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California legally requires a variety of individuals, contractors, and organizations to secure surety bonds to conduct business across the public service industry. Apply for a California Surety Bond today! Single Source Insurance is a leading California bonding company providing bonds with a convenient online application system. Browse the most common types of bonds in this state, or contact us for a full list.
California�s State Board of Equalization requires a sales tax bond as part of the licensing process for businesses that must charge and collect sales tax on customer purchases. The purpose is simple: to help ensure timely remittance of sales tax payments to the state. The bond also provides financial protection for the state in the event that a bonded business owner fails to make required tax payments.
Merchants applying for a license to do business in California selling goods or services subject to sales tax must purchase a California sales tax bond in an amount based on the previous year�s sales tax liability (or projected liability for a start-up business with no sales history). The State Board of Equalization, Department of Fee and Tax Administration will let you know when you apply for a license or permit whether your business is required to purchase a California sales tax bond and in what amount.
Every merchant subject to this bonding requirement must renew their sales tax bond and business license before the license�s expiration date. A valid bond must be in place at all times to avoid revocation of the merchant�s license to operate.
The State Board of Equalization is the �obligee� �the party requiring the bond�and has the right to file a claim against the bond if the �principal�� the merchant required to purchase the bond� fails to remit sales tax monies collected from customers.
When a claim is filed, the �surety�� the company underwriting and issuing the bond�will first confirm its validity and will then pay the claim, even though the legal obligation to pay claims rests with the principal. In essence, the surety is lending the necessary funds to the principal, and the principal must, by law, repay the surety.
Surety bond premiums are calculated as a certain percentage of the required bond amount. While that required bond amount (also known as the bond�s penal sum) is established by the obligee, the premium rate percentage is determined by the surety on a case-by-case basis.
The surety�s main concern is the risk involved in making advance claims payments on behalf of the principal. Consequently, the main considerations in setting the premium rate are the principal�s personal credit score and financial strength and stability.��With a good credit score, the premium rate could be as low as 1%, but with poor credit it could be as high as 10%.
Request a convenient online quote today, or call us to discuss the California sales tax bond you may need to obtain a business license.
