Surety Bonds are required by breweries in the United States and with the recent proliferation of Micro Breweries, The Alcohol and Tobacco Tax and Trade Bureau (TTB) has proposed new rules and put a temporary rule in place for the required TTB Surety Bonds.
The Alcohol and Tobacco Tax and Trade Bureau (TTB) has adopted a temporary rule to revise the required amount of the surety bond required for small brewers of beer, which are those brewers whose excise tax liability was not more than $50,000 in the preceding calendar year, and whose tax liability is reasonably expected to be not more than $50,000 in the current calendar year. Current law authorizes the Secretary to determine the bond amount by regulation.
Beer brewers filing returns and paying the tax quarterly must post a bond in an amount equal to 29% of the maximum amount of tax liability for the calendar year. Under current regulations, the minimum bond amount is set at $1,000 and the maximum bond amount is $500,000. The bond must be adjusted based on the changes in the tax liability. Under the Temporary Rule, the Bureau will be requiring a flat bond amount of $1,000 for brewers filing quarterly tax returns with no adjustment to the bond amount required.
The Bureau explains that the bond amount for small brewers with a tax liability under $50,000 often proves to be an excessive penal sum that is difficult for the brewer to obtain. The Bureau also notes that following discussions with beer industry members and after conducting a review of excise tax return data, the Bureau believes that “given the relatively low risk to the revenue, a penal sum of $1,000 for bonds obtained by small brewers is reasonably sufficient to protect and insure collection of the revenue.” The Bureau also states that it believes that changing the bond amount may encourage more brewers to file returns on a quarterly basis, which in turn would reduce costs and increase efficiencies for both the Bureau and industry members.
The temporary became effective on December 7, 2012 and will expire on December 7, 2015. The rule also has been proposed simultaneously for permanent adoption. Comments are due on February 5, 2012.