Liquor License Bond

You will be required to purchase a surety bond for a liquor (or distilled spirits) license when you start up a business that sells liquor to the public. This is considered a prerequisite for the sale of liquor in all states of the US, and it is a type of tax bond that guarantees payment to the proper authorities of all taxes levied on transactions involving liquor.

Any business attempting to defraud authorities of those tax amounts, or any business person who is unable to pay the appropriate taxes, would then have the proper tax amounts supplied to the relevant authority when a claim is made against this bond.

A liquor license bond is like all other surety bonds in that it consists of an agreement between three parties: the principal, the surety company, and the obligee. The principal is the business person purchasing the bond, the obligee would be the state or federal agency collecting taxes on the liquor sales, and the surety company is generally an insurance company that sells the bond to the principal.

There is a major difference between a liquor bond and most other sureties, in that a typical bond guarantees some kind of performance by the principal, whereas a liquor bond guarantees financial payment of taxes collected on liquor sales.

If the claim is found to be valid, the surety company will make good on the amount of the claim and reimburse the state agency. Following this action, the surety company would then try to recover lost monetary assets by obtaining them from the principal. Any principal wanting to stay in business would then be obligated to pay the amount of the claim to the surety company, so the surety could be made whole again. Any claim made against the liquor bond could be very damaging to a business person's reputation, as well as their financial situation, so having the bond in place is a great incentive to properly collect taxes and submit them to the state agency as required.

The required bond amount is always determined by the relevant state agency, although for the most part, these amounts will vary between $2,500 and $7,500. The owner of the liquor business will be required to pay a percentage of this amount as a premium when purchasing the bond, and this percentage will generally vary between 1 percent and 5 percent. For example, a $7,500 liquor bond with a 3 percent premium cost would end up requiring the owner of a liquor business to make a payment of $225 to secure the liquor bond.

There is nothing the business owner can do to reduce the bond amount required by the state agency. However, the premium percentage can be influenced significantly by having a good credit score. The reason for this is that businesses with very good credit are considered to be less risky than those with a poor credit score, as a good credit score is an indication of good business practices.

You can also make a case to the relevant state agency by demonstrating strong proof of liquidity and having several significant business assets. This will also demonstrate that you are much more likely to submit your liquor taxes appropriately and on time, which will, therefore, lower the cost of your bond amount.

Those businesses having a poor credit history may still be able to obtain a bond, but it could be at a much higher premium percentage than it would be for a company with a good credit history. It's even possible for a business that has undergone bankruptcies or civil judgments to obtain a bond, although the cost will almost certainly be higher, and it will probably be more difficult to obtain the bond.