A Fuel Tax Bond is a type of surety bond that fuel sellers need in order to get licensed. The bond guarantees payment of taxes on fuel.
Unlike insurance, which protects the insured, a surety bond protects the state and your clients. If you do not pay taxes when selling, distributing, or mixing fuel, the state can make a claim against your Fuel Tax Bond.
Likewise, if your clients are hindered because of misrepresentation or fraud of your services, they can also make a claim against your bond.
There are many types of Fuel Tax Bonds including bonds for airline, marine, and ground transportation operations. Fuel Tax Bonds are often called IFTA (International Fuel Tax Bonds.)
Who Needs a Fuel Tax Bond?
Sellers, mixers, and users of various types of fuel often need this bond before they can get licensed. A general rule of thumb is that if you supply, import, export, deal, or blend gasoline, then you need to get bonded.
Though IFTA Bonds are required in 48 continental states, it is important to check your state guidelines to ensure you aren’t purchasing something you don’t need.
Don’t know if you need this bond? Check out our state requirements.
How to get a Fuel Tax Bond
The first step in getting a Fuel Tax Bond is to apply for your bond through either an insurance company or surety bond company. Because these bonds are seen as high risk, you might have to submit financial statements with your application.
After you apply for your bond, the company will evaluate your information to determine how much you’ll pay.
How Much Does a Fuel Tax Bond Cost?
Fuel Tax Bond amounts will vary depending on what state you need your bond for and what type of fuel you are selling.
In most situations, the state will set your bond amount. Some states also base your bond amount on the amount of tax liability that could accrue in a given reporting period.
Bond amounts can range between $10,000 to $600,000.
You do not need to pay the full bond amount to get bonded. Instead, you will pay a small portion of this amount.
Those with good credit might only need to pay 1-4% of the total bond amount. Those with bad credit will have to pay more, up to 15% of the total bond amount.
These bonds are seen as high risk, though, so rates will vary depending on the size of the bond and the bonding company.
How to Save on your Bond
The best way to save money on your Fuel Tax Bond is to get your bond through a company that offers competitive prices from multiple different sureties.
At Surety Solutions, we know getting bonded can be expensive, which is why we have partnered with over 30 of the top insurance carriers in the nation. We are able to offer the most competitive prices from multiple sources.
We also created an online Bond Cost Calculator that generates free quotes for your bond. This means you can compare prices before you buy, saving you time and money.