North Carolina Motor Fuels Tax Bond: A Comprehensive Guide
July 13, 2022
This guide provides information for insurance agents to help their customers obtain a North Carolina Motor Fuels Tax bond
At a Glance:
- Average Cost: Between 1% to 12.5% of the bond amount per year based on the applicant’s credit history
- Bond Amount: Between $500 to $2 million (more on this later)
- Who Needs it: Businesses storing, delivering, or selling fuel in North Carolina
- Purpose: To ensure that the Department of Revenue will receive compensation for financial harm if the business fails to pay all required taxes
- Who Requires the Bond: The North Carolina Department of Revenue
North Carolina Statutes Chapters 119 and 105 require businesses that store, deliver, and sell fuel to obtain a license with the Department of Revenue. The North Carolina legislature enacted the licensing requirement to ensure that these businesses pay all required taxes. To provide financial security for the enforcement of the licensing law, the businesses outlined in Table 1 must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the North Carolina Motor Fuels Tax Bond?
North Carolina requires businesses that sell, deliver, and store fuel to purchase a surety bond as part of the application process to obtain a license. The bond ensures that the Department of Revenue will receive compensation for financial harm if the business fails to pay all taxes and render all required reports. In short, the bond is a type of insurance that protects the Department of Revenue if the business violates the terms of its license.
How Can an Insurance Agent Obtain a North Carolina Motor Fuels Tax Surety Bond?
BondExchange makes obtaining a North Carolina Motor Fuels Tax Bond easy. Simply login to your account and use our keyword search to find the “Motor” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.
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How is the Bond Amount Determined?
The limit on the North Carolina Motor Fuels Tax bond is determined based on the applicant’s license type, as outlined below:
|License Type||Bond Amount|
|Dyed Diesel Fuel Distributor*||Between $500 to $20,000|
|Kerosene Supplier*||Between $500 to $20,000|
|Kerosene Distributor*||Between $500 to $20,000|
|Bulk-End User of Alternative Fuel**||Between $2,000 to $500,000|
|Retailer of Alternative Fuel**||Between $2,000 to $500,000|
|Alternative Fuel Provider***||Between $2,000 to $500,000|
|Biodiesel Provider****||Between $2,000 to $500,000|
|Fuel Alcohol Provider****||Between $2,000 to $500,000|
|Blender****||Between $2,000 to $500,000|
|Distributor***||Between $2,000 to $500,000|
|Importer***||Between $2,000 to $2 million|
|Bonded Importer||$2 million|
|Terminal Operator||$2 million|
*Based on the business’s monthly taxable sales. Refer to pages 3 and 4 of the license application to determine the required bond amount.
**Only required if the business plans on storing highway and nonhighway alternative fuel in the same facility. The bond amount must be equal to two times the business’s average monthly motor fuel tax liability.
***Equal to two times the business’s average monthly motor fuel tax liability.
****Only required if the business’s average expected annual tax liability is at least $2,000. The bond amount must be equal to two times the business’s average monthly motor fuel tax liability.
Is a Credit Check Required for the North Carolina Motor Fuels Tax Bond?
Surety companies will run a credit check on the owners of the business to determine eligibility and pricing for the North Carolina Motor Fuels Tax bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.
How Much Does the North Carolina Motor Fuels Tax Bond Cost?
The North Carolina Motor Fuels Tax Bond can cost anywhere between 1% to 12.5% of the bond amount per year. Insurance companies determine the rate based on several factors including your customer’s credit score and experience. The chart below offers a quick reference for the cost of a $10,000 bond requirement.
$10,000 Motor Fuels Tax Bond Cost
|Credit Score||Bond Cost (1 year)|
|680 – 719||$150|
|650 – 679||$200|
|600 – 649||$400|
|550 – 599||$750|
|500 – 549||$1,250|
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
Who is Required to Purchase the Bond?
North Carolina requires businesses that store, deliver, or sell fuel in the state to purchase a surety bond as a prerequisite to obtaining a license. Businesses that fall into any category outlined in Table 1 must be bonded.
How Do Businesses Apply for a North Carolina Motor Fuels Tax License?
Businesses in North Carolina must navigate several steps to obtain a Motor Fuels Tax License. Below are the general guidelines, but applicants should refer to the application form for details on the process.
License Period – All North Carolina Tobacco Products Licenses expire on June 30 of every year and must be renewed before the expiration date
Step 1 – Determine the License Classification
North Carolina requires businesses to obtain specific Motor Fuels Tax licenses corresponding to the nature of their business. Below are the different classifications for the North Carolina Motor Fuels Tax License:
- Refiner: Owns or operates a facility that processes oil and gas into motor fuel. Additionally, businesses that produce more than 6 million gallons of fuel alcohol or biodiesel are considered to be refiners.
- Terminal Operator: Owns or operates a motor fuel storage and distribution facility that has been assigned a terminal control number by the Internal Revenue Service, is supplied by a pipeline or marine vessel and has fuel and gasoline that can be removed at a rack.
- Supplier: Receives motor fuel and is required to collect and remit tax on all motor fuel removed from a terminal or refinery rack.
- Distributor: Acquires motor fuel from a supplier or another distributor for resale. Importer: Imports motor fuel into North Carolina.
- *Exporter: Exports motor fuel outside of North Carolina
- Blender: Produces mixtures composed of gasoline or diesel fuel plus another liquid (other than an additive) that can be used as fuel in a highway vehicle
- Fuel Alcohol Provider: Produces an average of no more than 500,000 gallons of fuel alcohol a month or imports fuel alcohol into North Carolina
- Biodiesel Provider: Produces an average of no more than 500,000 gallons of biodiesel a month or imports fuel alcohol into North Carolina
- Retailer of Alternative Fuel: Stores and sells alternative fuel
- *Bulk End-user of Alternative Fuel: Maintains storage facilities for alternative fuel and uses that fuel to operate highway vehicles
- Kerosene Distributor: Acquires kerosene from a licensed supplier or distributor for resale
- Kerosene Supplier: Supplies kerosene or has storage facilities for kerosene used as fuel for airplanes
- Dyed Diesel Fuel Distributor: Acquires dyed diesel fuel
- Transporter: Transports reportable petroleum products
*No bond is required to obtain this license
Businesses transporting motor fuel for hire by transport truck must also obtain a Motor Fuel Transporter License.
Step 2 – Complete the Application
All North Carolina Motor Fuels Tax License applications should be mailed to the following address:
North Carolina Department of Revenue
Excise Tax Division
3301 Terminal Drive, Suite 125
Raleigh, NC 27604
Businesses must complete the application in its entirety, and submit the following items:
- Company formation documents
- Certificate of Authority (if applicable)
Step 3 – Purchase a Surety Bond
Businesses that store, distribute, and sell fuel in North Carolina must purchase and maintain a surety bond (limits outlined in Table 1).
What are the Insurance Requirements for the North Carolina Motor Fuels Tax License?
North Carolina does not require licensees to purchase any form of liability insurance as a prerequisite to obtaining a Motor Fuels Tax License. However, most reputable licensees will purchase this insurance anyway. Licensees must purchase and maintain a surety bond (limits outlined in Table 1).
How Do Businesses File Their North Carolina Motor Fuels Tax Bonds?
Businesses should mail their completed bond forms, including the power of attorney, to the following address:
North Carolina Department of Revenue
3301 Terminal Drive, Suite 125
Raleigh, NC 27604
The surety bond requires signatures from the surety company that issues the bond, the applicant, and a notary verifying the applicant’s signature. The surety company should include the following information on the bond form:
- Legal name of the entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can Businesses do to Avoid Claims Made Against Their North Carolina Motor Fuels Tax Bonds?
To avoid claims against their Motor Fuels Tax bonds, businesses in North Carolina must ensure that they pay all required taxes on time and in full and render all required reports.
What Other Insurance Products Can Agents Offer North Carolina Motor Fuels Tax Bondholders?
Most reputable businesses that need a Motor Fuels Tax bond will also purchase liability insurance. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for North Carolina Motor Fuels Tax Bond Customers?
North Carolina unfortunately does not provide a public database of businesses with active Motor Fuels Tax bonds. We suggest contacting the Department of Revenue’s Excise Tax Division at (919) 707-7500 to obtain this information. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.