As a contractor in Arizona, you may need to obtain a taxpayer bond to work on specific projects. This bond guarantees the state that you will pay all required taxes, including sales tax, use tax, and withholding tax. Here’s everything you need to know.
What is a taxpayer bond for contractors in Arizona?
The taxpayer bond for contractors is a type of commercial surety bond required by the Arizona Department of Revenue. Both new and out-of-state contractors must be licensed with the Registrar of Contractors and post this bond.
- Specifically, any contractor that has conducted business for less than one year in Arizona or has a principal place of business outside of the state must maintain the bond for at least two years.
The required bond amount ranges from $2,000 to $22,000 (minimum) and will depend on the contracting work you perform.
Get Your Taxpayer Bond for Contractors:
- Your Arizona taxpayer bond for contractors guarantees the state that you will pay all required taxes, including sales tax, use tax, and withholding tax.
- Both new and out-of-state contractors must be licensed with the Registrar of Contractors and post this bond.
- The required bond amount ranges from $2,000 to $22,000 (minimum) and will depend on the contracting work you perform.
How do these surety bonds work?
If you fail to pay the required taxes and penalties, the state of Arizona can make a claim against your bond to recover unpaid amounts. The surety company that issued your bond will investigate the claim and settle it if it’s valid. However, as the bonded party, you are responsible for repaying your surety company in full.
How much does a taxpayer bond for contractors cost?
The cost depends on various factors, including the bond amount required and your personal credit history. Typically, contractors with good credit can expect to pay a premium of 1-3% of the bond amount, while those with less-than-perfect credit will pay more.
Why do Arizona contractors need this bond?
Arizona contractors need a taxpayer bond to ensure they fulfill their financial obligations to the state. The bond serves as a guarantee that contractors will pay all taxes due on the projects they work on. This includes sales tax, use tax, and other taxes, penalties, and obligations to the state.
The bond also serves as protection for taxpayers. If a contractor fails to pay their taxes, the bond can be used to cover the outstanding amount. This helps ensure the state and its taxpayers are not left with unpaid debts due to contractor negligence or malpractice.
Arizona Taxpayer Bond Requirements for Contractors
To obtain an Arizona taxpayer bond, contractors must meet specific requirements set by the Arizona Department of Revenue.
- License: Contractors must be licensed by the Arizona Registrar of Contractors.
- Financial responsibility: Contractors must demonstrate financial responsibility and be able to cover the bond amount if a claim is made against the bond.
- Bond amount: The bond amount required is determined by the Arizona Department of Revenue and is based on the contractor’s estimated annual tax liability (see next section).
- Bond term: Any contractor that has conducted business for less than one year in Arizona or with a principal place of business outside of the state must maintain a bond for at least two years.
- Bond form: The bond must be on an Arizona Department of Revenue-approved form and submitted to the department for approval.
- Surety: Contractors must work with a surety company licensed to do business in Arizona (like ZipBonds).
The Arizona Department of Revenue sets specific surety bond requirements for different types of contractors operating in the state. The bond amount required ranges from at least $2,000 to $22,000. Here are some of the standard contractor classifications and their corresponding bond amounts:
- General contractors of residential buildings (other than single-family housing)
- Operative builders
- Painting, paper hanging
- Masonry stonework, other stonework
- Plumbing, air conditioning, heating (except electric)
- Decorating, f. electrical work
- Terrazzo, tile, mosaic, and marble work
- Plastering, drywall, acoustical, and insulation work
- Floor laying, other floor work
- Concrete work
- Water well drilling
- Glass and glazing work
- Special trade contractors
- Manufacturers of mobile homes
- Excavating and foundation work
- Structural steel erection
- Roofing and metal sheet work
- Wrecking and demolition work
- Installation and erection of building equipment
- Water, sewer, pipeline, communication, and powerline construction
- General contractors of single-family housing
- General contractors: Industrial buildings and warehouses
- General contractors: Nonresidential buildings (other than single-family)
- Highways and street construction (except elevated highways)
- Bridge construction
- Heavy construction
- Tunnel construction
- Elevated highway construction
It’s important to note that these are minimum bond amounts, and some contractors may need to obtain higher bond amounts depending on the scope of their work. Additionally, the Arizona Registrar of Contractors may require contractors to post a higher bond amount if they have a history of legal or financial problems.
Consult with a surety bond professional to determine the appropriate amount for your situation.
Other Helpful Resources
- Arizona State Legislature: Title 42 – Taxation
- Taxpayer Bond for Contractors form
- Arizona Contractor License Bond Requirements
How to Get Your AZ Taxpayer Bond for Contractors
ZipBonds offers the fastest and most secure option for getting the surety bonds you need. Our all-digital platform is intuitive and straightforward. Apply online or call us at (888) 435-4191 to get bonded in a flash!
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.