Sales Tax Bond Guide
Many states and municipalities require retailers to file a surety bond as a licensing requirement. Learn how they work and where to apply for one in this guide.
Bond Overview
- Purpose: To ensure businesses pay state and local sales taxes
- Who Needs It: Retailers and merchants in various states and cities, often sellers of alcohol, tobacco products or fuel
- Required Amounts: Varies based on annual tax liability and location
- Premium Rates: Typically 1–10% of the coverage amount, credit-based
Keep reading to learn how to navigate the sales tax bonding process with SuretyBonds.com.
What Is a Sales Tax Bond?
A sales tax surety bond is a form of financial security that ensures a business will remit all applicable sales taxes due to local and state governments by the specified deadlines.
The bond is also referred to as:
- Continuous bond of seller
- Sales and use tax bond
Retailers and merchants must post a sales tax surety bond to provide proof to the state or city that they are financially responsible for paying the sales tax.
How Do I Get My Bond?
SuretyBonds.com proudly provides the fastest and easiest bonding process. Simply follow these quick steps:
- Step 1: Determine which tax bond(s) you need.
- Step 2: Apply with SuretyBonds.com and receive a free quote.
- Step 3: Pay for your bond. We offer convenient payment options.
- Step 4: Receive your bond and file it with the obligee.
Depending on your obligee’s requirements, we'll ship you a physical document set or e-mail you a digital document to file. If you’re in a rush, we offer an overnight shipping option.
SuretyBonds.com is licensed to issue sales tax bonds in all 50 states.
State-Specific Bond Requirements
The requirements for each bond fluctuate because they are determined at the state level. Select your state below for more information about the sales tax bonds in your area or call now to speak with a surety expert:
How Much Does a Sales Tax Bond Cost?
The bond amount is calculated based on the businesses’ gross receipts or projected sales taxes at the end of the year. The sales tax bond premium cost is a small percentage of the full bond amount, typically 1–5%.
How Do Sales Tax Bonds Work?
The sales tax bond is purchased by retailers and other merchants as required by the state in which they operate. Each surety bond serves as a legal contract, which binds three entities together:
- Principal: The business owner or professional purchasing the bond
- Obligee: The government agency requiring the bond to ensure payment of taxes
- Surety: The insurance company financially backing the bond
Sales tax bonds protect the obligee if a bonded business does not pay proper taxes.
How Are Sales Tax Surety Bond Claims Handled?
In the event of misconduct, a claim may be filed against the bond. If the claim is valid, the surety will pay out the claim up to the full bond amount.
For example, a $7,000 sales tax claim can be paid in full from a $10,000 bond. Then, the principal is required to reimburse the surety for the entire claim amount.
Who Needs to Purchase a Sales Tax Bond?
Various businesses across the U.S. need a sales tax bond to legally operate. In general, a sales tax surety bond is necessary if you are selling, producing or storing the following product categories:
Some businesses may need additional types of tax bonds in some states. In other locations, however, only a general sales tax bond is necessary. Check with your state, county and city government agencies to verify your bonding requirements.
