Surety Bond Encyclopedia

Out of State Contractor Bond - Knox County, TN in Tennessee

Brief Summary

A contractor based outside Tennessee cannot get a Knox County business tax license without this bond or a cash escrow. The bond keeps your $500 or more in your operating account instead of sitting with the county, it attaches straight to the Clerk's license application, and it is usually a quick issue for a bond of this size.

Knox County requires every contractor domiciled outside Tennessee to file an Out of State Contractors Bond, or deposit certified funds in escrow, when applying for a Knox County business tax license under TCA 67-4-707. The minimum is $500, and the Knox County Clerk can set a higher amount based on your anticipated business tax for the rest of the tax period. The bond guarantees payment of Tennessee business tax on your Knox County work. It is not a performance bond and it does not replace a state contractor's license.

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How to Apply for a Out of State Contractor Bond:

Confirm your business is domiciled outside Tennessee and will be working in Knox County.
Complete the Knox County business tax license application.
Ask the Knox County Clerk what bond amount applies to your job. The minimum is $500.
Choose a surety bond or a $500 certified funds escrow deposit.
Complete the bond application, pay the premium and receive the executed Knox County Out of State Contractors Bond.
Mail the application, the $15 fee and the bond to the Business Tax Office, Knox County Clerk, P.O. Box 1566, Knoxville, TN 37901.
File your gross receipts return by September 30 or within 15 days of completing your contracts, whichever comes first.

Detailed Information About the Tennessee Out of State Contractor Bond:

This is a tax bond

Most out of state contractors assume this bond guarantees their workmanship. It does not. Tennessee Code 67-4-707 requires contractors in the classification described at 67-4-708(4)(A) who are domiciled in another state to file a bond or establish an escrow account with the county when they apply for a business tax license. The bond secures the business tax on the work you do in Knox County. If the tax, penalties and interest go unpaid, the state can collect against the bond.

How the amount is set

Knox County sets a minimum of $500. The statute says the bond must be large enough to pay your anticipated business tax liability for the balance of the tax period the license covers, and the clerk determines that figure. On a larger job, ask the clerk for the required amount before you order the bond so it is written correctly the first time.

Bond or escrow

The Knox County Clerk accepts either one. The escrow option is a $500 check in certified funds attached to the application. The bond option is the Knox County Out of State Contractors Bond, completed by an insurance company authorized in Tennessee and attached to the same application. The obligee is the County of Knox, Tennessee. The statute also allows two qualified individual sureties approved by the clerk, but a corporate surety is the usual route.

What the bond requires of you

Under the Knox County bond form, you must buy a minimum business tax license and file gross receipts tax returns reporting your total contracts on September 30 of each year or within 15 days of completing all of your contracts, whichever comes first, and pay the tax, penalties and interest due to the Tennessee Department of Revenue. The bond runs from its effective date to the last day of the current tax period for Classification 4 businesses. Either party can cancel on 30 days written notice sent by registered mail to the Business Tax Office.

Where to file

Send the license application, the $15 application fee and the bond or escrow check to the Business Tax Office, Knox County Clerk, P.O. Box 1566, Knoxville, TN 37901. The Clerk's main office is at 300 Main Street in Knoxville, and business tax questions go to 865-215-2392. Work inside an incorporated city may also call for a filing with that city's business tax office, so confirm with the Clerk before the bond is issued.

How premium is set

The surety charges a premium based on the bond amount the clerk sets and the owner's credit. At the $500 minimum the premium is usually a small flat charge. Larger amounts are rated on credit and financial strength.

Eligibility and Requirements for a Tennessee Out of State Contractor Bond:

Bond amount of at least $500, or more if the clerk sets a higher figure from anticipated tax.
County of Knox, Tennessee named as obligee on the Knox County Out of State Contractors Bond form.
A surety company authorized to do business in Tennessee.
Principal name matching the business tax license application.
Owner credit review for bonds above the minimum.

Tennessee Out of State Contractor Bond FAQs:

Is this a license bond that guarantees my work?

No. It guarantees that you will buy a Knox County business tax license, file your gross receipts returns and pay the business tax owed to the Tennessee Department of Revenue on your Knox County contracts.

How much is the bond?

At least $500. Under TCA 67-4-707 the bond must cover your anticipated business tax for the rest of the tax period, and the clerk decides the figure, so a large contract can call for more.

Can I pay cash instead?

Yes. Knox County accepts a $500 check in certified funds to open an escrow account in place of the bond. A bond keeps that money in your business.

Does this replace my Tennessee contractor's license?

No. The bond covers business tax only. State contractor licensing and any building permits are separate requirements.

How long does the bond last?

It runs until the last day of the current tax period for Classification 4 businesses. Either you or the surety can cancel it with 30 days written notice sent by registered mail to the Business Tax Office.