Surety Bond Encyclopedia

Nonresident Contractor (Single Job AU 964) Bond - Statewide in Connecticut

Brief Summary

This bond is what lets an out of state prime contractor start a Connecticut job of $250,000 or more without the owner having to worry about your state taxes. It is a tax guarantee to the Department of Revenue Services, sized at 5% of the contract price, and it is the document your customer is required to see before paying you.

Under Conn. Gen. Stat. 12-430(7), a nonresident prime or general contractor that is not verified by the Connecticut Department of Revenue Services must file a surety bond with DRS equal to 5% of the total contract price on any project of $250,000 or more. The bond is filed on DRS Form AU-964, Surety Bond and Release, and guarantees the contractor's Connecticut sales and use tax and income tax withholding on that project.

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How to Apply for a Nonresident Contractor (Single Job AU 964) Bond:

Confirm you are a nonresident contractor without verified status and that the entire project price is $250,000 or more.
Register for all applicable Connecticut taxes and have your Connecticut Tax Registration Number ready, since AU-964 asks for it.
Gather the customer or owner name and address, project name, physical location, and commencement and completion dates.
Calculate the bond at 5% of the total contract price, including change orders and add-ons.
Have the contractor and the surety both sign AU-964, with the surety's raised corporate seal.
Mail the bond to DRS, Hartford Regional Office, 450 Columbus Blvd Ste 1, Hartford CT 06103-1837, and give your customer proof of filing.

Detailed Information About the Connecticut Nonresident Contractor (Single Job AU 964) Bond:

This is a tax bond, not a performance bond

Most contractors assume AU-964 guarantees the work. It does not. The bond runs to the Connecticut Department of Revenue Services and guarantees that the contractor pays the sales and use taxes and income tax withholding tied to the project. Conn. Gen. Stat. 12-430(7) requires it from an unverified nonresident contractor, meaning a contractor or subcontractor that does not maintain a regular place of business in Connecticut. A regular place of business is a bona fide office, factory, warehouse or other space in the state where the contractor does business in its own name in a regular and systematic manner.

How the amount is set

The bond equals 5% of the total contract price, and Form AU-964 says that includes any change orders and add-ons. One bond covers the whole project. DRS Special Notice 2012(2) states that a single surety bond for 5% of the entire project price is filed by the unverified prime or general contractor when the contract price for the entire project is $250,000 or more. Below $250,000 the requirement does not apply.

Who does not post it

A verified contractor does not file AU-964. Verified status goes to a nonresident contractor that is registered for all applicable Connecticut taxes, has filed all required returns and owes nothing, and either has been registered for three years or more or has posted a verification bond on Form AU-961. Subcontractors are handled differently. The prime or general contractor holds back 5% of each payment to an unverified subcontractor until DRS issues a Certificate of Compliance.

Why your customer will ask for it

The customer of an unverified prime contractor must obtain proof that the bond was posted with DRS. If it does not, the customer becomes liable for the contractor's unpaid sales and use taxes and income tax withholding, up to 5% of the contract price. Under the statute, an owner or tenant of residential property with three or fewer dwelling units, one of which the owner or tenant lives in, is not treated as a person doing business with the contractor.

When the bond ends

The AU-964 conditions say the bond expires if the contractor pays all taxes, interest and penalties within three years from the last day of the month following the reporting period in which the bond was posted. An authorized DRS agent can release the contractor and surety for the project and timeframe on the form.

Eligibility and Requirements for a Connecticut Nonresident Contractor (Single Job AU 964) Bond:

Surety company authorized to do business in Connecticut.
Connecticut Department of Revenue Services as the party protected by the bond.
DRS Form AU-964, Surety Bond and Release, current revision.
Bond amount equal to 5% of the total contract price for the whole project.
Contractor registered with DRS before the bond is filed.

Connecticut Nonresident Contractor (Single Job AU 964) Bond FAQs:

Does AU-964 guarantee that we finish the job?

No. It guarantees Connecticut sales and use tax and income tax withholding owed by the contractor on the project. The obligee is the Department of Revenue Services, not the project owner.

How much is the bond on a $250,000 job?

The bond is 5% of the total contract price, including change orders and add-ons. If the contract price grows, the bond amount should reflect the full price.

We are a subcontractor. Do we file AU-964?

The single project bond is filed by the prime or general contractor. If you are an unverified subcontractor, the contractor paying you holds back 5% of each payment until DRS issues you a Certificate of Compliance, which you request on Form AU-967.

How do we stop posting a bond on every Connecticut project?

Become a verified contractor. You qualify after three years of registration with all returns filed and no balance due, or sooner by filing Form AU-960 with a verification bond on Form AU-961. Verified contractors are not subject to the 5% project bond or the holdback.

What happens if our customer never sees the bond?

The customer becomes liable for your unpaid Connecticut sales and use taxes and income tax withholding, up to 5% of the contract price. That is why owners and general contractors ask for proof before releasing payment.