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Alcohol Liquor Tax Bond

What is a 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 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.

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.

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.

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 a 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.

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 cancelled," meaning they remain valid until one of the parties involved indicates it wants to cancel the bond agreement.

How are claims handled for Alcohol Liquor Tax Bonds?

The surety agrees to pay for all valid claims, which they determine by launching a thorough investigation. If the principal has not paid their taxes as the state claims, the surety pays out whatever amount the principal owes up to the bond amount. That closes the claim, however, the debt isn't settled until the principal pays the surety company back, typically with interest and fees added to the debt.

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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