Sales Tax Bond

A sales tax bond guarantees that a business will pay the state the sales tax it collects from customers. Many state tax agencies can require security, either a cash deposit or a surety bond, before they issue or renew a seller's permit. This is common for new businesses and for sellers with a history of late payments. If you don't pay, the state can make a claim against the bond to collect what you owe.

How a sales tax bond works

The bond is an agreement among three parties: you, the business (principal); the state tax agency that requires the bond (obligee); and the surety that issues it. For example, if your store falls two quarters behind and owes $2,800 in sales tax, the state can make a claim against your bond. If the claim is valid, the surety pays the state up to the bond amount, and you must repay the surety. You may still owe penalties and interest to the state.

Who needs a sales tax bond?

Not every seller needs one. A state usually asks for security when you apply for a seller's permit or after missed or late payments, and it will tell you the amount required. Most states let you post a cash deposit instead, but a surety bond lets you keep that cash in your business. Some products, such as cigarettes, alcohol, cannabis and fuel, may require their own separate tax bonds.

Bond amount and your premium

The state sets the bond amount, usually based on your estimated tax liability rather than your total sales. In California, for example, the amount generally can't exceed twice your average quarterly tax liability, three times your average monthly liability, or $50,000, whichever is less. That amount is the coverage required, not the price you pay. Your premium depends on the surety's underwriting, including your credit and, for larger bonds, your financial statements. Request a quote rather than relying on a fixed rate.

How to apply

Apply as soon as you receive the state's security notice, since missing the deadline can delay or cost you your seller's permit. Start the online application with your business information, your seller's permit or account number and the bond amount the state set. WWIS will review your submission and help you with the quote, the state's bond form and issuance. Approval and timing depend on the surety and a complete application.

Information needed to apply

Can the requirement end?

Sales tax bonds typically stay in force as long as the state requires security for your permit, and you pay a premium each year to keep yours active. In some states, a record of filing and paying on time can lead the tax agency to lower or release the requirement. Ask your state tax agency how its review process works. Requirements vary by state, so confirm the details for yours.

Find bonds by state

Get help with your application

Call 888-518-8011 or email [email protected] for help selecting the bond and completing your application.