Contractor tax bond cost
The Arizona Registrar of Contractors requires contractors with transaction privilege tax licenses and contractors who have contracts for construction projects exceeding $50,000 to post an Arizona taxpayer bond for contractor. The bond amount varies depending on the type of work being performed by the contractor.
Type 1 bond amounts are for contractors of residential buildings that are not single family based. Type 2 bond amounts are for single family residential housing, water, sewer, pipeline, communication and power-line construction contractors. Type 3 bond amounts are for industrial contractors who engage in non-residential building and roadway and highway construction. Type 4 bond amounts are for non-residential heavy construction contractors. Type 5 bond amounts are for bridge, tunnel and elevated highway construction contractors.
Why this bond
The Arizona taxpayer bond for contractor ensures that the principal (contractor) will pay all transaction privilege taxes, penalties, and other obligations. If the principal fails to make the appropriate payments, the surety will compensate the state for any financial losses. These bonds are not required of all contractors in the state. The state might require a contractor to post this bond if the department experienced collection problems while a new license applicant was engaged in business under a prior license or if a new license applicant had a previous license revoked.
The contractor’s industry classification and transaction privilege tax license number is required on the bond form. Arizona contractor tax bonds are continuous until canceled, and the surety company must provide written notice of the bond’s cancellation to the Registrar at least 30 days in advance only after the two year term has passed.
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