Everything You Need to Know About Alcohol Tax Bonds

An alcohol tax bond is a type of surety bond which requires the party holding the bond to comply with any applicable state or federal laws and rules or regulations pertaining to the manufacturing, selling, and warehousing of alcohol. In certain cases, beer bonds ensure the collection of payment of taxes from the principal.

Similar bonds to alcohol tax bonds include:

• Ordinance Tax Bonds

• Beverage Tax Bond

• Brewers Bond

• Distilled Spirits License Bond

• Liquor License Bond

• Malt Beverage License Bond

• Wine Bond

Let’s take a closer look at what beer bonds are, how much they cost, and when they come into play. 

What is an Alcohol Tax Bond?

Alcohol Tax bonds are a form of surety bond, guaranteeing that a business will pay any taxes, fees, and fines related to the sale of beer. They’re required by most states in order to obtain a liquor license. While the specifics vary from state to state, these bonds ensure that consumers and government agencies receive the money they’re due when breweries and other beer-related businesses fail to meet their obligations. 

To understand how an alcohol tax bond works, it helps to know how surety bonds work in general. A surety bond is an agreement between three parties—the obligee (government agency or consumer), the principal (business owner purchasing the bond) and the surety (insurance company issuing the bond). The bond guarantees that if the principal fails to meet its contractual or legal obligations, then the surety will pay out up to a certain amount. This payment covers any damages caused by the breach of contract or failure of duty.  In the case of a beer bond, it covers unpaid taxes, fees, fines, or other charges associated with the sale of beer. 

Why Do We Need Alcohol Tax Bonds? 

Alcohol bonds exist for two reasons: consumer protection and tax collection. First, they protect consumers from being taken advantage of by preventing businesses from selling alcohol without paying taxes on them. Second, they provide governments with a way to collect taxes owed on beer sales as quickly as possible if something goes wrong with a particular business. Without these bonds in place, it can be difficult for consumers or governments to recover money lost due to businesses failing in their duties or contracts.  

How Much Does an Alcohol Tax Bond Cost?

The cost of your alcohol bond will vary depending on several factors including your personal credit score and financial history. Generally speaking, however, you can expect most states' beer bonds to cost $500 to $1000 annually.

You should also note that many states require you to renew your beer bond every year before you can apply for another liquor license; failure to do so could result in hefty fines for your business. So it’s important to budget for this ongoing business cost. 

Because alcohol bonds are a recurring and very necessary business expense for businesses who sell beer, it can be helpful to learn some tricks for lowering the cost of a beer bond.

One way to lower the cost of a alcohol bond (or any surety bond for that matter) is by increasing your credit rating. Having a higher score on your credit report often leads to a decrease in the amount of money you need for the bond, as companies offering surety bonds will consider their investment at less risk with an individual with excellent credit. 

To help improve your credit score, start small by ordering a free copy of your credit report and triple-checking it for any errors. If there are signs of identity theft on your credit report, such as unfamiliar accounts or addresses, file a dispute with the credit bureau who issues the report to work towards getting those mistakes removed and contact the authorities to report the identity theft.

It also helps to build good credit habits moving forward. Charge only what you can afford, pay off debt as quickly as possible (try using the snowball method), and take care not to miss debt payment due dates. With some dedication and consistent effort, improving your credit score can help open up financial opportunities in the future.

The Takeaway        

It’s clear that beer bonds play an important role in ensuring consumers and governments get paid what they’re owed when it comes time for breweries and other alcohol-related businesses to pay their taxes, fees, and fines. Without these bonds in place it would be much more difficult for individuals or governments who have been wronged by such businesses to get back their dues quickly and easily. These sorts of cases often take years when going through traditional court systems which can be costly both financially and emotionally for all involved parties. So make sure you understand your state's laws regarding beer bonding before getting started so you don't run into any unexpected surprises down the road.