A tax bond is a type of financial guarantee bond that may be required for your business if you operate in certain areas. Here at Surety by NFP, one of the main products we offer are sales tax bonds. Before you get started on the bonding process, you should be aware of what they are and the many different types, so that you can be well informed and make the best decision possible for your company.
For anyone asking themselves "What is a tax bond?," it’s a financial guarantee bond that offers security for a business that will automatically cover all of the various sales taxes that are owed on a state and federal level. This bond offers a guarantee that the business in question will file all of their information on time in accordance with state deadlines. There are several additional details that are important to understand.
For instance, there is a wide range of different kinds. Depending on the types of products your business sells, you may have to purchase one of these bonds or several of them. When you’re considering purchasing a bond and have determined the answer to the tax bond definition, you can focus on setting up the contractual agreement, which is a third-party agreement. Your business is known as the principal, while we as the bond provider are known as the surety. The third party in this contractual agreement is the state or local authority that puts in a request for this bond. They are known as the obligee. A sales bond is a type of protection offered to the obligee in the event that your business doesn’t pay its taxes on time.
Who Should Get a Tax Bond?
Now that you understand bonds, it’s important that you’re aware of who needs to obtain such a bond. Many businesses that operate throughout the United States will be required to obtain bonds of some sort, maybe even several depending on the type of product that’s sold. Without this, it will be impossible for this business to operate legally. The exact specification of when a sales tax surety bond is required and when it does not largely depend on whether the local or state governments within your area of operations deems it necessary to collect sales tax from your company. Whether a large tax company or a small shop, your business needs to be properly bonded.
Tax Preparer Bond
While most bonds are limited to businesses that are selling a specific product, it can, in certain instances, apply to businesses that are currently producing and storing any of the products that qualify. The products wherein a bond are required range all the way from alcohol to cigarettes. It’s also important that you understand that certain states call tax surety bonds by a different name. This type of surety is known as a continuous bond of the seller in Texas and a bond of the seller in California. Once you’ve determined that you need to purchase one or several surety bonds for your business, we can assist you with the process by streamlining it as much as possible. Tax preparer bonds are also required, especially in California.
Types of Tax Bonds:
In total, there are four different types of bonds. The type that you’ll be required to purchase depends on which products your business sells. If your company sales of multiple of these products you’ll need to purchase a bond for each type. The first of these bonds is one for cigarettes. If you sell cigarettes and tobacco products, you must obtain a cigarette tax (sales) bond, which is designed to make sure that your company follows through on paying the necessary taxes on the products that you’re selling.
Another type of surety is one for alcohol. Liquor license bonds are absolutely essential for the sale, production, and storage of alcohol, even if your company only does one of these three things. Even if you only provide the warehouses used to store alcohol, you will need to have an alcohol bond. In states where marijuana is legal, either for recreational purposes or simply for medical reasons, you will need to buy one for marijuana distribution. These will allow you to operate as a dispensary for recreational or medical marijuana. The final type that you might be required to get is a fuel surety bond. Fuel sellers must post these sureties, which cover all of the taxes necessary for the mixing, sale, and distribution of fuel.
How Much Do Tax Bonds Cost?
The amount that you must post with a sales bond differs depending on where you live. Each state has its own regulations that determine the required amount for any of the bonds that you need to purchase. We can assist you in identifying what these amounts are and which types of T bonds your business will need. Within the vast majority of states, the bond amount is determined by anything from your sales receipts to your yearly sales tax liability. It’s even possible for this amount to be determined by the monthly sales tax that you’re required to pay.
Let NFP do the bond shopping for you. We have been in the bonding industry since 1984. We make getting bonded quick and painless. Contact us today; we'll help you understand the process.