Alabama Motor Fuels Surety Bond Requirements Expanded

Alabama Motor Fuels Surety Bond Requirements Expanded

Date Enacted:  April 14, 2015
Date Effective:  October 1, 2016

Alabama’s SB 133 amends bond amounts for businesses and individuals selling petroleum products where an inspection fee is charged. The revised law also increases the list of entities required to post a bond. If you haven’t been required to post a bond in the past, you may need to know how to get your Alabama Motor Fuels Bond and how much it will cost you.

Who is Required to Post a Motor Fuels Bond?

With the changes to Alabama’s law, you may be wondering who will need to post a motor fuels bond in 2016. The changes will affect anyone engaged in first person selling, importing, or who is a bonded distributor of dyed diesel, dyed kerosene, or lubricating oil. Permissive suppliers and suppliers who sell dyed diesel fuel or dyed kerosene at the rack at an out-of-state terminal to an importer for delivery into Alabama that is not a bonded distributor and doesn’t have a valid inspection fee permit; and suppliers, permissive suppliers and undyed diesel fuel sold to a licensed exempt entity (except the federal government) by a supplier or permissive supplier at the rack.

Motor Fuels Bonds Before and After

The prior Alabama fuel tax law required a bond of no less than $2,500 and no more than $5,000. The amended law requires a surety bond of $5,000. In the past the Department of Agriculture has been responsible for licensing and bonding administration and collection of taxes. With the amendments, this duty has been transferred to the Department of Revenue.

The Bonding Process

Understanding Surety Bonds

The first question most people have is, what is a surety bond? In simple terms, a surety bond is an insurance policy of sorts. However, it’s not like homeowners’ insurance or car insurance, because a surety bond protects the public. Generally, surety bonds protect citizens and governments when companies fail to meet their contractual obligations or break a law.

How to Apply for a Motor Fuels Bond

The bond application process is easy. First, get a license application from the Alabama Department of Revenue. Then, you may apply for a surety bond directly on our website. Once you have obtained the bond, send both the bond and license application to the Alabama Department of Revenue.

How Your Premium is Calculated

Now that you know how to get a bond, you probably wonder how much it will cost you. While it’s hard to give an exact price due to variations in credit histories, a general set of guidelines can be given. First, you should know that a bond premium is a percentage of the whole bond amount. The premium amount is directly based on your credit score. If you have excellent credit, your bond premium will generally be about 1-3% of the total bond amount. However, if you have bad credit your premium can be as much as 15% of the total bond amount.

For more details, read the full enacted law on motor fuels.
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