A Texas sales tax bond is financial security the Texas Comptroller of Public Accounts can require from anyone applying for a sales tax permit, or from any existing permit holder who falls behind on filings or payments. Most businesses satisfy the requirement with a surety bond, but the state accepts cash, bank instruments, and U.S. Treasury bonds as alternatives. The bond amount can reach the greater of $100,000 or four times your average monthly tax liability, and if you use a surety company you’ll owe an annual premium for as long as the requirement is in effect.1State of Texas. Texas Tax Code Section 151.253 – Security: Requirements
Who Has to Post a Bond
By statute, every applicant for a Texas sales tax permit must file adequate security for the payment of sales and use taxes.2State of Texas. Texas Tax Code Section 151.251 – Security Required In practice, the Comptroller doesn’t demand a bond from every applicant. Businesses with established credit and a low-risk profile are often exempted at the outset. New entities with no financial track record, businesses in higher-risk industries such as alcohol or tobacco sales, and anyone who previously had a permit revoked should expect a bond demand.
Existing permit holders aren’t off the hook. If you become delinquent — missing a filing deadline or failing to pay a tax determination before additional penalties accrue — the Comptroller is required to demand security.2State of Texas. Texas Tax Code Section 151.251 – Security Required The office can also require a bond at any time it decides one is needed to ensure tax code compliance. Failing to provide the bond when demanded results in denial of your application or suspension of your existing permit. Without a valid permit, you cannot legally make taxable sales in Texas.
How Much the Bond Will Be
The Comptroller sets each bond amount individually, weighing what you’ve historically owed (or are projected to owe) in sales tax against the state’s exposure if you don’t pay. The statutory ceiling is the greater of $100,000 or four times your average monthly tax liability.1State of Texas. Texas Tax Code Section 151.253 – Security: Requirements Higher-volume sellers can face requirements well above $100,000; smaller operations typically stay at or below that figure.
For itinerant vendors, meaning sellers operating from temporary locations rather than a permanent storefront, the minimum bond amount is $500.3Cornell Law Institute. 34 Texas Admin Code 3.327 – Taxpayers Bond or Other Security Whatever the amount, you’ll learn it through an official notification letter from the Comptroller. The security you file must match that figure exactly.
Types of Security the Comptroller Accepts
A surety bond is the most common option, but Texas law allows several forms of security:1State of Texas. Texas Tax Code Section 151.253 – Security: Requirements
- A cash bond, deposited directly with the Comptroller; personal checks are accepted.3Cornell Law Institute. 34 Texas Admin Code 3.327 – Taxpayers Bond or Other Security
- An irrevocable assignment of a bank, savings and loan, or credit union account whose deposits are federally insured, executed on a Comptroller-approved form.
- A bank letter of credit the Comptroller deems sufficient in amount and secure.
- A certificate of deposit or savings certificate, irrevocably assigned on a Comptroller-approved form.
- U.S. Treasury bonds that are readily convertible to cash.
- A surety bond issued by a company chartered or authorized to do business in Texas.
Corporate stocks, corporate bonds, and personal guarantees are not accepted.3Cornell Law Institute. 34 Texas Admin Code 3.327 – Taxpayers Bond or Other Security If you have the cash on hand, posting a cash bond avoids ongoing surety premiums, but that money sits with the state for as long as the requirement lasts. A surety bond keeps your working capital free at the cost of an annual premium.
Filing the Surety Bond
The correct form is Form 01-752, “Continuous Bond of Seller (Sales Tax),” available from the Comptroller’s website.4Texas Comptroller of Public Accounts. Texas Bond Forms Don’t confuse it with Form 01-114, which is the Sales and Use Tax Return.
Completing the form requires your 11-digit Texas taxpayer number.5Texas Comptroller of Public Accounts. Components of a TIN If you’re a new applicant and haven’t received your number yet, leave that field blank and the Comptroller will fill it in during processing. Enter the bond amount exactly as it appears on your notification letter.
On the surety side, the bond must be executed by an attorney-in-fact appointed by a surety company chartered or authorized to do business in Texas. The power of attorney appointing that person must be notarized and physically attached to the bond.3Cornell Law Institute. 34 Texas Admin Code 3.327 – Taxpayers Bond or Other Security Both the surety’s representative and the business owner or an authorized officer must sign.
The Comptroller requires the original executed document, not a photocopy or scan. Mail the original to the Comptroller’s Austin office and keep a copy for your records.
What a Surety Bond Costs
You don’t pay the face amount of the bond. You pay the surety company an annual premium, typically 1% to 10% of the bond amount, based on your personal credit, financial history, and the size of the bond. An owner with strong credit posting a $10,000 bond might pay a few hundred dollars a year; someone with poor credit or a history of tax problems could pay near the top of that range or higher.
The premium is not refundable, and you pay it every year the bond stays in force. Rates vary between surety companies, so it’s worth getting more than one quote. A credit score that produces an unfavorable rate at one carrier may fare better at another.
The Indemnity Agreement Behind the Bond
When a surety issues your bond, it will require you to sign an indemnity agreement. If the Comptroller makes a claim on the bond because you failed to pay sales taxes and the surety pays out, you owe the surety every dollar back, plus legal costs. The surety isn’t absorbing your tax debt; it’s acting as a guarantor.
If your business is an LLC or corporation, the indemnity agreement generally requires personal guarantees from every owner with a significant stake, which pierces the entity’s liability shield for this purpose. Spouses are commonly required to sign as well, which forecloses transferring personal assets to avoid repayment. The bond is a more consequential commitment than the annual premium alone suggests.
Keeping the Bond Active and Forfeiture
A qualifying surety bond is a continuing instrument that operates as a new and separate obligation for each calendar year it’s in force, and it stays in force until the surety is formally released and discharged.1State of Texas. Texas Tax Code Section 151.253 – Security: Requirements You’re responsible for paying the annual premium on time and preventing any lapse in coverage.
If the Comptroller determines a forfeiture because you didn’t pay your sales taxes, the process moves fast. The Comptroller notifies the holder of the security and demands payment, then notifies you and demands a new or additional bond within 10 days. Miss the 10-day window and your sales tax permit is suspended.3Cornell Law Institute. 34 Texas Admin Code 3.327 – Taxpayers Bond or Other Security Ten days is not much time to arrange replacement security. Keep your tax account current and stay in contact with your surety.
If your surety cancels the bond for any reason, including a lapsed premium payment, you’ll need replacement security in place before cancellation takes effect. Operating without a valid permit exposes you to penalties beyond the unpaid tax itself.
Getting the Bond Released
The security requirement isn’t permanent. Texas law entitles you to request the return, refund, or release of your bond after two consecutive years of continuous compliance with the security’s conditions.6State of Texas. Texas Code TAX 151.254 – Security: Exemptions Compliance means every return filed on time and every dollar of tax paid during that period. No late filings, no delinquencies.
Release isn’t automatic. You have to request it, and the Comptroller decides whether to grant it. A spotless two-year record makes a strong case. Once the security is released, the surety premium stops and any cash deposit is returned. Businesses that held permits before January 1, 1974, and have never been found delinquent are exempt from the security requirement under the same statute.
Two years is the statutory minimum. The Comptroller can hold the security longer if the circumstances warrant. The fastest route to release is the plain one: file on time, pay in full, keep clean records, and ask.