An Alabama sales tax bond is a $25,000 one-time surety bond required by the Alabama Department of Revenue (ALDOR) under Ala. Code Section 40-23-6. It is not a bond that every Alabama retailer posts. It applies to two groups: a retailer who sells beer, wine, or tobacco products and is applying for a new sales tax license or renewing an expired or cancelled one on or after January 1, 2020, and any licensed retailer (selling any goods) who becomes non-compliant in collecting and remitting sales tax. For a new or renewed beer, wine, or tobacco license the bond amount is $25,000. For a non-compliant retailer the amount is the actual sales tax liability for the three months preceding the non-compliance, but not less than $25,000. The bond is a one-time bond maintained for a two-year period, and after two years of continuous compliance the licensee is exempt from the requirement.
| Item | Detail |
|---|---|
| Who requires it | The Alabama Department of Revenue (ALDOR), Sales and Use Tax Division |
| Who must post it | Retailers selling beer, wine, or tobacco who apply for a new sales tax license or renew an expired or cancelled license on or after January 1, 2020; and any licensed retailer of any goods who becomes non-compliant in the collection and remittance of sales tax. Retailers who do not sell beer, wine, or tobacco and stay compliant do not post this bond. |
| Governing law | Ala. Code Section 40-23-6 (License required to engage in business; one-time surety bond), effective January 1, 2020 |
| Official form | Sales Tax Surety Bond (form S&U BOND), with the Instructions for Executing the Sales Tax Surety Bond (S&U:BOND Inst), issued by ALDOR |
| Bond amount | $25,000 for a new or renewed beer, wine, or tobacco license. For a non-compliant retailer, the actual sales tax liability for the three months preceding the non-compliance, but not less than $25,000. |
| Premium basis | [CLIENT FLAG: insert All n One premium structure, e.g. percentage of the $25,000 bond amount by credit tier] |
| Coverage term | A one-time bond maintained for two years; after two years of continuous compliance the licensee is exempt |
| Obligee | The Commissioner of the Alabama Department of Revenue and his or her successors in office |
How much is the bond, and how is the amount set?
The amount depends on which trigger applies. For most people buying this bond, a new or renewed beer, wine, or tobacco sales tax license, the amount is a flat $25,000. For a retailer who has fallen behind on sales tax, the amount is tied to the tax at stake, with $25,000 as the floor.
| Situation | Bond amount |
|---|---|
| New sales tax license for a retailer selling beer, wine, or tobacco | $25,000 |
| Renewal of an expired or cancelled sales tax license that was issued for retail sales of beer, wine, or tobacco | $25,000 |
| Any licensed retailer (any goods) who becomes non-compliant in the collection and remittance of sales tax on or after January 1, 2020 | The actual sales tax liability for the three months immediately preceding the non-compliance, but not less than $25,000 |
A few things set this bond apart from a typical annual license bond:
- It is a one-time surety bond maintained for a two-year period, not a bond you renew every year for as long as you hold the license.
- After two years of continuous compliance (collecting and timely remitting sales tax), the licensee is exempt from the surety bond requirement.
- ALDOR can waive the bond where the applicant and a current, compliant licensee are related parties or members of a controlled group of corporations as defined in 26 U.S.C. Section 1563, and that related licensee has been compliant over the previous two-year period.
- In place of a surety bond, a person required to post one may deposit certified funds with the Department equal to the bond amount. A surety bond lets you avoid tying up $25,000 or more in cash.
What does the bond cover?
The bond guarantees that the retailer collects and remits Alabama sales tax as required by law. It is conditioned on the licensee collecting and remitting sales tax under Chapter 23 and any rules issued under it, and it is payable to the Commissioner of Revenue. If the licensee collects sales tax and fails to remit it, or otherwise leaves an unpaid sales tax liability, the State can make a claim against the bond up to its full amount.
Key points about coverage:
- It protects the State of Alabama and its sales tax collection, not your customers.
- It backs the licensee’s duty to collect and remit sales tax; it does not replace that duty. You still file returns and pay tax, and the bond is the state’s backstop if you do not.
- The bond must be executed by the applicant as principal and by a surety company qualified to do business in Alabama, on a form approved by the commissioner.
- A licensee required to post the bond may instead deposit certified funds with the Department equal to the bond amount.
How much does the bond cost?
You do not pay the full bond amount. You pay a premium, which is a small percentage of the bond amount and is set mainly by the bond size and your credit. Because the standard beer, wine, or tobacco bond is a fixed $25,000, the premium is usually straightforward to quote.
[CLIENT FLAG: insert All n One Insurance pricing for the Alabama sales tax bond, e.g. premium rate range by credit tier and one worked example such as “a $25,000 bond for $X.” Do not publish a premium number until All n One provides it.]
[CLIENT FLAG: confirm whether All n One quotes this bond on a flat fee or as a percentage of the bond amount, and how a non-compliance bond above $25,000 is priced.]
Is this the same as a sales tax license?
No. The license and the bond are two different things.
- The Alabama sales tax license is what authorizes you to make retail sales in Alabama. You register for it with ALDOR (retailers of beer, wine, or tobacco register through the appropriate ALDOR channel).
- The Alabama sales tax bond is the extra $25,000 security a beer, wine, or tobacco retailer must post to get a new license or renew an expired or cancelled one, and that any retailer must post if they become non-compliant. A compliant retailer who does not sell beer, wine, or tobacco does not post this bond.
It is also different from the surety bond that can come up when you receive a Final Assessment and want to appeal, which is a separate tax-procedure matter, and from the motor vehicle Certificate of Title Surety Bond (form MVT 10-1). Those are not the sales tax license bond described on this page.
How do I get bonded and file the Alabama sales tax bond?
- Confirm the requirement applies to you. You are applying for a new sales tax license, or renewing an expired or cancelled one, to sell beer, wine, or tobacco at retail; or ALDOR has notified you that you are non-compliant and must post a bond.
- Determine the amount. It is $25,000 for a new or renewed beer, wine, or tobacco license. For a non-compliance bond, it is the actual sales tax liability for the three months before the non-compliance, but not less than $25,000.
- Get a surety bond quote. Apply with All n One Insurance for the required amount. Approval and premium depend mainly on the bond size and your credit.
- Receive and sign your bond on ALDOR’s Sales Tax Surety Bond form (S&U BOND), executed by you as principal and by the surety, following the Instructions for Executing the Sales Tax Surety Bond (S&U:BOND Inst).
- File the completed bond, including the power of attorney, with ALDOR at the Alabama Department of Revenue, Sales and Use Tax Division, Administration Section, PO Box 327710, Montgomery, AL 36132-7710. [VERIFY against the ALDOR Sales Tax Surety Bond notice and form instructions: confirm the exact PO Box and ZIP for the Sales and Use Tax Division Administration Section (published references show both 36132-7710 and 36132-7720); use the address on the current form instructions.]
- Meet the deadline. A retailer notified of a bond requirement has 30 days to file the bond or file a notice of appeal to the Department.
- Consider the alternative. In place of a surety bond you may deposit certified funds with the Department equal to the bond amount, though a surety bond avoids tying up that cash.
Frequently asked questions
Who has to post an Alabama sales tax bond?
Two groups. First, a retailer who sells beer, wine, or tobacco products and is applying for a new sales tax license, or renewing an expired or cancelled one, on or after January 1, 2020. Second, any licensed retailer (selling any goods) who becomes non-compliant in collecting and remitting sales tax. A compliant retailer who does not sell beer, wine, or tobacco does not post this bond.
How much is the Alabama sales tax bond?
For a new or renewed beer, wine, or tobacco license, it is $25,000. For a non-compliant retailer, it is the actual sales tax liability for the three months before the non-compliance, but not less than $25,000.
How long do I have to keep the bond?
It is a one-time surety bond maintained for a two-year period. After two years of continuous compliance, collecting and timely remitting your sales tax, you are exempt from the surety bond requirement.
What if I do not sell beer, wine, or tobacco?
Then you generally do not need this bond when you register, as long as you stay compliant. The bond can still apply to any retailer who becomes non-compliant in collecting and remitting sales tax.
Can the bond be waived?
Yes, in one situation. ALDOR waives it where you and a current, compliant licensee are related parties or members of a controlled group of corporations under 26 U.S.C. Section 1563, and that related licensee has been compliant over the previous two years.
Can I post cash instead of a surety bond?
Yes. In place of a surety bond, you may deposit certified funds with the Department equal to the bond amount. Most retailers use a surety bond so they do not tie up $25,000 or more in cash.
How do I file the bond, and how long do I have?
You file the completed Sales Tax Surety Bond form (S&U BOND), including the power of attorney, with ALDOR’s Sales and Use Tax Division. A retailer notified of the requirement has 30 days to file the bond or to file a notice of appeal to the Department.
How much will the bond cost me?
[CLIENT FLAG: insert All n One premium guidance, e.g. a percentage-of-bond-amount range by credit tier and a worked example on the $25,000 bond. Do not publish a premium figure until All n One provides it.]
