The short answer is: it depends. Whether or not you will need a surety bond in order to obtain a liquor license depends on the state in which you will operate your business. Not all states require an alcohol surety bond as a condition for obtaining a liquor license. Learn more below, and contact Single Source Insurance today to discuss your bonding needs with an experienced agent.
What is a Liquor License Bond?
A liquor license bond (aka alcohol bond) is a type of license and permit bond required in many states as part of the process for becoming licensed to sell liquor for consumption on or off the seller’s premises. Some municipalities also issue local licenses and require a surety bond from licensees. Other types of alcohol surety bonds may be required in order to engage in other alcohol-related businesses, such as brewing, distilling, transporting, warehousing, or wholesaling alcoholic beverages, but our focus in this article is solely on surety bonds needed by those applying for or renewing a liquor license.
The purpose of a liquor license bond is to ensure a licensee�s compliance with all applicable state laws governing the sale of alcohol. It guarantees the payment of taxes due on alcohol sales and any fines incurred by violating the law�for example fines for selling alcohol to a minor.
Who Needs Surety Bonds for Liquor Licenses?
Anyone applying for or renewing a liquor license in a state and/or municipality that imposes a requirement for a liquor license bond must purchase one.
How Does It Work?
The bond brings three parties together in a legally binding agreement:
- The government agency requiring the bond (the obligee)
- The liquor license applicant or licensee (the principal)
- The company underwriting and issuing the liquor license bond(the surety)
The obligee sets the required bond amount, also known as the penal amount of the bond. Though this amount varies from state to state, it�s usually no higher than $10,000.
If the principal fails to remit the proper tax payments to the obligee as required, the obligee may file a claim against the bond in the amount of the unpaid taxes plus any fines.
The surety will determine the validity of a claim and try to negotiate a settlement. When no settlement is forthcoming, the surety will typically pay the claim on behalf of the principal. However, the fact that the surety pays a claim in advance does not let the principal off the hook. Nearly all surety bonds indemnify the surety and obligate the principal to reimburse the surety for claims already paid.
What Does It Cost?
The surety establishes the specific premium rate for each applicant based on the principal�s personal credit score and other factors pertaining to his or her creditworthiness, financial strength, and the likelihood of claims. Applicants with good credit may pay as little as 1% of the required bond amount. Those with poorer credit will likely pay more.
Get Bonded Today
Let the experts at Single Source Insurance help you determine the bonds you need for your alcohol-related business, or request a quote today.