The alcohol industry in the US employs over 4 million people and pays nearly $70 billion in taxes every year. Businesses across the country make all, most, or some of their money from the production, distribution, or sale or alcoholic beverages. Many of these businesses need a surety bond to operate legally – and in some cases they need several bonds – and it can get confusing keeping track of all these surety bond requirements. In this blog post, we wanted to address a common question we hear: what is the difference between an alcohol tax bond and a TBB bond? The answer is worth knowing for anyone in the alcohol industry.
A Note About Terminology
You may hear these terms used interchangeably. Some people will refer to a TBB bond as an alcohol tax bond, but not vice versa. Though related in some ways (which we will address later), these are two different types of surety bonds. It’s important not to confuse one for the other.
What is an Alcohol Tax Bond?
The term alcohol tax bond can refer to any bond used to make the bond holder liable for unpaid alcohol tax bills. In practice, however, the term primarily refers to bonds required by state and local governments to help them recoup taxes related to alcohol and sometimes tobacco. All 50 states require businesses throughout the alcohol industry to obtain an alcohol tax bond before the state will grant them a license.
What is a TBB Bond?
The Alcohol and Tobacco Tax and Trade Bureau (TBB) charges an excise tax on most breweries, wineries, and distilleries. A TTB bond holds these businesses accountable when they don’t pay the federal excise tax. Any alcohol producer that owed more than $50,000 in excise taxes in the previous year must have a TTB bond before the Bureau will grant it a permit to operate legally.
What is the difference?
There are two main differences between an alcohol tax bond and a TTB bond. First, the alcohol tax bond applies to taxes levied at the state and local level while the TTB bond applies to federal taxes. Second, only producers need a TTB bond, whereas businesses involved with transporting, warehousing, selling, and serving alcohol often need an alcohol tax bond. Many producers need an alcohol tax bond in addition to a TTB bond.
What Do These Bonds Have in Common?
The bonds work in the same way even if they apply to different bond holders. Both bonds make the bond holder liable for unpaid taxes. The bond allows the agency that regulates the bond holder (whether at the local, state, or national level) to file a claim against the surety bond for damages equal to the unpaid tax bill. The surety agency that backs the bond investigates all claims and settles any valid claim. This is an example of how bonds ensure that the government can collect taxes owed even if the taxpayer can’t or won’t pay. The bond guarantees payment, but the surety that backs the bond does not accept financial liability. Liability always rests with the bond holder – who must pay the surety back for any claims settled, in full, plus interest and fees.
How Do I Get a Bond?
Whether you need an alcohol tax bond or a TTB bond, it’s important to fulfill the bond requirement sooner rather than later. It can only cause problems for your business if you wait.
Applying for either bond requires you to complete a bond application and submit to a credit check. The surety will then quote you a price for the bond premium. Expect to pay a small percentage of the bond’s total size. Different people will pay different prices for the same bond because the exact price depends on your credit. Bad credit will increase the premium price, and at some surety agencies, it will be harder to get a bond. But not at Viking Bond Service. We have resources to help more people get approved for surety bonds, including people with bad credit.
Viking Bond Service – A Partner to Your Business
Perhaps you need one of these bonds or both. Either way, you will need a surety bond for as long as you’re in business. Failing to get one or letting the bond lapse makes your business license invalid and any business you do thereafter illegal. That’s why you don’t just want a surety bond – you want a partner who can handle all aspects of bonding for your business.
Viking Bond Service serves as that partner for businesses across the country, including many in the alcohol industry. It’s an industry we understand well. Since we issue both TTB bonds and alcohol tax bonds in all 50 states, we have plenty of experience with these types of bond, and processes in place to make obtaining them easy.
Request a quote for either bond at your convenience. For more information, please contact us or call 1-888-278-7389.