Motor Fuels Tax Continuous (Compressed Natural Gas) Bond - Statewide in Texas

Brief Summary

Fleets that fuel their own trucks from their own CNG or LNG station are often surprised to learn they need a dealer's license, and possibly this bond, even though they never sell a gallon. A surety bond satisfies the Comptroller's security demand without moving cash into a state suspense account.

Texas taxes compressed natural gas and liquefied natural gas at the point it goes into a vehicle's fuel tank, and the person delivering it must hold a CNG and LNG dealer's license from the Comptroller of Public Accounts. Under Texas Tax Code Section 162.361 the Comptroller may require a bond equal to two times the maximum tax that could accrue on CNG or LNG in a reporting period. The minimum is $30,000 for sellers, the Comptroller sets the minimum for fleet users, and the maximum is $600,000 absent undue risk.

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How to Apply for a Motor Fuels Tax Continuous (Compressed Natural Gas) Bond:

• Apply to the Texas Comptroller for a CNG and LNG dealer's license before selling or self-fueling vehicles.
• Receive the Comptroller's security determination and bond amount.
• Have a surety authorized in Texas issue the continuous bond to the Comptroller of Public Accounts.
• File the executed bond with the Comptroller.
• File quarterly returns by the 25th of the month after each quarter, or yearly if qualified.
• Report a delivery at least once in any nine-month span to keep the license from being canceled.

Detailed Information About the Texas Motor Fuels Tax Continuous (Compressed Natural Gas) Bond:

A fleet is a dealer, too

Section 162.357 requires a CNG and LNG dealer's license from anyone who sells CNG or LNG delivered into a vehicle's fuel tank, anyone who delivers it into vehicles not in connection with a sale or otherwise acts as a fleet user, and aviation fuel dealers who deliver CNG or LNG. The Comptroller's CNG/LNG page puts it plainly: those who deliver CNG or LNG from their own storage into their own vehicles must also be licensed dealers. One license and one bond cover both fuels.

Two minimums

When the Comptroller decides security is needed, the bond equals two times the maximum tax that could accrue on CNG or LNG produced, purchased, acquired, sold or delivered during a reporting period. For a seller under 162.357(a) the minimum is $30,000. For a fleet user or aviation fuel dealer that does not also sell, the Comptroller prescribes the minimum. The ceiling is $600,000 unless the Comptroller sees undue risk of lost revenue, in which case one or more bonds above that may be required.

In setting the figure the Comptroller weighs the tax that has come due or is expected, the dealer's history as a license holder, and the need to protect the state.

Rate and reporting

The tax is fifteen cents per gallon. Dealers report and pay quarterly, by April 25, July 25, October 25 and January 25, or yearly on January 25 if qualified.

How long the license lasts

The dealer's license is permanent while the required bond or security stays in force and reports are filed on time. The Comptroller cancels it if no delivery is reported during the previous nine months. It cannot be transferred.

Release and cancellation

The bond is a continuing instrument and a new obligation in the penal sum for each calendar year it is in force. After four consecutive years of compliance the dealer may ask for release, though the Comptroller can refuse if revenue would be at risk. A surety is released on the 31st day after filing a written request, and the license is canceled unless new security is filed in time.

Eligibility and Requirements for a Texas Motor Fuels Tax Continuous (Compressed Natural Gas) Bond:

• Texas Comptroller of Public Accounts as obligee.
• Bond equal to two times the maximum tax that could accrue on CNG or LNG in a reporting period.
• $30,000 minimum for sellers, Comptroller-set minimum for fleet users and aviation fuel dealers who do not sell.
• $600,000 maximum unless the Comptroller finds undue risk.
• Cash, an assigned Texas certificate of deposit or an irrevocable letter of credit accepted in place of a surety bond.

Texas Motor Fuels Tax Continuous (Compressed Natural Gas) Bond FAQs:

Official and Additional Resources for the Texas Motor Fuels Tax Continuous (Compressed Natural Gas) Bond: