Diesel Fuel Tax Bond - Federal in All States

Brief Summary

Not every fuel registrant has to post this bond. The IRS asks for it when your finances or tax history do not meet its adequate security test on their own. If that is you, the bond is the difference between an approved Form 637 registration and a business that cannot legally move diesel through the terminal system.

The federal diesel fuel tax bond is posted with the IRS on Form 928, Taxable Fuel Bond, by a business registering under 26 U.S.C. 4101 when the IRS decides a bond is needed to secure its excise tax on diesel. The amount is set by the IRS based on financial strength, tax history and expected liability, and cannot exceed the expected tax for a representative 6 month period. The surety must be listed in Treasury Circular 570.

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How to Apply for a Diesel Fuel Tax Bond:

• File IRS Form 637 to register under section 4101.
• If the IRS requires security, get the bond amount from the IRS.
• Provide company financial statements and tax history to the surety.
• Have the bond executed on IRS Form 928, Taxable Fuel Bond, with diesel fuel checked.
• Submit the executed bond to the IRS as directed in the registration process.

Detailed Information About the All States Diesel Fuel Tax Bond:

Who has to register

Under 26 CFR 48.4101-1(c), blenders, enterers, pipeline operators, position holders, refiners, terminal operators and vessel operators must register with the IRS under section 4101 using Form 637. Bus and train operators that owe tax at the bus or train rate must register too. Failing to register carries both civil and criminal penalties.

When the bond is required

The bond is not automatic. An applicant must pass the adequate security test in 26 CFR 48.4101-1(f)(4). That means the IRS finds it has adequate financial resources and a satisfactory tax history for itself and any related person. An applicant that falls short can satisfy the test by giving a bond instead. The IRS can also require an existing registrant to post a bond to keep its registration.

How much

There is no flat amount. Section 48.4101-1(j)(2) says the IRS sets the bond at a level that will ensure timely collection of the tax, based on the applicant's financial capabilities, tax history and expected liability. The IRS can raise or lower it as those change. The cap is the applicant's expected tax liability for a representative 6 month period. For a terminal operator, the cap also includes one representative month of tax owed by others on fuel removed at its terminal racks.

Form and surety

The bond is written on IRS Form 928, Taxable Fuel Bond, which covers gasoline, diesel fuel and kerosene excise tax. A surety bond must come from a company listed in Treasury Circular 570. The regulation also allows a U.S. government debt obligation or other security the IRS accepts.

Cancellation and release

A surety can end future liability by giving the IRS and the registrant written notice at least 60 days in advance. It stays liable for tax incurred while the bond was in force. If the IRS later finds the registrant passes the adequate security test without a bond, the bond requirement is lifted.

Premium depends on the bond amount and the surety's review of the company's financial statements and credit, so a quote is based on the figure the IRS sets.

Eligibility and Requirements for an All States Diesel Fuel Tax Bond:

• Surety listed in Treasury Circular 570.
• Bond on IRS Form 928.
• Amount set by the IRS, capped at expected tax liability for a representative 6 month period.
• Company financial statements for underwriting.
• Satisfactory federal tax filing, deposit and payment history.

All States Diesel Fuel Tax Bond FAQs:

Official and Additional Resources for the All States Diesel Fuel Tax Bond: