Liquor Bond

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Summary

A liquor bond, also known as a liquor license bond, is a type of surety bond that is required by some states for individuals or companies that sell, distribute, or manufacture alcohol. The bond is intended to provide financial protection to the state and consumers in case the bonded party violates any applicable laws or regulations. The bond amount required by each state varies, but typically ranges from a few thousand dollars to several hundred thousand dollars. To obtain a liquor bond, the bonded party must work with a surety company who will issue the bond on their behalf. If the bonded party violates any laws or regulations related to the sale, distribution, or manufacture of alcohol, a claim can be filed against the bond. If the claim is found to be valid, the surety company will pay out the amount of the bond to the affected parties, up to the bond amount. Having a liquor bond is a requirement in some states for anyone engaging in the sale, distribution, or manufacture of alcohol. The bond serves as a protection for the state and consumers, helping to ensure that the bonded party follows all applicable laws and regulations.

Liquor Bond Definition and Example

A liquor bond is a financial guarantee that your business will pay alcohol taxes and comply with all rules and regulations related to your industry. Since a liquor bond is often a prerequisite of securing your liquor license, getting bonded is a crucial part of staying legally compliant.

Within a surety bond arrangement, there are three parties you should note:

Principal: The business that needs to purchase the liquor bond (you).

Obligee: The governing agency that requires you to obtain the bond – typically the same agency that issues your liquor license.
Surety: The company that underwriters your surety bond and guarantees that you will pay your alcohol taxes and comply with other regulations.

Liquor bonds are also called alcohol bonds, alcohol beverage control bonds, brewer’s bonds, on-premise beer bonds, and wine bonds. All of these serve the same function — pay your taxes on alcohol transactions and comply with all regulations. 

What is an example of a liquor bond?

Let’s say your governing agency looks into your bar and discovers you’re less than timely on paying your alcohol taxes. Specifically, you owe $2,000 in unpaid alcohol taxes. To get what’s owed (the government always does), a file is claimed against your liquor bond. The surety confirms the claim is valid and pays the governing agency the outstanding balance of $2,000.

How Does a Liquor Bond Work?

If you’re opening an establishment that sells alcohol, such as a bar, brewery, or winery, then you’ll need to secure a liquor license. One requirement for obtaining your license is to furnish a liquor bond. This bond serves two primary functions:

Payment of taxes: Special taxes are levied against alcohol transactions. The bond ensures you will pay all applicable taxes.

Protect the general public: The bond requires you to comply with all rules and regulations specific to your industry. This protects everyday consumers from dishonest business practices.

Keep in mind that liquor bond requirements extend beyond the sale of alcohol to the general public. Any company that manufactures, warehouses, or transports liquor may also need to secure a liquor bond before they can legally do business.

When buying your liquor bond, you’ll need to take note of three things:

Bond amount: The highest amount the obligee can be reimbursed on an approved claim. The minimum requirements will vary by state.

Premium: How much it costs to buy the liquor bond – a percentage of the minimum required bond amount

Term: How long the bond lasts before you pay another premium to renew it – typically one year.

What happens when a claim is filed?

When a claim is filed, the surety can either approve or deny it after conducting an investigation. A denied claim typically indicates that there is no evidence of your non-payment of taxes or violating any laws. If the claim is approved — it’s proven true that you did not pay all required taxes, for example — then the obligee can claim the amount owed.
Keep in mind that surety bonds do not function the same way as insurance. In an approved insurance claim, your provider will cover the loss. For approved surety bond claims, on the other hand, you are 100% liable. The surety may pay the claim but you are still responsible for repaying the surety that full amount.

Liquor Bond Cost and Requirements

Since each state or county can set its own minimum requirements for a liquor bond, the cost can vary per location. Generally, premiums will cost 1% to 5% for those with good credit. Business owners with low credit or less-than-strong business financials can expect to pay higher premiums. 
For example, let's say your governing agency sets the minimum bond requirement at $25,000. A good-credit applicant can expect to pay between $200 and $250. On the other hand, somebody with poor credit may pay $2,500 (10%) and up.

How Do I Get a Liquor Bond?

Business owners can easily secure a liquor bond through conventional insurance companies or businesses that specialize in surety bonds. Generally, buying a bond is a straightforward process that can be done quickly and completely online:
Submit an application that includes your personal and business information (e.g., business name and address).
Receive a premium quote based on your qualifications.
Purchase and receive your bond (or refuse and shop around).
File your liquor bond with the governing agency requiring the bond.
Fortunately, liquor bonds are pretty simple to buy and do not have the stringent requirements that other types of surety bonds would require.

Buy Your Liquor Bond Today

Obtaining a liquor bond is a simple process when applying with Worldwide Insurance, Inc. After completing our initial application form, you can get an instant quote in minutes. With rates starting as low as 1%, we issue all types of surety bonds in all 50 states. No credit check required and no obligation.

Liquor Bond FAQs

What is a liquor bond?

A liquor bond is a financial guarantee that a commercial entity that deals in alcohol will pay all required taxes on alcohol. The bond also requires that the business stays compliant with all industry rules and regulations. As a prerequisite of securing a liquor license, breweries, wineries, and liquor stores commonly need liquor bonds.

How much does a liquor bond cost?

Premiums will generally cost 1% to 5% of the minimum required amount, which will vary by state or county. A $50,000 liquor bond, for example, can cost between $400 and $500. Those with good credit will typically qualify for cheaper rates, while poor-credit applicants can pay a 10% premium or higher.

How long does a liquor bond last?

Terms on liquor bonds often last one year or however long your liquor license is valid for. You will need to pay another premium to your surety to renew your bond and stay legally compliant.

Can I get a bond with bad credit?

Yes, bad credit applicants can still get bonded but may face higher premiums. Worldwide Insurance, Inc. works with thousands of business owners — even those with low credit — to help them meet their bonding requirements.

What type of surety bond do I need?

Visit our list of bonds by state to get a closer idea of your bonding requirements. To learn more about surety bonds in general, check out our free surety bond guide.

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