Alabama Tax Bond Requirements

New Sales Tax Bond Requirement in Alabama

Alabama Introduces New Sales Tax Bond Requirements for Retailers

A new sales tax bond is being required in Alabama for retailers in the state. House Bill 151, which was signed into law on March 27, 2018, introduces a sales tax bond criterion for retailers applying for an initial sales tax license and those renewing an expired or cancelled license in relation to gross receipts.

If you are an Alabama retailer, you will have to comply with the new rules as of January 1, 2020. This means that you have more than a year to make sure you keep your legal compliance. That’s why it’s a good idea to get acquainted with the requirements, so that you can satisfy them with ease

The changes brought by House Bill 151

As of the beginning of 2020, retailers in Alabama have to meet a new requirement when getting a sales tax license. You have to obtain a $25,000 sales tax bond as a part of the licensing process. This new rule applies to both initial license applications, as well as to renewing expired or cancelled licenses. The bond is required for the first two years of a retailer’s licensing. Retailers who are part of a related company or are members of a controlled group that has been in compliance for two years do not have to post a bond.

The purpose of the surety bond is to ensure that retailers collect and remit all sales tax on gross receipts, thus complying with relevant state laws. In case you fail to make the necessary collections or remittance, you may get a claim against your bond. This is how state authorities can seek a financial reimbursement for any financial losses due to uncollected taxes.

If a licensee has duly collected and remitted all sales tax for a period of two years, they would not need to obtain a new surety bond. If, however, you have failed to comply with the law, you will need to get bonded again. You will have to get a surety bond for a two-year period in the amount of the actual sales tax liability for the three months immediately preceding the period in which you were non-compliant. However, the bond amount cannot be less than $25,000.


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