Sales tax bond costs depend on your state, your business size, and the bond company you choose
A sales tax bond is a financial may provide that you'll pay the sales tax you collect from customers. The cost is not a fixed amount—it varies by state and by the surety company issuing the bond. Most businesses pay between $100 and $500 per year, though some states charge more and some charge less. The bond amount itself (the total the state requires you to may provide) is usually based on your estimated monthly sales tax liability, which is why two businesses in the same state can pay different premiums.
Your bond cost depends on three main factors: the state where you do business, the amount of sales tax you're expected to collect, and your credit history. A surety company assesses your personal credit score and business financials to decide whether to issue the bond and at what price. If you have strong credit, you'll typically pay the lower end of the range. If your credit is weaker, the premium goes up—sometimes significantly.
Key Takeaways
- Sales tax bond premiums typically range from $100 to $500 per year, but vary by state and the surety company you choose.
- The bond amount (the total may provide) is usually set by your state based on your estimated monthly sales tax liability, not a flat fee.
- Your personal credit score and business financials directly affect the premium you pay—stronger credit means lower cost.
- Some states do not require a sales tax bond at all, while others make it mandatory for all retailers or only certain business types.
- You renew the bond annually, and the premium may change if your sales tax liability or credit profile changes.
How states set the bond amount you need to may provide
Each state that requires a sales tax bond sets a minimum bond amount based on your expected sales tax liability. This is not the same as the premium you pay—the bond amount is the total may provide, and the premium is what the surety company charges you for that may provide. For example, a state might require you to post a $5,000 bond if you're expected to collect $1,000 per month in sales tax. You don't pay $5,000 upfront; instead, you pay a percentage of that amount as an annual premium.
Some states use a formula based on your projected monthly sales tax. Others set a flat minimum (for instance, $500 or $1,000) for all retailers. A few states allow you to post the bond amount in cash instead of buying a surety bond, but most require you to work with a surety company. When you explore for your sales tax permit, the state will tell you the bond amount required for your business type and location.
What the surety company charges as a premium
The surety company that issues your bond charges a premium, which is typically 1 to 15 percent of the bond amount per year. If your bond amount is $5,000 and the surety charges 2 percent, your annual premium is $100. If the surety charges 10 percent, it's $500. The percentage depends on your credit score, the surety's underwriting standards, and how much risk they perceive in your business.
Surety companies pull your personal credit report and may ask for business financial statements, tax returns, or bank statements. A credit score above 700 usually qualifies you for the lower end of the premium range. Scores below 650 may result in higher premiums or denial of the bond altogether. Some sureties specialize in higher-risk applicants and will issue bonds to people with poor credit, but at a much higher cost—sometimes 15 percent or more of the bond amount.
Which states require a sales tax bond and which don't
Not every state requires a sales tax bond. States that do include California, Illinois, New York, Texas, and Florida, among others. Some states require bonds only for certain business types—for instance, a state might require a bond from retailers but not from service providers, or from online sellers but not from brick-and-mortar stores. A few states require bonds only if your sales tax liability exceeds a certain threshold.
When you register for a sales tax permit with your state, the state will tell you whether a bond is required and what amount. If you're unsure, contact your state's department of revenue or tax administration directly. They can confirm the requirement and often provide a list of approved surety companies. Some states have preferred or approved sureties, which can make the process faster.
How to get a quote and compare surety companies
To get a bond quote, you'll need to contact surety companies directly or work with an insurance broker who handles surety bonds. You'll provide your state, business type, expected monthly sales tax liability, and personal credit information. The surety will then quote you a premium based on their underwriting. It's worth getting quotes from at least two or three sureties, because premiums can vary significantly for the same bond amount.
Many surety companies offer online quote tools where you can enter basic information and receive an estimate in minutes. Others require a phone call or process form. Be prepared to provide your Social Security number, business structure (sole proprietor, LLC, corporation), and a rough estimate of your annual sales. If you have weak credit, some sureties will decline to quote you, so don't be discouraged if the first company says no—others may still work with you at a higher rate.
Renewal, changes, and what happens if you don't pay
Sales tax bonds renew annually. When your bond is about to expire, the surety will contact you to renew it. The premium may stay the same, go up, or go down depending on changes to your credit score, your sales tax liability, or the surety's underwriting guidelines. If your business grows and your sales tax liability increases, the state may require a higher bond amount, which will increase your premium.
If you fail to pay sales tax that you've collected, the state can make a claim against your bond. The surety will pay the state from the bond amount, and you'll be responsible for repaying the surety. This is a serious consequence—it damages your credit and can make it difficult to get bonded again in the future. If you stop collecting sales tax (for instance, because you closed your business or changed your business model), notify your state and the surety so the bond can be cancelled and you won't be charged for renewal.
Frequently Asked Questions
Do I have to renew my sales tax bond every year?
Yes, in most states the bond must be renewed annually. The surety company will contact you before expiration. If you don't renew, your sales tax permit may be suspended or revoked. The renewal premium may be different from the previous year if your credit or sales tax liability has changed.
Can I get a sales tax bond if I have bad credit?
Some surety companies will issue bonds to applicants with poor credit, but the premium will be higher—sometimes 10 to 15 percent of the bond amount instead of 1 to 3 percent. You may also be asked to provide additional documentation like bank statements or a co-signer. Shop around, because different sureties have different credit requirements.
What's the difference between the bond amount and the premium?
The bond amount is the total may provide set by your state (for example, $5,000). The premium is what you pay the surety company each year for that may provide (for example, $100 to $500). You don't pay the full bond amount upfront unless you post it in cash instead of buying a surety bond.
Can I post cash instead of buying a surety bond?
Some states allow it, but most require you to work with a surety company. Check with your state's department of revenue. If cash posting is allowed, you'd deposit the full bond amount with the state, and it would be held as a may provide. You'd get it back when you close your business or the state releases it.
What happens if the state makes a claim on my bond?
The surety pays the state from the bond amount, and you become liable to repay the surety. This damages your credit and makes it very difficult to get bonded again. It also signals to the state that you may not be trustworthy with tax collection, which can result in additional audits or permit suspension.