Surety Bond Encyclopedia

Motor Vehicle Fuel Broker Bond - Statewide in California

Brief Summary

California fuel tax security is not a set figure, so the first thing to get is the amount in writing from the California Department of Tax and Fee Administration. Once you have it, a bond payable to the state lets you meet the demand without leaving cash on deposit for three years.

This bond guarantees that a business dealing in motor vehicle fuel will pay the taxes, penalties and other obligations it owes under California's Motor Vehicle Fuel Tax Law. The California Department of Tax and Fee Administration sets fuel tax security under Revenue and Taxation Code section 7486, at no more than three times the estimated average monthly tax liability. Confirm the current amount, form and filing steps with CDTFA before the bond is issued.

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How to Apply for a Motor Vehicle Fuel Broker Bond:

Ask CDTFA for the security amount it has set for your motor vehicle fuel account.
Confirm with CDTFA the account or license number the bond should reference.
Have an admitted surety insurer execute the bond payable to the State of California.
Make sure the bond language covers faithful performance and payment of all taxes, penalties and other obligations under the Motor Vehicle Fuel Tax Law.
Deliver the executed bond to CDTFA as its request directs.
Keep returns and payments current to qualify for release after three years.

Detailed Information About the California Motor Vehicle Fuel Broker Bond:

How the amount is set

Section 7486 of the Revenue and Taxation Code allows the department, whenever it considers it necessary to ensure compliance, to require any person to deposit security. The amount is fixed by the department and may not be more than three times the person's estimated average monthly tax liability. The department may increase or decrease it at any time. CDTFA's compliance manual lists a $2,000 minimum for motor vehicle fuel tax security.

The $1,000,000 limit has a condition

The statute caps total security at $1,000,000 only where the person has shown the department that this security, together with property to which the section 7872 lien attaches, is enough to ensure payment of taxes equal to three times the estimated average monthly liability. Without that showing, the three month multiple controls.

What the bond must say

A bond posted as security must be executed by an admitted surety insurer, be payable to the state, be conditioned on faithful performance of all requirements of the Motor Vehicle Fuel Tax Law, and expressly provide for payment of all taxes, penalties and other obligations arising under it. Cash or insured bank and savings and loan deposits are the other accepted forms.

Who posts it and how it ends

A business buying this Motor Vehicle Fuel Broker bond posts it when CDTFA requires security for its fuel tax account. CDTFA confirms which account and license the bond attaches to. Security is released after a three year period in which the person has filed all returns and paid all tax due on time. Under section 7487, cash or deposit security the department applies to the account is treated as a payment on account of any liability.

Eligibility and Requirements for a California Motor Vehicle Fuel Broker Bond:

Admitted surety insurer.
State of California as obligee, with CDTFA administering the security.
Amount no greater than three times estimated average monthly tax liability.
Business name on the bond matching the CDTFA account.
Adjustment on CDTFA's request, since the department may raise or lower the amount at any time.

California Motor Vehicle Fuel Broker Bond FAQs:

How much is the bond?

CDTFA fixes the amount for each account. Section 7486 limits it to three times the estimated average monthly tax liability, and CDTFA's manual lists a $2,000 minimum. Get the figure from CDTFA before ordering the bond.

Is security ever capped at $1,000,000?

Only when the person has shown CDTFA that the security plus property subject to the section 7872 lien is enough to cover three months of estimated tax liability. In that case total security cannot exceed $1,000,000.

Can CDTFA change the amount after the bond is filed?

Yes. Section 7486 states that the department may increase or decrease the amount of security at any time.

When is the bond released?

After a three year period in which the person has filed all returns and paid all tax required to be paid to the state within the time required.