Learn more about fuel tax bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.
What Are Fuel Tax Bonds?
Fuel tax bonds are categorized as financial guarantee surety bonds because they guarantee the payment of fuel taxes (and any penalties or interest) by fuel sellers. They are also known as “fuel bonds” or “International Fuel Tax” (IFTA) bonds. These bonds are required as part of the process of becoming licensed as a fuel seller. They protect the state and consumers against the unlawful or unethical practices of certain fuel sellers, including failure to pay sales and use taxes on the fuel they sell, distribute, or mix.
Who Needs Them?
Nearly all states require sellers, mixers, and users of a variety of fuels to obtain a fuel tax bond as part of the licensing process. In general, this bonding requirement applies to most businesses that import, export, blend, supply, or sell gasoline and other fuels for airline, marine, or automotive use.
How Do They Work?
Both the state and consumers can file claims against the bond. The state can file a claim for failure to pay fuel taxes. Consumers can file a claim for any harm they suffer due to a fuel seller’s dishonest business practices. The fuel seller is the principal, and the company that issues the bond is the surety.
Once a claim is filed against the bond, the surety will make sure that it’s valid before paying the claimant, up to the full penal amount of the bond. The principal is then legally obligated to repay the surety.
What Do They Cost?
In some states, the required amount of a fuel tax bond is a fixed amount set by the state agency that licenses businesses in the fuel industry. In others, it depends on such factors as the type of fuel and the principal’s anticipated tax liability for a certain reporting period. In these situations, it is established on a case-by-case basis. The required bond amount can be as little as $10,000 or as much as $600,000.
The annual premium, however, is a small percentage of the required bond mount. The specific percentage is set by the surety based on the principal’s credit history and financial stability. Applicants with good credit typically will be charged 4% or less of the bond amount. Applicants with poor credit will pay more. Bear in mind that fuel tax bonds are considered high-risk.
Use our convenient online application form or call to discuss your fuel tax bond needs with one of our experienced surety bond professionals.