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What is a Texas Sales Tax Bond?
Certain businesses operating in the state of Texas are required to post a surety bond for sales tax. A Texas sales tax bond is often a requirement for obtaining a business license as it ensures you will pay the sales tax due on all items sold and within the time frame required by state law. In Texas, any business that violates a sales tax regulation may have a claim filed against them.
If you operate a business as a merchant, a hotel, or an auctioneer, or if you hold a business license for a mixed beverage, private club, or catering company, it is likely you need a Texas sales tax bond to comply with state regulations. This type of bond is a contract between the surety company which provides the bond to the business, the bondholder, and the state licensing authority which requires a bond to be posted.
When is a Texas Sales Tax Bond Required?
Merchants or retailers operating in the state of Texas may be required to post a Texas sales tax bond, depending on their industry, total revenue, and tax payment history. The Comptroller of the state determines when a sales tax bond is necessary.
Texas Sales Tax Bond Obligee Details
Under Texas state law, Title 34, Part 1, Chapter 3 of the Texas Administrative Code, businesses operating in the state may be required to secure a Texas sales tax bond in order to comply with licensing and permit requirements. When a Texas sales tax bond is necessary, the obligee of the bond is the State of Texas, through the Comptroller of the state. The obligee contact information is as follows:
State of Texas, Comptroller
Public Accounts
111 East 17th Street
Austin, Texas 78774
Phone: 1-800-252-5555
What Does a Texas Sales Tax Bond Cost?
In Texas, the maximum bond amount required for businesses is $100,000, although there may be instances where a higher Texas sales tax bond is necessary. Fortunately, a licensed business does not have to pay the full amount of the bond. Only a percentage of the bond posted is paid to the surety company for providing the bond.
The cost of a Texas sales tax bond ranges from 1 to 5% for low-risk bondholders. When it comes to surety bonds, low-risk means that you have a strong credit score, financial stability in terms of the business, and minimal claims history. You can still obtain a Texas sales tax bond if you have bad credit, but the price of your bond is likely to be 10% or more.
How Do I Get a Texas Sales Tax Bond?
You can start the process of securing a Texas sales tax bond by submitting a brief application online.
Renewal Term and Expiration Date of Texas Sales Tax Bonds
Texas state law mandates that Texas sales tax bonds be continuous, meaning they are in force until the surety company cancels the bond or until the merchant as the principal of the bond ceases business operations. However, this does not mean a Texas sales tax bond does not renew. Instead, these bonds are updated each calendar year based on the amount required by the state. The surety company providing the bond alerts the principal to the updated bond premium and renewal instructions before the end of the one-year term.
Frequently Asked Questions
Apply online, get approved instantly, sign the indemnity agreement, pay on our website and we will send the bond to you.
We have forms on file. If you do not see your bond, you need to obtain the bond form from the obligee (the one requiring the bond).
It is generally based on the business location and dollar amount of sales. You need to determine the bond amount with the specific government department requiring the bond of you.
The type of sales tax bond needed will vary by the type of goods being sold, and the state in which your business operates. It is recommended that you contact your state directly to determine any bond requirements, as these may be modified without notification.