In most states, when you buy a $1.00 cup of brewed coffee at a corner coffee shop, you end up paying about $1.07 at the cashier. What is the extra $.07? It’s sales tax, of course!
Sales tax is one of the main revenue sources for states and some larger cities or municipalities. When you make a purchase of goods or services, you pay the sales tax directly to the selling merchant or business. The merchant, in turn, is responsible for submitting the sales tax directly to the governing municipality and/or state agency.
How do government agencies ensure that all retailers and merchants file a tax return and remit all collected sales tax? They enforce a surety bond called a Sales Tax Bond.
What is a Sales Tax Bond?
A Sales Tax Bond is a type of surety bond purchased by retailers and other merchants at the requirement of the state in which they operate. In order to provide proof to the state and/or city that the retailer or merchant is financially responsible for paying the sales tax, they must make a deposit in the form of a Sales Tax Bond.
Why are Sales Tax Bonds required by states that impose sales tax? It is a common way to guarantee that a merchant complies with sales tax rules and regulations. It is every retailer’s responsibility to collect, report and submit the proper amount of sales tax to the governing agency in a timely manner. Failure to report and submit accurate sales tax in a timely manner can result in hefty penalties and interest on unpaid sales tax amounts.