New Jersey Alcohol Tax Bond
Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your New Jersey alcohol tax bond needs.
What Are New Jersey Alcohol Tax Bonds?
New Jersey alcohol tax bonds protect the state against financial loss from nonpayment of taxes due on revenues from alcoholic beverage sales. They accomplish this by requiring bonded businesses to operate in accordance with Title 54 of the New Jersey Revised Statutes, paying all taxes, penalties, and interest due to the state of New Jersey and filing the required reports.
Who Needs Them?
Alcohol retailers and distributors must purchase a New Jersey alcohol tax bond as a mandatory step in obtaining a license to operate in the state. The Director of the NJ Division of Taxation determines the required bond amount for each applicant. The bond amount cannot exceed three times the value of alcoholic beverages handled in a 2-month period or $1 million; the minimum bond amount is $100.
New Jersey alcohol tax bonds must be renewed annually before June 30. Not having an active bond in force at all times can result in license or permit suspension or revocation.
How Do They Work?
There are three parties to the legally binding contract formed by a surety bond:
- The New Jersey Division of Taxation is the “obligee” requiring the bond.
- The business owner required to purchase the bond is the “principal.”
- And the bond’s guarantor is the “surety.”
The obligee can file a claim against the bond to secure payment of past due taxes, fines, or penalties. If the surety’s investigation shows that the claim is valid, it must be paid. The principal is legally obligated to pay all claims the surety deems legitimate.
How Are Claims Paid?
Although the legal obligation to pay valid claims is exclusively the principal’s, the surety has guaranteed that they will be paid. The surety also has agreed to extend credit to the principal, if necessary, to provide the necessary funds to pay a claim.
Because of that guarantee, the usual practice is for the surety to pay a valid claim initially, drawing against the credit line established for the principal. That payment creates a debt that the principal must, by law, repay to the surety. Not repaying it can result in the surety suing the principal to recover the claim amount and can end up costing the principal more in the long run thanks to court costs and legal fees.
How Much Do They Cost?
The annual premium for a New Jersey alcohol tax bond is calculated by multiplying two factors—the required bond amount and the premium rate, which the surety assigns through underwriting. The underwriting aim is to determine how risky it is for the surety to pay claims on behalf of the principal with the expectation of being repaid. The underwriters rely on the principal’s personal credit score as a measure of risk.
The higher the credit score, the less risk of nonrepayment there is for the surety. Low risk results in a low premium rate. The reverse is also true. A low credit score means higher risk and demands a higher premium rate.
The average well-qualified principal will pay a premium rate that’s in the range of one to three percent.
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Our surety bond professionals will get you the New Jersey alcohol tax bond you need at a competitive rate.