a method to ensure taxes are paid.
- The surety is the insurance company backing up the bond with a financial guarantee.
Sales tax bonds are used as protection for the obligee in the event your business does not pay proper taxes. The bond will then serve as a form of financial compensation, so bond claims cannot be made against you.
In the incident of misconduct, a claim may be filed against your bond. If the claim is proven, the surety will pay out the claim up to the full amount of the bond coverage. For example, a $3,000 claim will be paid out in full from a $10,000 bond amount. In a case like such, the principal (bond holder) is required to reimburse the surety for the entire claim amount.
State Specific Costs
The bond amounts and regulations enclosed on each sales tax bond are created on the state level. Thus, sales tax bond costs and requirements fluctuate across states.
The bond is also referred by different names throughout several states. For example, the bond is called a “continuous bond of seller” in Texas, while in Missouri, it’s referred to as a “sales and use tax bond”. Select your state below to learn more information about the sales tax bonds in your area or call 1 (800) 308-4358 to speak with one of our surety experts.
Who Needs to Purchase a Sales Tax Bond?
A myriad of businesses across the U.S. are required to obtain a sales tax bond in order to legally operate. In general, a sales tax surety bond is needed if you are selling, producing or storing alcohol, cigarettes and tobacco products, marijuana or fuel. Each sales tax bond presents a financial guarantee that a business entity or individual will pay all anticipated sales taxes at the appropriate times, such as annually, semi-annually or quarterly.
What are the Different Types of Sales Tax Bonds?
The size of your bond will be determined by the gross receipts or projected sales taxes you will likely pay at the end of the year.
Depending on the type of business you own, you may need to obtain a few different sales tax bonds. In some states, only a general sales tax bond is needed. Before applying for your bond, check with your state, county and city government agencies to verify your specific bonding requirements.
How Do I Obtain a Sales Tax Surety Bond?
By applying for the bond today, you’re guaranteed a complimentary price quote within 24 business hours. SuretyBonds.com is licensed to issue surety bonds in all 50 states, which means we can be of service to you no matter where your business is located. If you need the original bond form in your hands by tomorrow, we offer an overnight shipping option.