What is a California Sales Tax Bond?
Merchants doing business in the state of California are required to post a California sales tax bond to comply with state and local licensing regulations. A California sales tax bond helps ensure that a licensed business pays the sales tax they owe on the goods they sell to the public within the time frame mandated by state laws. If a merchant fails to pay the sales tax due to the state, a claim can be made against the bond for any losses that may have incurred.
As a surety bond, a California sales tax bond represents a contract between three parties. The principal is required to obtain a bond, while the obligee, the State Board of Equalization, requires a sales tax bond to be posted. The surety company provides the bond to the principal and pays for claims on its behalf. The principal is ultimately responsible for repaying valid claims against the bond.
Am I Required to Get a California Sales Tax Bond?
The majority of merchants in California are required to secure a permit or license in order to operate a business legally. A California sales tax bond is required as well. The State Board of Equalization determines if and when a California sales tax bond is necessary for a business.
Obligee Information for a California Sales Tax Bond
Under current California law, specifically Revenue and Taxation code 6701, certain businesses operating in the state are required to have a business permit or license. Part of these requirements for licensing as a merchant or retailer includes securing a California sales tax bond to ensure timely collection of sales tax. The State of California is the obligee of the sales tax bond, with the Department of Fee and Tax Administration managing permit and bonding details. The obligee contact information is as follows:
State of California, State Board of Equalization
Department of Fee and Tax Administration
450 N Street
Sacramento, California 95814
Phone: 1-800-400-7115
What Does a California Sales Tax Bond Cost?
The first factor in determining the price of a California sales tax bond is the bond amount required. This depends on local guidelines, but a business can estimate the bond requirement by calculating the sales tax it pays each year. The bond requirement based on annual sales tax can range from $2,500 up to $50,000, but you are not on the hook for this entire amount.
The price you pay for a California sales tax bond is between 1 and 10% of the bond total. Your specific percentage is based on your personal credit history and business financial standing. Merchants with a low credit score or negative credit history pay a higher percentage of the bond total because they pose more of a risk to the surety company.
How Do I Get a California Sales Tax Bond?
You can start the process of securing a California sales tax bond by filling out a short application online. Once the surety company reviews your credit details and business information, you receive a quote for your bond premium and instructions on completing the process.
Do I Need to Renew my California Sales Tax Bond?
There is no set expiration date for a California sales tax bond, as it runs concurrently with the renewal term of the business license or permit. Both licenses and bonds must be renewed before the expiration date so merchants remain in compliance with current regulations. The surety company providing a California sales tax bond send instructions on how to renew the bond before the renewal term ends.
