Kerosene Excise Tax Bond - Federal in All States
Table of Contents
Brief Summary
When the IRS makes a bond a condition of your section 4101 registration for kerosene, this is the instrument it means. You file it on Form 928 with the kerosene box checked, pay a premium instead of pledging Treasury securities, and keep your registration moving.
The kerosene excise tax bond is IRS Form 928, Taxable Fuel Bond, with the kerosene excise tax box checked. The IRS requires it when a registrant handling kerosene does not meet the adequate security test for registration under Internal Revenue Code section 4101, or as a condition of keeping an existing registration. The amount is set by the IRS and cannot exceed expected fuel tax liability for a representative 6-month period.
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How to Apply for a Kerosene Excise Tax Bond:
- Have the IRS notice or Form 637 file showing the bond amount required.
- Business legal name, address and EIN exactly as on Form 637.
- Complete the bond application and review the premium quote.
- Have the right principal sign Form 928: the individual owner, a principal corporate officer, an authorized partner or member, or the fiduciary.
- File Form 928 in duplicate with the IRS employee who required the bond.
Detailed Information About the All States Kerosene Excise Tax Bond:
The bond is a fallback, not automatic
Kerosene is a taxable fuel under the federal excise rules, so refiners, terminal operators, enterers, blenders and position holders handling it register with the IRS on Form 637. Under 26 CFR 48.4101-1(f), an applicant must pass an activity test, an acceptable risk test and an adequate security test. The security test is met either by adequate financial resources plus a satisfactory tax history, or by posting a bond. That means plenty of registrants never post one. The IRS can also demand a bond from an existing registrant whose conduct creates a significant risk of late or unpaid tax, in place of revoking or suspending the registration.
Amount
There is no published flat amount. Under section 48.4101-1(j)(2), the IRS sets a figure that will ensure timely collection of the taxes imposed by sections 4041(a)(1) and 4081, considering your finances, tax history and expected liability. It cannot exceed expected liability for a representative 6-month period. Terminal operators can also be bonded for the section 4081 liability of others on fuel removed at their racks over a representative 1-month period. The IRS can raise or lower the amount as circumstances change.
What the bond covers
The principal and surety are bound to the United States. The principal promises not to defraud the government of fuel tax, to file all returns, to pay all tax with penalties and interest, and to comply with the fuel tax rules. Unpaid tax can be collected straight from the bond.
After it is filed
The bond is continuous. The IRS may require a strengthening bond to add to the amount, or a superseding bond to replace it, when monthly volume grows past what the bond was based on or ownership or management changes substantially. If you also handle gasoline or diesel, Form 928 lets you check those boxes on the same bond.
Eligibility and Requirements for an All States Kerosene Excise Tax Bond:
- Surety listed in Treasury Department Circular 570.
- IRS Form 928 with the kerosene excise tax box checked.
- Amount set by the IRS, capped at expected liability for a representative 6-month period.
- Strengthening or superseding bond when volume, ownership or management changes.
- Credit and financial review by the surety, with financial statements for larger amounts.
All States Kerosene Excise Tax Bond FAQs:
No. Under 26 CFR 48.4101-1(f)(4), showing adequate financial resources and a satisfactory federal tax history meets the adequate security test without one. The IRS asks for a bond when that showing falls short, or later as a condition of keeping a registration.
The IRS sets it based on your financial capability, tax history and expected liability under sections 4041(a)(1) and 4081. It cannot be more than your expected liability for a representative 6-month period.
Not necessarily. Form 928 has boxes for gasoline, diesel fuel and kerosene excise tax, so one bond can cover more than one fuel if the IRS agrees to the amount.
Yes, with written notice to you and the IRS at least 60 days ahead. The surety remains liable for tax, penalties and interest you incurred before the release date.
