Colorado Sales Tax Bond Guide

Colorado sales tax bonds are a legal requirement for businesses that collect and remit sales tax in the state. They guarantee that tax revenue will be paid correctly and on time. This guide covers costs, how bonds work, how to get one, claim management, and key FAQs.

The cost of a Colorado sales tax bond depends on the bond amount set by the state and the applicant’s credit profile. Businesses generally pay a percentage of the bond total, called the premium.

Bond premiums typically range from 1% to 5% of the total bond amount. For example, if your business needs a $20,000 bond, the cost may be:

• Around $200 per year for applicants with excellent credit (1%)
• Around $1,000 per year for applicants with lower credit scores (5%)
   

The state determines the bond amount, but the surety company calculates the premium. Good credit, strong financials, and business history can all help lower costs.

Applying for a Colorado sales tax bond is a simple process handled through a licensed surety bond provider. Businesses must provide accurate details and financial history to secure approval.

Step 1: Determine the Required Bond Amount

The Colorado Department of Revenue (CDOR) sets the required bond amount based on projected tax liability. This ensures businesses cover potential unpaid tax obligations. Official requirements can be reviewed on the Colorado Department of Revenue website. 

Step 2: Submit an Application

You’ll complete a bond application through a licensed surety. The provider will ask for personal details, business information, and financial history to assess your eligibility. 

Step 3: Underwriting and Credit Review 

Sureties review credit reports, financial documents, and business track record. Applicants with strong credit usually qualify for lower premiums. Those with weaker credit may face higher rates but can still secure approval. 

Step 4: Receive and File the Bond

Once approved, the surety issues the bond document. You’ll need to file it with the CDOR before conducting taxable sales. For more context, see our resource on what a surety bond is and how it works.

Sales tax bonds are a three-party agreement that ensures businesses remit taxes properly. If obligations are not met, the state can file a claim against the bond.

• The Principal is the business owner required to post the bond.
• The Obligee is the State of Colorado, which requires the bond.
• The Surety is the company providing the bond guarantee.

If a business fails to remit collected taxes, the state may file a claim. The surety company covers the loss up to the bond amount, and the business must reimburse the surety. For comparison, see how a surety bond vs insurance functions differently.

Colorado requires different types of sales-related tax bonds depending on the goods or services sold. Each ensures compliance with tax collection and remittance.

• General Sales Tax Bonds – Required for businesses selling taxable goods and services.
• Alcohol Tax Bonds – Special requirement for alcohol sales; see Alcohol Tax Bond for details.
• Tobacco Tax Bonds – Required for wholesale or retail tobacco distributors.
• Marijuana Tax Bonds – Applicable to businesses in Colorado’s regulated cannabis industry.

Each type protects state revenue by ensuring businesses follow specific tax rules.

Yes, businesses with poor credit can still qualify for a Colorado sales tax bond, although costs may be higher. Surety companies assess risk before issuing bonds.

Applicants with credit issues may pay closer to 5% of the total bond amount. To improve approval chances, provide complete financial information and demonstrate steady business performance. Many surety providers also offer special programs to help applicants with non-ideal credit histories.

Sales tax bond claims occur when a business fails to remit taxes. Managing claims quickly is critical to avoid financial and legal consequences.

If the Colorado Department of Revenue files a claim, the surety investigates its validity. If the claim is paid, the business must reimburse the surety. Preventing claims requires accurate bookkeeping, timely tax filings, and regular compliance checks. Businesses should work directly with CDOR if issues arise to avoid escalating into formal claims.

The FAQs address common concerns about validity, refunds, renewals, and possible alternatives.

How long is a Colorado Sales Tax Bond valid?

Colorado sales tax bonds remain valid as long as the business operates and renews the bond as required. The bond must stay active to maintain compliance. 

Is the Colorado Sales Tax Bond refundable if I close my business?

No, premiums are non-refundable. If you close your business, the bond can be cancelled, but unused premiums are generally not returned. 

Do I need to renew my Colorado Sales Tax Bond every year?

Yes, bonds must be renewed annually. Surety companies usually send renewal notices in advance, making the process straightforward. Businesses should confirm deadlines to avoid lapses in compliance. 

Are there alternatives to a sales tax bond in Colorado?

In some cases, the state may allow a cash deposit or irrevocable letter of credit in place of a bond. These alternatives must be approved directly through the Colorado Department of Revenue.

Colorado Department of Revenue. (n.d.). Sales tax bond requirements. Retrieved from
https://tax.colorado.gov/ 

JW Surety Bonds. (n.d.). What is a surety bond? Retrieved from
https://www.jwsuretybonds.com/edu/what-is-a-surety-bond

JW Surety Bonds. (n.d.). Surety bond vs insurance. Retrieved from
https://www.jwsuretybonds.com/edu/surety-bond-vs-insurance

JW Surety Bonds. (n.d.). Alcohol tax bond. Retrieved from
https://www.jwsuretybonds.com/license-bonds/liquor-tax-bond

JW Surety Bonds. (n.d.). Colorado surety bonds. JW Surety Bonds.
https://www.jwsuretybonds.com/states/colorado/