Stacking

[Mr. Bond]

I am trying to obtain a 2 year Texas Sales Tax Bond and the surety that has approved me will only write it for one year because of the stacking in the bond language. What is Stacking and can I get around it?

[Bond Magician]

Stacking basically means that the bond language reads that the bond will continue from year to year, and each year is a new obligation. This would be a cumulative liability for the surety company, so they will not handle.

[marietta68]

Originally Posted by Mr. Bond

I am trying to obtain a 2 year Texas Sales Tax Bond and the surety that has approved me will only write it for one year because of the stacking in the bond language. What is Stacking and can I get around it?

"Stacking" occurs when a bond has a definite expiration date and a new bond must be filed for each successive term. Each bond carries a new bond penalty, thus “stacking” the bond liability each year. These bonds must be underwritten annually to qualify Principal for additional exposure. It isn't possible to "get around it" because the state has created the two-year bond requirement in its statute. It's important to note that the liability for each bond accrues only during the term for which it's written. However, the bond form does contain a 30 day notice cancellation clause and if I were you, I'd appeal the bond company's decision on that basis - if review of your financial condition shows deterioration, the bond company can terminate its liability quickly. I'd also point out that the bond is required for only two years - unless you fail to make proper filings and tax payments. Collateral in the form of an irrevocable letter of credit may also be an option. Good luck with your appeal.