Sales And Use Tax Surety Bond

Retailers are required to pay sales and use taxes and to file tax returns. Although you are required to pay and report sales and use taxes to your specific state entity, you may be required to provide proof of financial responsibility or a deposit in the form of a sales tax or sales and use tax bond.

A sales tax bond and sales use tax bond is a common way to guarantee compliance with the state or municipality which is requiring you to be bonded. It is the retailers responsibility to report the correct amount of sales and use tax and to pay the taxes or fees due to the state. To avoid paying a penalty and interest charges most retailers must also obtain a sellers permit which is usually accompanied by a sales tax bond or sales and use tax bond.

One of the most frustrating types of commercial bonds is sales and use tax bonds, particularly in California. They are frustrating because the California State Board of Equalization (SBE), the bond obligee, inordinately delays in making claims, does not provide supporting documentation, and demands immediate payment. Unfortunately, the law that governs California sales and use tax bonds and, presumably, other jurisdictions clearly favors the obligee, particularly as it relates to the statute of limitations.

Sales and use taxes are assessed under the California Sales and Use Tax Law. Section 6701 is the section requiring sales and use tax bonds and it provides, in relevant part:

The board, whenever it deems it necessary to ensure compliance with this part, may require any person subject thereto, to place with it any security that the board may determine.. The amount of the security shall be fixed by the board.. Security held by the board shall be released after a three-year period in which the person has filed all returns and paid all tax to the state or any amount of tax required to be collected and paid to the state within the time required..