Surety Bond Encyclopedia

Liquid Fuels and Fuels Bond - Statewide in Pennsylvania

Brief Summary

Most new fuel distributors assume this is a flat $2,500 bond. That number is only the legal minimum. The Department of Revenue sizes the bond to the tax you are expected to owe, and a surety bond lets you meet that figure without depositing cash, Treasury bonds or a letter of credit with the Commonwealth.

Pennsylvania will not grant a liquid fuels permit or a fuels permit until the distributor files a surety bond payable to the Commonwealth in an amount fixed by the Department of Revenue of at least $2,500, under 75 Pa.C.S. § 9003(d). New accounts are bonded at 1.5 months of average tax due, and distributors in good standing for two full permit years can ask to drop to one month at renewal. Permits expire every May 31.

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How to Apply for a Liquid Fuels and Fuels Bond:

Estimate your monthly liquid fuels and fuels tax, because the bond is sized from average tax due.
Have the legal name of the distributor and every Pennsylvania place of business that will appear on the permit application.
Provide owner or officer details and business financials for the surety's review.
Get the bond amount fixed by the Department of Revenue, then have the bond executed by an approved surety.
File the bond with the Department of Revenue. The permit is not granted until it is accepted.
Renew before June 1 each year on Form REV-1338R with the bond or other financial guarantee.

Detailed Information About the Pennsylvania Liquid Fuels and Fuels Bond:

The $2,500 figure is a floor, not your bond amount

Section 9003(d) of the Liquid Fuels and Fuels Tax Act, 75 Pa.C.S. Chapter 90, says a permit shall not be granted until the applicant files a surety bond payable to the Commonwealth "in an amount fixed by the department of at least $2,500." The department sets the actual number. Its Bureau of Motor and Alternative Fuel Taxes applies 1.5 months of average tax due to all new accounts. A distributor that has been registered for two complete permit years and is in good standing on filing, payment and permit history can request a reduction to one month of average tax due. Reductions are handled during the annual permit renewal, and the department can take them back if the account falls out of compliance. No reduction can take the bond below $2,500.

The department can ask for more

The statute lets the department require any distributor to furnish additional corporate surety bond as needed to secure payment of all taxes, penalties and interest due at all times.

Who does not post this bond

The department must waive the bond for retail sales of kerosene sold for private household use. It may also waive the bond for a class of distributors if it finds the cost of bonding that class is excessive compared to the risk of loss to the Commonwealth. Outside those waivers, a distributor needs a permit to use or sell and deliver liquid fuels or fuels in Pennsylvania, and the permit needs the bond.

Alternatives to a surety bond

Instead of a surety bond, a distributor may deposit United States or Commonwealth bonds with the State Treasurer or present an irrevocable letter of credit. Those tie up capital or bank credit for the full amount. A surety bond does not.

Permit term, renewal and cancellation

The department issues a permit for each place of business listed in the application. Permits are not assignable, must be displayed at the location, and expire on the May 31 after issuance. Renewal is annual, before June 1, using Form REV-1338R, which is sent in with the surety bond or other financial guarantee. A surety may ask the department in writing to be released, and its liability for anything accruing more than 60 days after that request ends.

Eligibility and Requirements for a Pennsylvania Liquid Fuels and Fuels Bond:

Surety bond payable to the Commonwealth of Pennsylvania, never less than $2,500.
Surety must be an authorized surety company approved by the Department of Revenue.
Amount fixed by the department, 1.5 months of average tax due for a new account.
Reduction to one month of average tax due available only after two complete permit years in good standing.
Additional bond can be required at any time to secure taxes, penalties and interest.

Pennsylvania Liquid Fuels and Fuels Bond FAQs:

Is the bond just $2,500?

Only if your average tax is small enough. The statute sets $2,500 as the minimum and leaves the actual amount to the Department of Revenue, which bonds new accounts at 1.5 months of average tax due.

Can I lower my bond after a few years?

Yes, if you have been registered for two complete liquid fuels and fuels permit years, your bond is above $2,500, and your account is in good standing. The department can then reduce the requirement to one month of average tax due during the permit renewal process.

Do I need this bond to sell heating kerosene?

No bond is required for retail sales of kerosene sold for private household use. Section 9003(d.1) directs the department to waive the bond for those sales.

When does the permit expire?

Every permit expires on the May 31 after it was issued. Renew before June 1 on Form REV-1338R and include the surety bond or other financial guarantee the department requires.

Can I use a letter of credit instead?

Yes. The law allows a deposit of United States or Commonwealth bonds with the State Treasurer or an irrevocable letter of credit in place of the surety bond. Both commit capital or bank credit for the full amount, which a surety bond avoids.