South Carolina Motor Fuel User Fee Bond: A Comprehensive Guide

September 1, 2022

South Carolina Motor Fuel User Fee Bond

This guide provides information for insurance agents to help their customers obtain a South Carolina Motor Fuel User Fee bond.

At a Glance:

  • Average Cost: Between 1.5% to 4% of the bond amount per year, with a minimum premium requirement of $100
  • Bond Amount: Based on the type of motor fuel license being applied for (more on this later)
  • Who Needs it: All businesses that sell, deal, or manufacture motor fuel subject to user fees in South Carolina
  • Purpose: To ensure the state will receive compensation for financial harm if the business fails to pay all required taxes
  • Who Regulates Motor Fuel Taxes in South Carolina: The South Carolina Department of Revenue

Background

South Carolina Statute 12-28-1100 et seq. requires all businesses that sell, deal, or manufacture motor fuel subject to user fees to obtain a license from the Department of Revenue. The South 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, businesses must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the South Carolina Motor Fuel User Fee Bond?

South Carolina requires businesses that sell, deal, or manufacture motor fuel subject to user fees to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that the public will receive compensation for financial harm if the business fails to abide by the regulations outlined in South Carolina Statute 12-28-1155. Specifically, the bond protects the state if the business fails to pay all required taxes and maintain all required records. In short, the bond is a type of insurance that protects the public if the business violates the terms of its license.

South Carolina Motor Fuel User Fee Bond Form

South Carolina Motor Fuel User Fee Bond Form

How Can an Insurance Agent Obtain a South Carolina Motor Fuel User Fee Surety Bond?

BondExchange makes obtaining a South Carolina Motor Fuel User Fee bond easy. Simply login to your account and use our keyword search to find the “Motor Fuel” 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.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

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How is the Bond Amount Determined?

The amount on the South Carolina Motor Fuel User Fee bond is determined based on the type of license being applied for, as outlined below:

License Type Bond Amount
Supplier* $1 million or $2 million if not registered under IRC 4101
Permissive Supplier* $1 million or $2 million if not registered under IRC 4101
Bonded Importer* $1 million or $2 million if not registered under IRC 4101
Occasional Importer 3 times their estimated monthly user fee liability for imports (minimum of $2,000)
Tank Wagon Operator-Importer 3 times their estimated monthly user fee liability for imports (minimum of $2,000)
Terminal Operator (In-state) $2,000
Transporter $2,000
Fuel Vendors – Eligible Purchase Status 3 times their estimated monthly user fee liability to suppliers
Exporter $2,000
Manufacturer 3 times their estimated monthly user fee liability (minimum of $2,000)

*Applicants with a net worth of at least $5 million are exempt from the bonding requirement

Is a Credit Check Required for the South Carolina Motor Fuel User Fee Bond?

Surety companies will run a credit check on the owners of the company to determine eligibility and pricing for the South Carolina Motor Fuel User Fee 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 South Carolina Motor Fuel User Fee Bond Cost?

The South Carolina Motor Fuel User Fee bond can cost anywhere between 1.5% to 4% of the bond amount per year, with a minimum premium requirement of $100 (for bonds with limits that are less than $2,500). Insurance companies determine the rate based on several factors including your customer’s credit score and experience. The charts below offers a quick reference for the cost of $1 million, $50,000, and $10,000 bond requirements.

$1 million Motor Fuel User Fee Bond Cost

Credit Score Bond Cost (1 year)
800+ $15,000
650 – 799 $20,000
600 – 649 $40,000

$50,000 Motor Fuel User Fee Bond Cost

Credit Score Bond Cost (1 year)
800+ $750
650 – 799 $1,000
600 – 649 $2,000

$10,000 Motor Fuel User Fee Bond Cost

Credit Score Bond Cost (1 year)
800+ $150
650 – 799 $200
600 – 649 $400

*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?

South Carolina requires businesses that sell, deal, or manufacture motor fuel subject to user fees to purchase a surety bond as a prerequisite to obtaining a business license. South Carolina Statute 12-28-110 defines “motor fuel subject to user fees” as gasoline, diesel fuel, kerosene, blended fuel, substitute fuel, alternative fuel and blends of them and any other substance blended with them. Additionally, “user fee” refers to the amount of tax that must be paid by licensees on each gallon of motor fuel. Current user fees can be found here.

Exemptions to the user fee requirement include motor fuel that:

  • Has proof of export in the form of a terminal issued destination state shipping paper and is:
    • Exported by a supplier licensed in the destination state
    • Sold by a supplier for immediate export to a state whose user fees have been paid to the supplier who licensed to remit fees in the destination state
    • Subject to a use, other than resale, that the destination state has made a user fee exemption for
  • Has been obtained by a licensed exporter when the user fee has already been paid or accrued and was placed in storage before being exported by a transport truck
  • Has been obtained by an  unlicensed exporter when the user fee has already been paid or accrued and was placed in storage before being exported by a transport truck in a diversion across state boundaries
  • Is exported out of a bulk plant located in the state in a tank wagon as long as the destination is not more than 25 miles outside of South Carolina and the user fee has already been paid or accrued
  • Is K-1 kerosene being sold at retail through dispensers designed to prevent delivery directly from the dispenser into a fuel supply tank as well as K-1 Kerosene sold at retail through nonbarricaded dispensers in quantities not exceeding 21 gallons
  • Is sold by the United States government
  • Is used to operate equipment attached to a motor vehicle if the fuel was placed into a fuel supply tank of a vehicle that has a common fuel reservoir for travel on the highway and for the operation of the equipment
  • Has been acquired by the end-user out of state and carried into South Carolina while being consumed from the same vehicle fuel supply tank within which it was imported
  • Is kerosene and diesel fuel used as heating oil or in trains or in equipment not licensed as a motor vehicle
  • Has been lost or destroyed due to an unexpected casualty
  • Is diesel fuel that has been tainted by dye and therefore is unusable as highway fuel
  • Is used in state-owned school buses and service vehicles used to transport students
  • Is used to manufacture fuel oil
  • Is used in commercial shrimp boats
  • Is used to power farming equipment as long as no equipment is driven on public roads
  • Is used in aircraft

How do Motor Fuel Companies Apply For a License in South Carolina?

Motor fuel companies in South Carolina must navigate several steps to obtain a license. Below are the general guidelines, but applicants should refer to the licensing statutes and the Department of Revenue’s licensing page for details on the process.

License Period – All South Carolina Motor Fuel Licenses and perpetual and do not expire

Step 1 – Determine the License Classification

South Carolina requires motor fuel companies to obtain specific licenses corresponding to the nature of their business. Below are the different classifications for the South Carolina Motor Fuel License:

    • Supplier: Is registered under IRC 4101 and is one of the following:
      • The position holder in a terminal or refinery in South Carolina
      • Imports motor fuel subject to the user fee into South Carolina from a foreign country
      • Acquires motor fuel subject to the user fee from a terminal or refinery in South Carolina pursuant to a two-party exchange
      • A position holder in a terminal or refinery outside of South Carolina who imports taxable motor fuel into the state on his/her own account
    • Permissive Supplier: Is not located in South Carolina but meets all of the following requirements:
      • Is a position holder in a federally qualified terminal located outside South Carolina or acquires product in out-of-state terminals through a qualified two-party exchange
      • Is registered under Section IRC 4101 for transactions in taxable motor fuels in the bulk transfer/terminal distribution system
    • Importer: Obtains motor fuel from another state and delivers it to buyers in South Carolina. Importers must select one of the following license classifications
      • Bonded importer
      • Occasional importer
      • Tank wagon operator-importer
    • Terminal Operator: Owns, operates, or controls a fuel storage and distribution facility
    • *Out of State Terminal: Owns, operates, or controls a fuel storage and distribution facility located outside of South Carolina but delivers into the state
    • Transporter: Transports motor fuels and is not licensed as a supplier
    • *Fuel Vendor: Purchases motor fuel from a licensed terminal supplier
    • *Fuel Vendor Blender: Fuel vendors that blend other liquids with gasoline and diesel fuel to use as motor fuel
    • Eligible Purchaser Status: Optional for fuel vendors and that want to make deferred payments of their user fees
    • Exporter: Exports motor fuel from South Carolina into another state from a fuel storage and distribution facility not recognized as an IRS terminal
    • *Miscellaneous: Required for:
      • Municipalities that purchase dyed low sulfur diesel fuel
      • Liquid propane gas (LPG), compress natural gas (CNG) or liquefied natural gas (LNG) dealers that make sales of these products for use in highway vehicles or that have delivery trucks that use the product
      • Producers and users of substitute fuels and/or liquids on which the motor fuel user fee, inspection and environmental fees have not been previously paid that are suitable for use in highway vehicles
      • Persons not licensed as fuel vendors that blend materials with motor fuel
    • Manufacturer: Manufacturers substitute fuel or diesel fuel

*  Indicates that no bond is required to obtain these licenses 

Step 2 – Purchase a Surety Bond

Motor fuel companies whose license classification is subject to a bonding requirement must purchase and maintain a surety bond (limits outlined above) or subject a financial statement with their application verifying an acceptable net worth.

Step 3 – Complete the Application

All South Carolina Motor Fuel License applications should be mailed to the following address:

South Carolina Department of Revenue
PO Box 125
Columbia, SC 29214-0850

Motor fuel companies must complete the application in its entirety and pay all required fees (check the application form for fee amounts).

Do South Carolina Motor Fuel Companies Need to Renew Their Licenses?

No, as all South Carolina Motor Fuel Licenses do not expire unless suspended, surrendered, or revoked.

What are the Insurance Requirements for the South Carolina Motor Fuel License?

South Carolina does not require companies to purchase any form of liability insurance as a prerequisite to obtaining a business license. However, motor fuel companies may be required to obtain insurance before being issued another state license/permit. Motor fuel companies whose license classifications are subject to a bonding requirement must purchase and maintain a surety bond (limits outlined above).

How do South Carolina Motor Fuel Companies File Their Bonds?

Motor fuel companies should submit their completed bond forms, including the power of attorney, to the following address:

South Carolina Department of Revenue
PO Box 125
Columbia, SC 29214-0850

The surety bond requires signatures, including witness signatures, from both the surety company that issues the bond and from a representative of the company. The surety company should include the following information on the bond form:

  • Legal name and address of the entity/individual(s) buying the bond
  • Surety company’s name
  • Bond amount
  • Date of the bond is signed

What Can South Carolina Companies do to Avoid Claims Made Against Their Motor Fuel User Fee Bonds?

To avoid claims against their Motor Fuel User Fee bonds, companies in, or doing business in, South Carolina must ensure that they pay all required taxes and maintain all required records.

What Other Insurance Products Can Agents Offer Motor Fuel Companies in South Carolina?

Most reputable motor fuel companies will 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 South Carolina Motor Fuel Company Customers?

South Carolina unfortunately does not provide a public database of active motor fuel license holders in the state. We recommend contacting the Department of Revenue to obtain this information. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

2022-09-02T11:14:24-04:00