A Texas fuel tax bond is a financial guarantee that a licensed handler of motor fuel will pay the state taxes it owes on gasoline, diesel, or compressed and liquefied natural gas. The Texas Comptroller of Public Accounts sets each bond at twice the maximum tax that could come due in a single reporting period, with minimums that start at $10,000 and a cap of $600,000 for most license types.1Texas Comptroller of Public Accounts. AP-111 Texas Motor Fuels Tax Continuous Bond You post the bond on Form AP-111 alongside your fuel tax license application, and the Comptroller will not issue or renew the license until the bond is on file.
Who Has to Post One
Any business with a tax obligation under Texas Tax Code Chapter 162 needs both a fuel tax license and a bond. That covers suppliers, distributors, importers, exporters, blenders, and certain end users, including dealers and interstate truckers.2Texas Comptroller of Public Accounts. Motor Fuels Tax Cases A distributor moving fuel from a terminal rack to retail stations triggers the requirement. So does an importer bringing fuel across state lines, an exporter shipping it out, or a blender mixing tax-paid fuel with untaxed products.
CNG and LNG dealers fall under the same framework. If you produce, purchase, sell, or deliver compressed or liquefied natural gas commercially, you need a license and bond just like a gasoline distributor.1Texas Comptroller of Public Accounts. AP-111 Texas Motor Fuels Tax Continuous Bond Dyed diesel fuel bonded users, who handle off-road diesel, face a lower minimum but still must post security.
How the Bond Amount Is Set
The Comptroller calculates the bond at two times the maximum tax that could accrue on tax-free fuel you purchase, acquire, or sell during a single reporting period.3State of Texas. Texas Code 162.212 – Bond and Other Security for Taxes If your monthly tax exposure is $20,000, your bond runs $40,000. Minimums and maximums break out by fuel type:
- Gasoline: $30,000 minimum, $600,000 maximum
- Diesel fuel: $30,000 minimum, $600,000 maximum
- Dyed diesel fuel bonded user: $10,000 minimum, $600,000 maximum
- CNG and LNG: $30,000 minimum, $600,000 maximum
The $600,000 cap is not absolute. If the Comptroller believes there is an unusual risk of lost tax revenue, the office can require one or more bonds totaling more than $600,000.3State of Texas. Texas Code 162.212 – Bond and Other Security for Taxes Businesses with steady compliance and lower volume often stay at the minimum. If your volume grows, expect the Comptroller to request an increase to keep the two-times ratio intact.
What You Actually Pay
The bond amount is not what you pay out of pocket. You pay a surety company an annual premium, typically between 1% and 5% of the total bond amount. On a $30,000 bond, that means roughly $300 to $1,500 a year. Your credit score, financial history, and industry experience determine where you land in that range. Strong credit and clean financials generally get you closer to 1%; weaker credit pushes you toward the top. Poor credit does not automatically disqualify you, but it raises the price.
Most sureties also require a general indemnity agreement before issuing the bond. That agreement makes you personally liable to reimburse the surety if a claim is paid against your bond, even if your business is an LLC or corporation. Every owner holding 10% or more of the business typically must sign, and some sureties require spouses as well. The bond doesn’t just protect the state. It creates a direct repayment obligation that follows you personally.
Alternatives to a Surety Bond
Texas law allows three substitutes for a traditional surety bond:4State of Texas. Texas Tax Code 162.111 – Bond and Other Security for Taxes
- A cash deposit in U.S. currency for the full bond amount, deposited into the state treasury’s suspense account.
- A certificate of deposit from an FDIC-member bank or savings institution in Texas, assigned to the Comptroller, in at least the required bond amount.
- An irrevocable letter of credit issued to the Comptroller from an FDIC-member bank or savings institution in Texas, in at least the required bond amount.
Each alternative ties up the full bond amount in a way a surety bond does not. A $30,000 surety bond might cost you $300 to $1,500 in yearly premiums; a cash deposit locks up the entire $30,000 for as long as you hold the license. The trade-off is no credit check and no indemnity agreement.
Filing the Bond
The bond form and the license application are two separate documents. Form AP-111 is the Texas Motor Fuels Tax Continuous Bond. Form AP-133 is the Texas Application for Fuels Tax License.5Texas Comptroller of Public Accounts. Texas Application for Fuels Tax License You need both. The AP-133 includes a built-in bond section at Items 27 through 35, but you can also submit a standalone AP-111.
What Goes on Form AP-111
The bond form asks for your business’s legal name, Federal Employer Identification Number, and Texas Identification Number (use the first 11 digits). You also enter the surety company’s full corporate name and Texas Identification Number.1Texas Comptroller of Public Accounts. AP-111 Texas Motor Fuels Tax Continuous Bond Item 10 is where you enter the bond amount and the specific statute section that governs your fuel type: Section 162.111(b) for gasoline, Section 162.212(b) for diesel, or Section 162.361(b) for CNG and LNG. Citing the wrong statute section means the bond is ineffective for the fuel you actually handle.
The surety’s authorized agent signs and dates Item 11. You, the principal, or your authorized agent sign Item 12. If someone signs on your behalf, attach a written power of attorney.1Texas Comptroller of Public Accounts. AP-111 Texas Motor Fuels Tax Continuous Bond
Where to Send It
Mail the completed bond to:
Comptroller of Public Accounts
111 E. 17th Street
Austin, TX 78774-0100
Use a mailing method with tracking. Discrepancies in legal names, ID numbers, or signatures cause the Comptroller to return the document for correction, which delays your license and the start of operations.
When Your Bond Gets Canceled or Replaced
If your surety wants out, it files a written request with the Comptroller. The surety is released from future liability on the 31st day after that request is filed, though it stays on the hook for any taxes that accrued before the 30-day period expires.4State of Texas. Texas Tax Code 162.111 – Bond and Other Security for Taxes The Comptroller will notify you promptly, and you must post a replacement bond or other authorized security before the existing one expires. Miss that window and the Comptroller cancels your license.
This scenario catches people off guard. A surety might non-renew because of a late tax payment, a change in your financial condition, or a business decision on their end. You then have roughly 30 days to find a new surety or post alternative security. If the new bond isn’t in place in time, you cannot legally handle fuel.
IFTA and Federal Bonds Are Separate
Two related bonds sit outside the Chapter 162 requirement, and the reader should not assume the Texas fuel tax bond covers them.
The International Fuel Tax Agreement covers motor carriers operating across state lines. Texas administers IFTA through the same Comptroller’s office, but first-time applicants generally do not need a bond.6Texas Comptroller of Public Accounts. Texas Continuous Bond for International Fuel Tax Agreement License The Comptroller can require an IFTA bond after the fact if a licensee falls behind on returns or remittances, or if an audit reveals serious compliance problems.7Texas Comptroller of Public Accounts. Fuels Taxes Frequently Asked Questions There is no fixed statutory amount; the Comptroller sets it based on the carrier’s situation.
Federal registration under 26 U.S.C. § 4101 is a separate matter. It applies to anyone the IRS requires to register with respect to federal excise taxes on motor fuel, as well as producers and importers of biodiesel, alcohol, and sustainable aviation fuel.8Office of the Law Revision Counsel. 26 USC 4101 – Registration and Bond The IRS sets the federal bond amount at its discretion, based on your financial condition, tax history, and expected liability. The required form is IRS Form 928, and bonds over $25,000 generally require personal and business financial statements. Producers, importers, and terminal operators with federal excise tax exposure may need both a Texas bond and a federal one.
What Happens If You Skip It
Operating without the required bond or license invites escalating enforcement. The Comptroller can cancel or refuse to issue a license to anyone who has violated Chapter 162 or a Comptroller rule, with at least 10 days’ notice and a chance to appear at a hearing in Austin or at a field office.9Texas Public Law. Texas Tax Code Section 162.005 – Cancellation or Refusal of License
In more urgent situations, the Comptroller can suspend a license immediately without prior notice if the business’s continued operation poses a substantial threat to tax collection. A preliminary hearing must happen within 10 days of the suspension, and the licensee must show cause why the suspension should be lifted.10State of Texas. Texas Code 162.006 – Summary Suspension of License If notice is served in person, you hand over the license on the spot.
Criminal exposure goes further. Blending fuel to expand its volume and evade taxation, or engaging in a motor fuel transaction without a license, can result in felony charges.2Texas Comptroller of Public Accounts. Motor Fuels Tax Cases If the Comptroller determines that taxes went unpaid and the required bond amount isn’t satisfied within 15 days, the bond or other posted security is forfeited to the state.