Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. In this guide, we’ll walk you through how to get a liquor license.
With access to a broad range of surety markets, our expert agents are ready to assist with all of your alcohol tax bond needs.
What is a Liquor License Surety Bond?
The alcoholic beverages industry is highly regulated at every level of government—federal, state, and local. Bonding requirements at the federal level are, of course, consistent because they apply in all states. But at the state and local levels, there is wide variation.
Liquor license bonds may be called something else in some jurisdictions—alcohol tax bond, alcohol bond, or ABC (for alcoholic beverage control) bond. The federal bond required by the Alcohol and Tobacco Tax and Trade bureau is known as a TTB bond.
When purchasing a surety bond is a mandatory step in the licensing process, it’s typically for these purposes:
- To guarantee the payment of taxes, fines, and fees owed to a government authority,
- To ensure that the business complies with the laws, statutes, and ordinances governing the alcoholic beverages industry in a given jurisdiction,
- And to provide a source of funds for paying claims filed against the bond by parties financially harmed by the business’s unlawful or unethical conduct
If you are subject to a bonding requirement, there must be an active liquor license bond in force at all times to prevent suspension or revocation of your license.
Who Needs a Liquor License Bond?
Whether or not you will need a liquor license bond depends on where you are located and what type of business you operate. The alcoholic beverages industry includes more than liquor stores, restaurants, and bars that sell alcohol for consumption on or off the premises. There are also manufacturers, importers, wholesalers, and companies that transport and warehouse alcoholic beverages.
And all of those business categories are further distinguished by the type of alcoholic beverages they sell (retail or wholesale), produce, import, transport, or store: beer only, wine only, liquor only, or some combination of these.
What type of license you will need and whether or not you need to purchase a surety bond depends on the details of your specific business and the licensing and bonding requirements in your specific location. You may need no bond at all or you might need local, state, and federal bonds.
How Does a Liquor License Bond Work?
While the details may seem complicated, it’s really quite straightforward. The surety bond agreement tells you what laws and regulations you must comply with. Any violation that harms another party financially gives the injured party the right to file a claim for damages.
There are three parties to that surety bond agreement, which is a legally binding contract. The licensing authority requiring the bond is called the “obligee,” the license purchasing the bond is the “principal,” and the company guaranteeing the bond is the “surety.”
How Are Liquor License Bond Claims Paid?
The legal obligation to pay claims rests entirely with the principal. However, the surety guarantees payment, so if the principal doesn’t satisfy a claim right away, the surety will pay it initially. This creates a debt that the principal must then repay to the surety. Failure to repay can result in the surety taking legal action against the principal.
How Much Does A Liquor License Bond Cost?
The annual premium for a liquor license bond depends on the required bond amount and the premium rate. The surety’s main concern in underwriting a liquor license bond is the risk of not being repaid in a timely fashion by the principal. The best predictor of that is the principal’s personal credit score.
The higher your credit score, the lower the premium rate, and the reverse is also true. With a high credit score, your premium rate could be as low as one percent. With lesser credit, it could be as high as ten percent, or even more.
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