Texas Continuous Bond of Seller (Sales Tax): A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a Texas Continuous Bond of Seller (Sales Tax).
At a Glance:
- Lowest Cost: 4% of the bond’s limit
- Bond Amount: Determined on a case-by-case basis (more on this later)
- Who Needs It: All sales tax permittees operating in Texas that have become delinquent in the payment of taxes
- Purpose: To ensure that the Comptroller will receive compensation for financial harm if the permit holder fails to pay all required taxes
- Who Regulates Sales Tax Permittees in Texas: The Texas Comptroller of Public Accounts
Background
Texas Administrative Code 3.327 requires all sales tax permittees operating in the state that have become delinquent in the payment of taxes to purchase and maintain a surety bond. The Texas Legislature enacted the requirement to ensure that sales tax permittees do not engage in further unethical business practices. To provide financial security for the enforcement of the law, delinquent sales tax permittees must purchase and maintain a surety bond to be eligible for an active permit.
What Is the Purpose of the Texas Continuous Bond of Seller (Sales Tax)?
Texas Administrative Code 3.327 requires all sales tax permittees that have become delinquent in the payment of taxes to the state to purchase a surety bond. The bond ensures that restitution is available to the Comptroller of Public Accounts should the sales tax permittee fail to abide by the regulations outlined in the Texas Statutes Tax Code, Title 2. Specifically, the bond ensures that the Comptroller will receive compensation for financial harm if the permittee fails to pay all required taxes. In short, the bond is a type of insurance that protects the state if the sales tax permittee violates the terms of their permit.
How Can an Insurance Agent Obtain a Texas Continuous Bond of Seller (Sales Tax)?
BondExchange makes obtaining a Texas Continuous Bond of Seller (Sales Tax) easy. Simply log in to your account and use our keyword search to find the “sales tax” 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?
According to Texas Administrative Code 3.327, the minimum limit for the Continuous Bond of Seller (Sales Tax) is $100,000. If the sales tax permittee’s monthly tax liability multiplied by four exceeds $100,000, then that number is the required bond limit. The Comptroller must approve the bond amount.
Is a Credit Check Required for the Texas Continuous Bond of Seller (Sales Tax)?
Surety companies will run a credit check on the sales tax permittee to determine eligibility and pricing for the Texas Continuous Bond of Seller (Sales Tax). Applicants with excellent credit and work experience can expect to receive the best rates. Applicants with poor credit may be declined by some surety companies or have to pay higher rates. The credit check is a “soft hit,” meaning that the credit check will not affect the applicant’s credit.
How Much Does the Texas Continuous Bond of Seller (Sales Tax) Cost?
The Texas Continuous Bond of Seller (Sales Tax) can cost between 4% to 10% of the bond amount per year. Monthly subscription options are also available. Insurance companies determine the rate based on several factors, including your customer’s credit score and experience.
Who Is Required to Obtain a Texas Continuous Bond of Seller (Sales Tax)?
The Texas Continuous Bond of Seller (Sales Tax) is required of sales tax permittees who have become delinquent in the payment of any taxes, penalties, or interest to the Comptroller. Taxes must be paid by the 20th day of each month unless the Comptroller allows for sales tax payments to be paid quarterly for those who owe less than $500 a month or $1,500 a quarter.
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
What Are the Insurance Requirements for Sales Tax Permittees in Texas?
Texas does not require sales tax permittees to purchase any form of liability insurance as a prerequisite to obtaining a permit. Sales tax permittees that have become delinquent in the payment of taxes must purchase and maintain a surety bond.
How Do Texas Sales Use Tax Permittees File Their Bonds?
Sales tax permittees in Texas should submit their completed bond forms, including the power of attorney, when submitting their permit applications to the Comptroller (see the mailing address listed below).
Texas Comptroller of Public Accounts
PO Box 13528
Austin, TX 78711
The surety bond requires signatures from the surety company, as well as the sales tax permittee. The surety company should include the following information on the bond form:
- The legal name of the individual buying the bond
- Surety company’s name
- Date the bond is signed
What Can Texas Sales Tax Permittees Do to Avoid Claims Made Against Their Bonds?
The best way to avoid a bond claim on the Texas Continuous Bond of Seller (Sales Tax) is for the sales tax permittee to simply pay all taxes, penalties, and interest to the Comptroller in full and on time.
What Other Insurance Products Can Agents Offer Sales Tax Permittees in Texas?
Most reputable sales tax permit holders will purchase business 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 Texas Sales Tax Permittee Customers?
Texas conveniently provides a public database to search for active sales tax permit holders in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.