A Tax bond is a type of financial guarantee surety bond and is typically required by an individual state or local governmental entity to guarantee payment of any taxes due or that may become due. There are many types tax bond requirements on both the state and local levels including:
• Sales Tax (also Bond of Seller, Continuous Bond of Seller, Sales and Use Tax, Limited and Excise Use Tax) Typically required for retail or general sales not including food and beverages.
• Alcohol Tax (also Mixed Beverage (Gross Receipts/Sales) Tax, Liquor Tax, Alcoholic Beverage Tax) Usually for the sale, manufacturing or distribution of alcoholic beverages including beer and wine.
• Highway Use Tax (also International Fuel Tax Agreement (IFTA) Tax)
• Contractor Tax (also Out-of-State or Non-Resident Contractor Tax)
The bond amount will be set by the Obligee (State, City, Town, etc.) that is requiring the bond. Some States have minimum amounts required, or they may calculate the bond required based on the anticipated taxes due for any stated period. Usually tax bonds are either required for every applicant applying for a permit or based on a disciplinary basis. For example, if the taxpayer pays their taxes on time and per the terms of their agreement with the Obligee, then the bond requirement may be reduced or removed. If the taxpayer is past due or has late payment history, the bond requirement may be increased and/or extended. Other Obligees will require the bond for the life of the permit regardless of payment history.
Most tax payment bonds under $25,000.00 will be approved with just a credit check for the applicant(s). Depending on the bond amount and type of bond required, we have many instant issue programs for these bonds with no need to review credit. Many local bond requirements for alcohol taxes can be approved without a credit check up to $10,000.00 and Highway Use (IFTA) bonds up to $3,000.00. Minimum premiums and State taxes apply.
Generally, for any bond amounts over $25,000.00, business and/or personal financial statements will be required. The rates for this type of bond will start at 2% for preferred applicants with strong personal credit and financial statements (if required) but are often rated between 3-5% of the required bond limit. Non-standard rates are also available with collateral options.
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