Arizona Sales Tax Bonds Explained
Sales tax bonds are an umbrella term for several types of surety bonds, which some businesses need to post in order to legally operate in Arizona. The most common types of sales tax bonds are cigarette tax bonds, fuel tax bonds, and alcohol tax bonds.
Under titles 42 and 43, the state of Arizona may require any business to post a sales tax bond to make sure that they pay the sales tax amount, plus any interest and penalties that may result from not doing so. The purpose is to make sure state revenues are protected. If you are given notice that you need to post a sales tax bond, you need to do so within 5 days of receiving notice.
Like other surety bonds, sales tax bonds in Arizona are a three-party contractual agreement between the business (principal), the state (obligee), and a surety bonds company (surety). The surety underwrites the bond and is legally responsible if the principal violates the bond agreement. Violating the bond agreement can result in a claim, and the ultimate liability lies with the principal.
The sales tax bond requirement may be waived if a business maintains a good filing and payment record for at least two years.
You can begin your online application now, or keep reading for some more information regarding Arizona sales tax bonds.
Frequently Asked Questions
How much does an Arizona sales tax bond cost?
The total bond value, i.e. the maximum penal sum of the bond, is determined on a case-by-case basis. In the case of cigarette tax bonds, it’s either $500 or four times the average monthly tax liability, whichever is greater. Your tax liability is calculated as the average of your monthly tax due for the past 6 months.
Bond principals pay a premium in order to obtain their sales tax bond. That premium is usually between 1% and 5% of the bond amount, if the applicant has a good credit score and a sound credit history. Depending on the specifics of the situation, other factors can be considered, such as your financial statements. Go to our What Does a Surety Bond Cost? Page for more information on the topic.
Can I get an Arizona sales tax bond with bad credit?
Thanks to our bad credit surety bonds program, you can obtain a sales tax bond even with bad credit. In that case, you will be considered a higher risk applicant, so bonding companies will ask for a higher premium. Usually, it is in the range of 15% to 17%.
Our surety bond experts will also work with you and provide advice on how you can lower your premium as much as possible.
How do I apply for an Arizona sales tax bond?
The application process is not complicated. Our online application form takes just a few minutes to complete. We’ll give you a free bond quote and assistance with completing the rest of the process.
As per the industry standard, you will have to sign an indemnity agreement with the surety bonds company. Afterwards, we can proceed with issuing your bond, which should take no more than 1-2 business days. For any questions, don’t hesitate to call us at (877) 514-5146.
How are bond claims handled for sales tax bonds in Arizona?
The purpose of the sales tax bond is to protect state revenue. Any breach of the bond agreement can result in claim. Most often, this means a failure to declare and pay sales tax.
It’s imperative to avoid claims against your sales tax bonds, because they can create numerous complications. You may be denied a surety bond next time you apply, or the total value of the bond can increase, because the state considers you more likely to trigger another claim.
If you’re facing a claim, you should contact your surety and ask for assistance. Keeping all interactions with the claimant is essential, as it may serve to defend your case if the claim goes to court. You surety will provide legal assistance and advise you on the best course of action, such as reaching a settlement or fighting the claim in court.
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