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Alabama Sales Tax Bonds
As of 2020, the Alabama Department of Revenue (AL DOR) will require applicable retail businesses who sell beer, wine, or tobacco products to obtain a one-time sales tax surety bond. For individuals or businesses who are registering for a new or renewal sales tax license, a $25,000 Sales Tax Bond will be needed as a requisite of the license. Additionally, for those licensed individuals or businesses who have been determined by the AL DOR to be “non-compliant” with retail sales taxes in the previous year, a custom Non-Compliance Sales Tax Bond is required in order to maintain an active license.
Jet Insurance Company offers these sales tax surety bonds to provide the Alabama Department of Revenue with an extra level of assurance that licensees will pay all retail sales taxes, interest, and fees required of them by the state and will do so honorably and on time. The bond acts as a fiscal guarantee in cases where the licensee fails to abide by the above obligations, and covers past due retail sales taxes, including accrued interest and late due penalties.
If you are looking to initially apply for or renew an Alabama sales tax license, Jet can help you secure the necessary surety bond quickly and efficiently!
What Is the Lowest Price for the Alabama Sales Tax Bond?
At Jet, we work as a direct surety provider so our rates are only a small percentage of the bond limit that is based on the personal credit score of the applicant. The $25,000 Sales Tax Bond starts at $250 for one year, or you can choose to pay just $25 monthly with our affordable monthly payment option. Considering this bond is a one-time requirement for a two year period, the Jet team has also provided rates for a 2-year bond term. Below is an example of Jet’s preferred pricing tier for the $25,000 Sales Tax Bond.
| Bond Term | Cost |
|---|---|
| Monthly | $25 |
| 1 Year | $250 |
| 2 Years | $438 |
Non-Compliance Sales Tax Bond
Alabama sales tax licensees who have proven to be non-compliant in the collection and payment of sales tax during on or after January 1, 2020 are now required by the Alabama Department of Revenue to file a custom Non-Compliance Sales Tax Bond with their office. The bond must remain active for a two year period, and be posted in an amount determined by the AL DOR. To calculate the bonding limit, AL DOR will calculate the exact amount of sales tax liability for the three months preceding the non-compliant period; the bond limit cannot be less than the general $25,000 amount.
Due to the nature of this bond and the potentially high bond limit, Jet will be required to evaluate the risk of the Non-Compliance Sales Tax Bond on a case-by-case basis. Our underwriting process will evaluate criteria such as personal credit, business information, and details pertaining to the business and/or personal financials of the applicant.
Jet makes this process quick, and once we have provided you with an approved rate, you will be able to immediately purchase your bond online.
Why Are the Sales Tax Bond and Non-Compliance Sales Tax Bond Required?
Effective January 1st, 2020, the Alabama Department of Revenue officially enacted legislation into the Code of Alabama 1975 Section 40-23-6 for applicable retailers of beer, wine, or tobacco to obtain a one-time surety bond as a sales tax licensing requirement. This new legislation was created because the Department noticed a growing trend of Alabama business retailers failing to collect sales tax from their customers, and failing to hold such taxes in trust for the State. Further failures to promptly file taxes on time and in the correct amount escalated the need for regulation.
The $25,000 Sales Tax Bond is required of retailers who are registering for the first time or for a renewal sales tax license. This bond is specifically for individuals and businesses just starting out or those who have proven to be compliant with their sales taxes, providing an assurance that they will continue to file and pay all taxes, interest, and fees due responsibly.
The custom Non-Compliance Bond is required of licensed sales tax retailers who have a history (in the period beginning January 1st, 2020) of failing to honor their license by not collecting and paying all taxes due to the state and/or have failed in some way to file with the AL DOR. The bond is a second chance for such licensees to prove to the Department that they can responsibly transact with their customers in wine, beer, or tobacco while upholding all licensing and bond requirements.
If either bond is violated, the licensee will lose their sales tax license and the Department will file a claim on their bond to cover all overdue sales taxes, interest, fees, and additional penalties charged
How Does the Application Process Work With Jet?
The Jet team takes pride in our online bond application process. Each application is simple and will ask for general information such as the applicant's social security number, business addresses, and potentially further information for bonds that require manual underwriting. For an approved rate, a soft credit check will be completed in just minutes, while an additional review of information by one of our underwriters will be conducted for non-compliant sales tax applicants. Once a rate is provided and you have chosen one of Jet’s price options, just make your payment and Jet will take care of the rest!
It is important to note that the surety bond form must contain exactly the same name and physical/mailing address of the business, as well as name of ownership that appears on your AL DOR sales tax license application. Incorrect completion of these forms is the most common reason for licensure delays and loss of application fees.
How Are Sales Tax Bonds Filed in Alabama?
The Jet team can file your bond for you! The original signed bond form is required to be filed with the Alabama Department of Revenue and must remain so for a two year period. Failure to maintain an active bond during this timeline can result in suspension or termination of the sales tax license.
Once payment is complete, Jet will file the bond with the AL DOR immediately. If you would prefer to file the bond yourself, our application process allows you to select that option at checkout. The original signed bond form should be mailed to the address below.
Alabama Department of Revenue
Sales & Use Tax Division
P.O. Box 327710
Montgomery, AL 36132-7710
For initial or renewal sales tax license applicants, the AL DOR requires applications to be completed online through the “My Alabama Taxes” web page. Once submitted, notice of your application status should be given within 3 to 5 business days. If approved, an account number and sales tax license will be issued; both are required to be openly displayed at the licensee’s business location.
Can the Alabama Sales Tax Bond and Non-Compliance Sales Tax Bond Be Cancelled?
Once your bond has fulfilled the Alabama Department of Revenue’s two-year activation timeline, and compliance of all sales tax requirements have been upheld, the Commissioner of the AL DOR will release and discharge the bond. Otherwise, neither sales tax bond can be cancelled by you or the surety provider before these regulations have been met.
The AL DOR will send written notice to the licensee and/or surety provider, confirming the bond’s termination. Liability for the bond will be released by the Commissioner within 30 days of the bond cancellation notification date.
Do Either of the Sales Tax Bonds Need to Be Renewed in Alabama?
Both the Sales Tax Bond and Non-Compliance Sales Tax Bond are a one-time requirement by the Alabama Department of Revenue to maintain for a two-year period. After two years of continuous sales tax compliance, a licensee will not be obligated to renew their bond and is exempt from the surety bond mandate.
If you choose to purchase your bond with Jet through the annual payment option, renewal of the bond will be needed to keep your sales tax license in good standing for one more year. But don't worry, our team will send you a bond renewal invoice prior to the bond term expiration date. No additional paperwork or fees will be requested, just provide the renewal payment and Jet will take care of the rest.
For monthly payment bondholders, there is no need for renewal! Payments will continue to come out of your preferred account until liability of the bond is released by the AL DOR. Jet will be required to charge for the Commissioner’s standard 30-day liability period as the bond remains active during that timeline.
How Does a Retail Licensee Avoid Sales Tax Bond Claims?
Alabama sales tax licensees are expected to follow all regulations of their license and state tax laws pursuant to Code of Alabama 1975, Title 40, Chapter 23- Article 1, when making retail transactions of beer, wine, or tobacco products. Failure to do so may lead the Alabama Department of Revenue to impose large fines, suspend or permanently revoke the business’s license, charge the licensee with a misdemeanor crime, and/or pursue a bond claim. Key prohibited acts that could facilitate a bond claim are as follows:
- Failure of the licensee to collect and pay all sales taxes due to the state for retail transactions of beer, wine, or tobacco
- Failure of the licensee to file all sales taxes on time to the Department
- Failure of the licensee to pay all interest, fees, and/or penalties due to the state
If the AL DOR finds that the sales tax licensee has committed a sales tax violation, they will send notice of such penalties to the person or business with an order for payment. The Commissioner of the Department will file a claim on one of the sales tax surety bonds if the licensee is unable or unwilling to pay all fees due to the state.
It is in the best interest of the person or business to resolve this violation and promptly pay what is due before their license is lost and a claim is filed on either their Sales Tax Bond or their Non-Compliance Sales Tax Bond.
What Happens if I Get a Bond Claim?
Immediately contact Jet upon receipt of the AL DOR Commissioner’s claim notification. The Jet team will brief you on how our claim process works, and then will proceed with a thorough review of the claim details, additional information from the Department of Revenue, and any supporting documentation.
For claims that are found to be valid, Jet is obligated by the surety bond terms to make payment up to the bond limit. The sales tax licensee is ultimately responsible for their actions and must pay Jet Insurance Company back for the full amount paid on their behalf. Failure to do so will lead to future difficulties in purchasing a surety bond, particularly the Sales Tax Bond or the Non-Compliance Sales Tax Bond, which are required to maintain a sales tax license in Alabama.
