What is a Fuel Tax Bond?
A fuel tax bond is a specialized type of surety bond that fuel sellers and mixers of fuel (gas, diesel and bio-diesel) must carry in order to get a license. It ensures payment of taxes on fuel (i.e., the gas tax) to the state. The rates for fuel bonds vary widely, which is why we work with many sureties that understand gas and fuel tax users and sellers have.
Who Needs a Fuel Tax Bond/Gas Tax Agreement Bond?
All fuel sellers or any entity that mixes different kinds of fuel are typically required to carry this type of commercial bond. Although each state has slightly different laws and regulations, IFTA bonds are required in all 48 continental states and Canada. Fuel sellers purchase the IFTA bond to guarantee the proper payment of taxes for their market. These are commercial bonds for fuel sellers and provide surety bonding for the benefit of the taxing authority.
What do Fuel Tax Bonds Cost?
The cost for a fuel bond varies widely, to be sure. Fuel bonds are considered higher risk bonds, which is why we utilize multiple surety bonding companies to provide these surety bonds. We work extremely hard with fuel sellers to get the lowest possible rate for their IFTA fuel bond.
Some of the reasons that these tax bonds are costlier is that the tax bond itself protects against unethical or illegal acts , or financial distress, by certain fuel sellers. Thus, each seller of fuel works with a bonding company to get a fuel agreement bond to protect the government against any tax losses.
What is the Process to Get Federal Fuel Tax Surety Bonds?
Have any questions? Call us at (913) 214-8344, or email at gary(at)swiftbonds.com
What is the International Fuel Tax Agreement?
The International Fuel Tax Agreement (commonly known as IFTA) is a concord among the continental United States and Canada to make the reporting of fuel usage simpler. Motor carriers have to file an IFTA quarterly fuel tax report and are required to have an IFTA bond as well. You can find out more information about IFTA from the International Fuel Tax Association.
A fuel tax surety bond protects the Obligee (the government), which is the party requesting the surety bond, against damages, financial losses, a failure to adhere to local or state regulations or laws, or unethical decisions on the part of the fuel seller(the Principal).
What is IFTA?
The International Fuel Tax Agreement, or IFTA for short, is a treaty between the United States and Canada, which affects all Canadian provinces and the 48 continental United States. IFTA produces a matrix that is supposed to “clarify” how fuel taxes are calculated and paid. Of course, there are so many exceptions that this “clarification” can be terribly difficult in real life.
Here's an example. In 2015, biodiesel in Georgia had some exceptions passed, which are:
1) Jurisdiction provides either a refund or an exemption, impose a tax rate different than diesel, or offer an incentive (i.e. producers' or income tax credit):
2) Jurisdiction offers a refund for tax paid on biodiesel for IFTA carriers:
3) Jurisdiction offers a biodiesel tax exemption for IFTA carriers:
4) Jurisdiction imposes a tax on biodiesel at a rate different than the tax imposed on diesel:
5) Instructions for the IFTA licensees based in your jurisdiction to report biodiesel use on the IFTA return. :
6) Biodiesel incentive such as a producer’s credit or an income tax credit:
7) Website that includes information regarding biodiesel:
So, this is what can create a lot of headaches. Because this gets so tricky, states require that a bond is posted so ensure that taxes are paid.
IFTA Motor Fuel Tax Surety Bond
The IFTA Motor Fuel Tax Surety Bond is used to ensure that you pay all taxes when getting a bond. Each state has some great resources on this. For example, here is Missouri's page on IFTA motor fuel tax surety bonds.
Fuel Tax and Gasoline Tax Bond
For most convenience stores, the fuel tax and gasoline tax bond are required so that you can sell fuel to consumers. The IRS has some good resources on taxable fuel bonds as well.