Tax & Customs
Contractor Tax Bond
A contractor tax bond guarantees that a contractor, often an out-of-state one, will pay the state sales, use, or withholding taxes owed on a job.
- Required by
- State revenue departments (for example, the Alabama and Georgia Departments of Revenue)
- Bond amount
- Set by whoever requires the bond. We confirm it.
What this bond guarantees
The bond runs to the state revenue department. It promises the contractor will file returns and pay the taxes, interest, and penalties due on the work. If the contractor does not pay, the state collects from the surety.
Who needs it
- Nonresident contractors working in another state
- Construction employers that must show withholding compliance
- Contractors on large public or private projects
What the underwriter looks at
- Contract size
- Expected tax liability
- Contractor's financial statements and credit
Requirements vary by state and by who asks for the bond. Send us the request you received and we will confirm exactly what it calls for.
Common questions
Does Alabama require one?
Alabama requires certain construction employers to post a bond or other security for withholding taxes before the Department of Revenue issues a Notice of Compliance (Administrative Code 810-3-73.1). Without that notice, the contractor paying them must hold back 10 percent of each payment.
What about Georgia?
Georgia requires nonresident contractors on contracts over $10,000 to register, and uses a Nonresident Contractor Performance Tax Bond (form ST-C 214-4).