What is a Texas Taxable Fuel Bond?
Understand what this bond is for and how to obtain one!
By the Code of Federal Regulations Section 48.4101-1, the Internal Revenue Service requires those who are in the excise tax-related businesses, such as buying, selling, and producing of taxable fuel (gasoline, diesel fuel, and kerosene), should be registered.
As a condition of the Taxable Fuel registration, applicants are obligated to post a surety bond - as part of a security test - issued by a reputable surety bond company such as Surety Bond Authority.
Some of the persons that need to be registered are:
- Pipeline operator or vessel operator
- Enterers, position holders, refiners, and terminal operators
- Blenders
- Producers or importers of alcohol, Agri-biodiesel, and biodiesel
- Producers of second-generation biofuel
What is the bond amount?
The bond amount varies. It will be determined by the district director based on several factors such as the person’s tax history as well as the person’s significant risk in a late payment or nonpayment of taxes. He will also assess the person’s financial capabilities and other expected liabilities.
The bond’s premium varies as well. Those who have excellent credit scores may be eligible for a low bond premium or just 1% of the assigned bond amount!
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What are the bond conditions?
- The bond must be in the form prescribed by the district director
- The bond must be a public debt obligation of the United States Government
- The obligation of the bond’s principal is unconditionally guaranteed by the United States Government
- The surety bond company who will issue the bond should be part of the Department of the Treasury Circular 570 list of accepted sureties
- In case of bond cancellation, the district director requires a 60-day notice
How can I obtain a Taxable Fuel bond?
To secure this type of bond, the Taxable Fuel registration applicant must seek the assistance of a surety bond company.
You will be asked to apply for this bond.
Once the application is received, the surety bond company will immediately process it. In our case, one of our expert surety bond agents will guide you through the whole process from the time you applied for the bond. We will make sure that you understand all the conditions before we issue the bond.
An underwriter will then evaluate your financial strength, job/business performance history, tax payment history, and your credit score.
Once the pre-qualification process is fulfilled, we will execute the bond and send it to you.
What else are the requirements for a Taxable Fuel registration?
You must complete IRS Form 637. This is a blanket form for different excise tax activities including taxable fuel.
The IRS will perform a registration test on the applicant. This will include an Activity Test, Acceptable Risk Test, and Satisfactory Tax History Test.
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