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Alcohol Liquor Tax Bond

What is an Alcohol Tax Bond

An Alcohol Liquor Tax bond is a type of financial guarantee surety bond. The bond is required at the state level. The bond provides a form of guarantee that the taxes due to the state from the sale of alcoholic beverages will be paid. Each state specifies which specific types of businesses are required to post this type of bond. Typically, any business that serves alcoholic beverages on-premises, or sells alcoholic beverages in a catering capacity, could be required to post a liquor tax bond. Don't confuse this type of surety bond with an alcohol license bond: An unrelated type of surety bond that many businesses need in addition to a liquor tax bond.

How does an Alcohol Liquor Tax Bond work?

If the state believes that someone with a Liquor Tax bond has not paid all the taxes owed on liquor sales, the state can file a claim against the bond seeking financial compensation. The surety company will then investigate the claim and pay for the unpaid tax bill if the bonded party continues to hold out. The debt to the state is settled at that point, but the business owner must still pay the surety company back because the bonded party always has the final financial responsibility. By holding them financially responsible, bonds discourage alcohol-related businesses from trying to avoid their tax obligation.

How are Claims for Alcohol Liquor Tax Bonds Handled?

When the state agency responsible for collecting liquor taxes believes someone has an outstanding debt, the agency can file a claim against the surety bond seeking damages in that amount. Payment is not automatic. The surety agency will investigate the claim first using whatever resources necessary, from professional investigators to specialized accountants. If the details of the claim do not hold up under scrutiny, no settlement is paid. However, if the details prove true, the surety immediately settles the claim in full (up to the total amount of the surety bond). At that point, the debt to the state agency is cleared, but the claim is not settled. The bonded principal must still pay the surety agency back the amount of the settlement, plus fees related to the cost of the investigation, plus interest accrued while the settlement remains unpaid. The surety agency may use whatever legal means necessary to collect this debt. The agency may also decline to continue bonding the principal, who is now seen as a financial risk.

Who should get an Alcohol Liquor Tax Bond?

States often require businesses to obtain a bond as a condition for gaining a liquor license. Bars and catering companies are common candidates, but any business involved with liquor sales could be required to be bonded depending on the state laws. If a business does require a bond, it's important to seek one out as early as possible to avoid delaying the licensure process. For anyone unclear about whether they need an alcohol liquor tax bond, why they need one, or in what amount, the team at Viking Bond Service is here to help. Contact us for good information and all the resources necessary to meet the surety bond requirements.

Who are the parties involved in an Alcohol Tax Bond?

Unlike insurance and loan agreements that typically involve two parties, surety bond agreements like this one involve three parties:

  • The Principal - The business required to get the bond and required to pay for valid claims filed against the bond.
  • The Obligee - The state agency that regulates liquor sales and has the right to file claims against the bond for unpaid liquor taxes.
  • The Surety - The company that issues the bond, pays out valid claims to the obligee and holds the principal financially responsible.

How much does an Alcohol Tax Bond cost?

Liquor tax bond amounts vary state by state as well. There is typically a minimum bond amount accompanied by a method of calculating the bond amount based on the estimated tax liability for the business. The state agency requiring the bond be posted will usually provide the required bond amount as well. Compared to the bond amount, the actual bond cost (called the premium) is only a small percentage. Exactly how much depends on the bond applicant's credit and financial standing. Those with a low credit score or blemishes like bankruptcy will pay more.

Can you get an Alcohol Tax Bond with bad credit?

That depends on where you apply. Every company treats risk differently. The best way to get a bond with bad credit is to work with a surety brokerage like Viking Bond Service. With our abundant resources and expansive industry connections, we can help you find more options for companies willing to work with your credit. We even offer a bad credit surety bond program designed to help more people get approved for a bond even if they have a blemish like bankruptcy on their financial record or a credit score below 700. If you are worried that your credit could negatively affect your ability to get a bond, work with a surety agency that's on your side - Viking Bond Service.

How long does an Alcohol Liquor Tax Bond remain valid?

That depends on the state and the bond. In many cases, these bonds are "continuous until canceled," meaning they remain valid until one of the parties involved indicates it wants to cancel the bond agreement. It's vital to know long the surety bond remains valid because allowing it to lapse for any reason makes it illegal to continue selling alcohol. Rely on Viking Bond Service to help you understand the details and keep you informed if/when you need to take further action related to your surety bond.

How to Apply for a Liquor Tax Bond?

Liquor Tax bond requests are typically simple and easy to process. At times, financial guarantee bonds may require financials as part of the underwriting process. Our agents will let you know what is necessary to gain the best quote and terms for your specific bond request. Quotes are typically provided the same day or within 24 hours.

Viking Bond Service - Working With Small Operators Nationwide

When you want the resources of a big bond company but the service of something smaller, partner with Viking Bond Service. As a nationwide surety brokerage, we can help you secure the bond you need wherever you are. Get the ball rolling by completing our online bond application at your convenience. Or do it later after you've got more information. Connect with one of our bond experts through the form on this page or by calling 888-278-7389.

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