A Distilled Spirits bond goes by several names such as an Alcohol Tax bond, Alcohol Ordinance Tax bond, Brewer’s bond, Malt Beverage License bond, Wine bond, Liquor Tax bond, along with several more.
Each state sets their own specific bond form and bond name for this type of bond. No matter what the form is called, this bond guarantees all taxes, fees, and fines owed to the state or federal government will be paid in full by the principal.
The three parties of this bond include the obligee, the principal, and the surety company. The obligee is the state or federal government that is requiring the principal to be bonded. The surety company is the party that underwrites and ensures the bond.
What is This Bond For and What Does it Do?
The bond protects the state and federal government that is requiring the bond. With this bond, state and federal entities are protected from falsified records of sale, or the principal’s inability to pay taxes, fees, and fines from previous sales.
This license and permit bond guarantees the principal will pay all taxes from the manufacturing, sale, and warehousing of distilled spirits. Since this bond is required by state Alcohol, Tobacco, and Firearms agencies, this bond is also called an ATF surety bond. The bond may also be referred to as a TTB surety bond if it is required by the Alcohol and Tobacco Tax and Trade Bureau (the Federal government).
Obligee and Bonding Requirements
State and Federal laws and regulations that govern the specific state that manufactures and stores distilled spirits requires this bond. As stated above, the bond requirements are state specific, and guarantee legal and financial protection of the state and federal government.
If the principal does not abide by the specific bonding requirements, the obligee can revoke the principal’s business license. All state specific bonding requirements must be followed by the principal.
Bond Cost and Bond Amount
The cost for the bond is also referred to as the bond premium. The bond premium is the one cost that the surety company sets. All other fees that are related to the bond are set by the obligee. The bond premium is only a small percentage of the bond amount.
The bond amount is set by the obligee, not the surety company. A bond amount is the amount of coverage the surety company will pay out to the state or federal government if a claim is filed against the bond. For example, in Colorado, the Department of Treasury Bureau of Alcohol Tobacco and Firearms (the obligee) sets the bond amount at $20,000. If the Colorado principal does not abide by the bond, the state or federal government can file a claim against the bond in order to receive the moneys owed. If that happens, the principal must repay the surety company for all paid claims.
Does This Bond Renew?
Yes. The majority of states set the validity for this bond to one year. This means the bond must be renewed annually in order for the bond to remain valid and legal to use under a business license. Fortunately, the renewal cost is much less than the bond premium.
To find out the state specific renewal dates and length of bond validity, the principal can contact the state government in which the business license is filed.