Sales Tax Bonds & Seller Bonds

A sales tax bond (also called a seller bond, use tax bond, or sales and use tax bond) is a surety bond required by state revenue departments or tax agencies when businesses become delinquent in paying sales taxes, apply for a new sales tax permit with limited financial history, or operate in high-risk industries with frequent tax compliance issues. The bond guarantees payment of sales and use taxes owed to the state.

Sales tax bond costs typically range from $100 to $2,500 annually depending on the required bond amount and your credit profile. Premium rates generally run 1-10% of the bond amount annually. Good credit (700+) results in 1-3% rates, while poor credit or delinquency history may cost 5-10%. For a $10,000 bond, costs range from $100-$1,000 annually.

State revenue departments require sales tax bonds for: businesses with delinquent sales tax payments or payment history issues, new businesses applying for sales tax permits in certain industries, businesses with past bankruptcies or financial instability, high-risk businesses with fluctuating sales volumes, itinerant vendors or temporary sellers, and businesses whose existing bond amount proves inadequate after revenue assessment.

States use different formulas to calculate required bond amounts. Texas requires the greater of $100,000 or four times average monthly tax liability. California bases amounts on the department's assessment of compliance risk. Many states use 2-4 times estimated monthly sales tax liability. The bond amount must be sufficient to cover potential unpaid taxes during the permit period or assessment cycle.

Most states with sales tax require bonds in certain situations. Texas, California, Florida, New York, Illinois, Pennsylvania, and other major states have specific bond requirements through their revenue departments or comptroller offices. Requirements vary - some states require bonds only for delinquent taxpayers, others for new businesses in specific industries, and some base requirements on projected sales volume or business structure.

Yes, sales tax bonds are available even with existing tax liens, delinquencies, or payment plan arrangements. However, premium rates will be significantly higher (typically 5-15% of the bond amount versus 1-3% for good credit). You may need to provide additional documentation including payment plan agreements, recent payment history, business financials, and explanation of circumstances leading to delinquency.

If you fail to pay required sales and use taxes, the state revenue department will make a claim against your sales tax bond. The surety investigates and, if taxes are legitimately owed, pays the state up to the bond amount. You must then reimburse the surety for all amounts paid plus interest and fees. Unreimbursed bond claims result in bond cancellation and sales tax permit revocation.

Sales tax bonds are typically continuous, remaining in effect until cancelled by the surety with proper notice to the state (usually 30-60 days). The bond must remain active as long as you hold a sales tax permit. If you cancel your bond before closing your sales tax account with the state, your permit will be suspended or revoked. Bond obligations continue for taxes owed during the period the bond was active.

Yes, state revenue departments can require increased bond amounts if: your business sales volume increases significantly, you become delinquent after the initial bond was posted, your business structure changes (adding locations or employees), or the department determines the current bond amount is inadequate to protect tax revenue. You must obtain a new or additional bond at the increased amount to maintain your sales tax permit.

In practice, most bonds cover both sales tax and use tax and are called "sales and use tax bonds" or "seller bonds." Sales tax is collected from customers at point of sale. Use tax is paid directly by businesses on items purchased for business use without sales tax paid. States typically require one bond covering both tax obligations rather than separate bonds for each tax type.