If you’ve been interested in opening up your own business, you may have heard of a sales tax bond. Sales tax bonds play an important role in making sure sales taxes are properly handled. Let’s take a look at some of the basics of sales tax bonds, then dive into who may be required to post such a surety bond.
Sales Tax Bond Basics
Sales tax bonds, also known as sales and use tax bonds, are a type of financial guarantee bond that are meant to ensure that sales taxes are properly collected and remitted to state or local governments in a timely matter. This bond also serves as a guarantee that companies will file their taxes by the applicable deadline. Governing bodies use sales tax bonds to ensure that businesses within their jurisdiction are handling taxes in an appropriate manner.
Just like with other types of surety bonds, sales tax bonds involve three parties. First off, there’s the obligee, which is the state or local governing body that requires the bond in this case. Next, the principal — your business — is the entity that is required to post the bond. Lastly, the surety serves as the underwriter of the bond, and steps in to resolve bond disputes if needed.
Does My Business Need a Sales Tax Bond?
Sales tax bond requirements vary, depending on local and state government regulations. They may be called by different names in different states, for example in Texas they are known as a “continuous bond of seller” while in California they’re known just as a “bond of seller”. Sales tax bonds usually surround the sale of substances which are heavily regulated, like alcohol and cigarettes. If your business sells these types of products, you will likely be required to post a sales tax bond.
Some of the most common types of sales tax bonds are as follows:
- Alcohol bonds, which are needed for businesses that are involved in producing, warehousing or selling alcohol.
- Cigarette tax bonds, which are required when selling tobacco products.
- Fuel tax bonds, which apply to the sale, distribution, or mixing of fuel.
- Marijuana bonds, which are required when operating a cannabis dispensary. For more information on cannabis-related surety bonds, check out our post on Cannabis Industry Insights and Predictions for 2019.
Sales Tax Bonding Requirements
Bonding requirements can vary greatly, based on where your business is located. Usually, your bonding requirement depends on your estimated annual tax liability. It’s best to consult with your local government authority to determine the specific surety bond amounts you’ll need, if any. Many institutions provide information about bonding requirements on their website, or even offer helpful calculators that can help you determine your specific needs. If in doubt, you can always get in touch with a qualified surety bond expert from Viking Bond Service, Inc.
Why are Sales Tax Bonds Required?
State or local governments usually mandate sales tax bonds as part of the business licensing process. This is to make sure that all relevant sales tax is paid, and that revenue is reported appropriately. It’s no secret that taxes play a fundamental role in the services that government entities provide, which is why state and local authorities are adamant about the use of tax bonds. These bonds provide a path of recourse in the event that tax money is mishandled. Failure to comply with tax bond requirements may make a businesses liable to pay fines up to the amount listed on the sales tax bond.
How Much Does a Sales Tax Bond Cost?
Sales tax bond premiums are calculated based on a variety of factors, including credit and industry type. The price of your surety bond is a percentage of the bond amount — you’re not required to put the entire bond amount up front. Though better credit usually leads to lower premiums, there are also options for those with bad credit. Viking Bond Service, Inc. is committed to providing businesses with the surety solutions they need, at the lowest premium price possible.
Working with a Qualified Surety
With all the horror stories out there about illegitimate surety bond providers, it’s normal to be wary about who you work with. Viking Bond Service, Inc. has over thirty years of experience providing superior surety bond solutions to businesses of all sizes. No matter what your sales tax bond needs are, our team of surety experts can ensure that you meet the necessary requirements to have a successful business.
With Viking Bond Service, Inc. the sales tax bonding process is simple and typically has a very fast turnaround. We’ll walk you through the bond process to get you the coverage you need in a quick and easy way, at the best possible value. To get started, give us a call at 1-888-278-7389 or complete an online application today.