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 tobacco bond needs.
What Are They?
The New Jersey Department of Treasury, Division of Taxation requires certain parties involved in the tobacco industry to purchase tobacco bonds—commonly referred to as cigarette tax bonds—as a condition for operating within the state. Tobacco bonds are classified as a type of license and permit bond, as they are required for licensure. These bonds serve as a guarantee to do business in accordance with all applicable laws and regulations.
Who Needs Them?
Those applying for a new or renewal license as a tobacco distributor (defined as buying directly from manufacturers for resale) must purchase a $6,000 surety bond. Wholesalers (businesses that sell to retailers) are required to obtain a surety bond in the amount of $6,000 if they are domiciled in New Jersey or $2,000 if they are non-resident.
All New Jersey cigarette tax bonds expire on March 31st of each year and must be renewed to avoid license revocation.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
There are three parties to a New Jersey tobacco surety bond agreement:
- The state of New Jersey is the “obligee” requiring the bond
- The tobacco distributor or wholesaler is the “principal” required to purchase the bond
- The surety bond company issuing the bond is referred to as the “surety”
A violation of the terms of the surety bond agreement can result in a claim being filed against the bond by any party incurring a financial loss as a result of that violation. For example, the state could file a claim to collect unpaid penalties assessed for regulatory infractions.
The surety will usually pay any valid claim and wait to be reimbursed by the principal, essentially extending a line of credit to the principal. Paying a claim draws down the principal’s line of credit, and the principal is legally obligated to repay that amount. The claimant receives payment in a timely manner, and the principal benefits from being able to reimburse the surety in manageable installments.
What Do They Cost?
The annual premium for a New Jersey tobacco bond is a small percentage of the required bond amount. That percentage is the premium rate, which is set by the surety on a case-by-case basis, with the main consideration being the principal’s creditworthiness. The better the principal’s credit, the lower the risk to the surety, and therefore the lower the premium rate—potentially as low as 1% for those with outstanding credit.
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Our surety bond professionals will get you the New Jersey tobacco bond you need at a competitive rate.