Fuel Tax Bonds
What are fuel tax bonds?
Fuel tax bonds ensure that fuel sellers pay all taxes, interest, and penalties they owe the state. It’s a type of license bond required as part of the licensing process for those wanting to sell fuel.
These bonds are three-party agreements between a principal, an obligee, and a surety.
- Principal: The fuel business that needs the bond
- Obligee: The state governing agency that requires the bond (e.g., Department of Revenue, Department of Finance, Comptroller of Public Accounts, etc.)
- Surety: The financial company that issues and backs the bond in case of claims
The bond holds fuel sellers accountable to state laws and regulations, protecting the state and the public. Fuel sellers could face costly bond claims if they break the rules. The surety may step in to settle claims upfront, but the principal will be held responsible for repaying the surety for all claim-related costs.
Get Your Fuel Tax Bond:
Quick Takeaways
- Fuel tax bonds ensure that fuel sellers pay all taxes, interest, and penalties they owe the state.
- The bond holds fuel sellers accountable to state laws and regulations, protecting the state and the public.
- Most states require fuel sellers and related businesses to get bonded to become licensed to operate.
- Different states have different bond requirements.
Who needs this bond?
Most states require fuel sellers and related businesses to get bonded to become licensed to operate. Generally, if you plan to engage in fuel-selling activities in the United States, you will need one or more surety bonds. Depending on your state, the requirement may encompass suppliers, exporters, importers, dealers, distributors, and blenders of gasoline, diesel fuel, and kerosine.
This bond ensures payment of all taxes imposed on fuel under section 4041(a)(1) or 4081 of the Internal Revenue Code. Learn more.
Types of Fuel Tax Bonds
A fuel tax bond is a type of sales tax bond. There are various types of fuel tax bonds, including the following:
- IFTA (International Fuel Tax Agreement) bond
- Ground transportation operations fuel tax bond
- Airline fuel tax bond
- Marine fuel tax bond
- Motor fuels tax bond
- Mileage and fuel tax bond
- Fuel supplier or distributor bond
Different states have different bonding requirements, so be sure to contact your state licensing agency or ZipBonds if you have questions.
How much do fuel tax bonds cost?
The cost of your bond will depend on the bond amount you need in your state and the type of fuel you plan to sell. Your state will set your bonding requirement, ranging anywhere from $10,000 to $600,000.
To get your bond, you will pay a small percentage of the bond amount. Typically, the better your credit score is, the lower your premium will be. For example, if you need a $50,000 bond and have excellent credit, you may pay around 1%, or $500. Other factors also play into your premium rate, including your financial status and business history.
Frequently Asked Questions
Can I get a fuel tax bond with bad credit?
If you have a low credit score, you may still be able to get bonded. However, your premium rate may be higher – upwards of 10-15% of the bond amount.
Do I need to renew my surety bond every year?
These are continuous, which means they will remain in effect until canceled. This means you must renew your bond annually through your surety provider – and pay an annual premium.
Apply for Your Fuel Tax Bond Today
When applying for your bond, we may ask for financial documentation and credit information. You can start your application online or call us at 888-435-4191. One of our agents would be happy to walk you through the process over the phone, so don’t hesitate to give us a call!
About ZipBonds.com
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.