42-1102. Taxpayer bonds; definition

A. If the department deems it necessary to protect the revenues to be collected under this title and title 43, it may require a person liable for the tax to file a bond to secure the payment of the tax, penalty or interest, which may become due from that person. The bond shall be:

1. Issued by a surety company authorized to transact business in this state and approved by the director of the department of insurance and financial institutions of this state as to solvency and responsibility or composed of securities or cash that are deposited with, and kept in the custody of, the department.

2. Except as otherwise provided in this section, in the amount that the department prescribes by administrative rule to secure the payment of any tax, penalty or interest, which may become due from the person.

B. For the purposes of licenses to sell tobacco products issued under section 42-3401, the amount of the bond required under this section is the greater of $500 or four times the average monthly tax liability. For the purposes of determining the bond amount, the average monthly tax liability is equal to the average monthly tax due from the applicant for the preceding six consecutive months. If an applicant does not have a six-month payment history, the bond amount is a minimum of $500.  If an applicant provides a surety bond and the bond lapses, the applicant shall deposit with the department cash or other security in an amount equal to the lapsed surety bond within five business days after the applicant's receipt of written notification by the department. The bond amount may be increased or decreased as necessary based on any reason listed in subsection D of this section or a change in the applicant's previous filing period, filing compliance record or payment history. If the bond amount is increased above the amount computed under this subsection, the applicant may request a hearing pursuant to subsection C of this section to show why the order increasing the bond amount is in error.

C. If the department determines that a person is to file a bond it shall notify the person to that effect, specifying the amount of the bond required. The person shall file the bond within five days after the giving of notice unless within that time the person requests in writing a hearing before the department at which time the department shall determine the necessity, propriety and amount of the bond. The determination is final unless within fifteen days after the giving of notice of the determination the person appeals the determination to the state board of tax appeals. The board shall decide on the appeal within fifteen days of its receipt. The bond, at any time without notice, may be applied to any tax, penalties or interest due, and for that purpose the securities may be sold at public or private sale without notice to the depositor.

D. For purposes of this section a bond may be required if:

1. After investigation of financial status, the department determines that an applicant for a new license would be unable to timely remit amounts due.

2. An applicant for a new license held a license for a prior business, and the remittance record for the prior business falls within one of the conditions in paragraph 5 of this subsection.

3. The department experienced collection problems while the applicant was engaged in business under a prior license.

4. The applicant is substantially similar to a person who would have been required to post a bond under paragraph 5 of this subsection or the person had a previous license that was revoked. An applicant is substantially similar if it is owned or controlled by persons who owned or controlled a previous licensee.

5. An existing licensee has had two or more delinquencies in remitting tax during the preceding twenty-four months if filing on a quarterly or less frequent basis or four or more delinquencies during the preceding twenty-four months if filing on a monthly or more frequent basis.

E. If a licensee who is required to post a bond or security maintains a good filing and payment record for a period of two years, the licensee may request that the department waive the continued bond or security requirement.

F. For the purposes of this section, "person" includes a firm, partnership, joint venture, association, corporation, sole proprietorship or other business or governmental entity subject to a tax administered by this article but does not include an individual subject to individual income tax.