If you’ve never heard of a sales tax surety bond before don’t worry, you’re not alone! A sales tax bond is a type of surety bond that’s generally only required if you operate a business in certain industries. These bonds are designed to ensure that a business files tax returns on time and pays any applicable sales tax that’s owed to the local or state government. Government agencies require businesses to have these bonds so they do not lose out on any income from the sale of taxable products should the business fail to comply with tax rules.
There are many types of sales tax bonds, some of the most common are tobacco bonds, fuel bonds, marijuana bonds, and alcohol bonds. Depending on the state or states that your business operates in, if you sell any of these items, whether as a distributor or outlet, you may need to secure a sales tax bond. You should check the requirements in your state to ensure that you have the correct bond in place.
Sales Tax Surety Bonds are a Contract Between Three Parties
One key thing to note is that surety bonds are not insurance. In fact, all surety bonds are a contract between three parties, which are:
The obligee – the organization that requests the bond, which in this case is a government agency
The principle – the business selling taxable products
The surety – the underwriter of the bond
The contract guarantees that the surety will reimburse the obligee for all financial losses incurred as a result of the principles failure to pay taxes. In turn, the principle agrees to reimburse the surety if they need to pay out on the bond. Unlike insurance, the bond purchaser is not protected from financial loss; the bond simply acts as a form of credit.
Finding an Affordable Sales Tax Bond
The cost of sales tax bonds is affected by a number of factors, including bond type and bond amount. Your credit score will also play a major role in determining the bond premium, as the surety will need to determine how risky it is to issue your bond. Securing a sales tax bond if you have poor credit can be difficult. However, the team at Viking Bond Service is experienced in helping all businesses, whatever their credit history, find an affordable sales tax bond. Call us or apply online to find the bond you need, today!