Marijuana Bonds

Marijuana surety bonds differ from state to state, because the cannabis industry itself varies from state to state. This, of course, is dependent on the laws that have been enacted at the state level. Some states have legalized only medical marijuana use, while others have also made the recreational use of marijuana legal. Whether you need a retail marijuana bond or medical marijuana bond, Surety Bond Professionals are happy to help. Request a quote today!

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Learn more about this type of bond below, or contact our experienced surety agents for assistance with any questions you may have.

What Are They?

For the most part, marijuana bonds take the form of license and permit bonds. These bonds must be obtained as part of the licensing process that enables a marijuana-related business to operate legally.

In some states, however, a marijuana bond is a sales tax bond guaranteeing that the licensed cannabis business remits to the state the sales taxes collected from customers. In either case, the bond provides protection for the state and for consumers in the event that the bonded business fails to live up to the terms of the bond.

Who Needs Them?

Again, there is wide variation from one state to the next. There are several different types of businesses in the cannabis industry. These include: dispensaries (both medical and recreational), growers, processors, testing labs, and others. All of these businesses are subject to tight regulation and are typically required to purchase surety bonds to ensure that they abide by state laws. Compliance is a serious matter in this highly regulated and rapidly growing industry.

How Do They Work?

As with all surety bonds, there are three parties to a marijuana bond. These include:

  • The Obligee – The state agency that regulates the cannabis industry and requires companies engaged in it to be bonded
  • The Principal – The marijuana business purchasing the bond
  • The Surety – The company that underwrites and issues the bond

Each bond spells out the specific terms that the principal must abide by. Terms can include things like whether to collect, report, and remit sales taxes to the state or to comply with the myriad rules and regulations governing the industry in that state.

The Claims Process

If the principal does not live up to the terms of the bond, any party that suffers a financial loss as a result is entitled to file a claim against the bond. The surety will investigate to make sure the claim is valid. If it is, then the surety will pay the claimant. That doesn’t let the principal off the hook, however. The principal is responsible for reimbursing the surety for any payments made to claimants.

How Much Do They Cost?

As the obligee, the state establishes the required bond amount. The required bond amount varies greatly depending on the state. Note, however, that the business owner will pay only a small percentage of that amount. This is known as the bond premium.

The surety determines what the premium rate will be based on the applicant’s credit score and financial stability. In most cases, the premium rate will be 3% or less for applicants with good credit. Those who have credit issues may pay anywhere from 5-10%.

Request A Quote

At Surety Bond Professionals, we have over 30 years of experience and access to a wide range of providers, which allows us to ensure competitive rates across all of our offerings. Use our convenient online form to request a quote, or speak with an agent for a no-obligation consultation.