What are Tobacco Surety Bonds?
These financial guarantee surety bonds provide the federal government with a guarantee that all taxes owed will be paid and assurance that the principal (manufacturer or exporter) will comply with federal laws and regulations. If the principal fails to pay their taxes or conduct business in a lawful manner, the harmed party can file a claim with the surety company.
If the claim is validated, the surety company will pay out up to the penal sum of the bond and any monies paid out must be reimbursed by the principal.
Who needs a Tobacco Surety Bond?
Tobacco Surety Bonds, also known as cigarette bonds or tobacco tax bonds, are required by the Alcohol and Tobacco Tax and Trade Bureau (TTB). This government agency is tasked with regulating and licensing the tobacco industry at the national level. Per Title 27, Chapter 1, subchapter B of the Code of Federal Regulations, anyone who wishes to conduct business as a manufacturer of tobacco products or export warehouse proprietor shall file, in connection with his application for permit, a tobacco surety bond.
Along with this federal requirement, many states also require a tobacco surety bond to operate as a tobacco distributor or manufacturer. Please consult your local regulatory agency for all state level bonding requirements.
How much are Tobacco Surety Bonds written for?
The penalty amount for a Tobacco Surety Bond varies and is based on the following:
Manufacturer of Tobacco Products
Total tax liability on all tobacco products manufactured in the factory, received in bond from other factories and from export warehouses, and released to them in bond from customs custody
- Manufacturer producing or receiving cigarettes in bond: $1,000 to $250,000 Bond
- Manufacturer producing or receiving cigars, smokeless tobacco, pipe tobacco or roll your own tobacco in bond: $1,000 to $150,000 Bond
- Manufacturer producing or receiving any combination of tobacco products in bond: $1,000 to $250,000 Bond
Export Warehouse Proprietor
Total tax liability on all tobacco products, and cigarette papers and tubes in the export warehouse
- $1,000 to $200,000 Bond
When the amount of the bond on file is no longer sufficient to cover the tax liability, the manufacturer or exporter must immediately file a strengthening bond or a superseding bond in an appropriate amount. The first bond filed is an original, a superseding bond replaces that bond and a strengthening bond strengthens the amount of the one that is on file. If a manufacturer of tobacco products operates more than one factory, a blanket bond is available in lieu of filing separate bonds for each facility.
Please consult the TTB for information regarding your specific needs before bonding.
How much do Tobacco Surety Bonds cost?
Tobacco Surety Bond pricing will vary, and your premium will be based on the following factors:
- Amount of the bond
- Personal credit for all owners with at least a 10% ownership stake in the business
Individuals with good credit can expect to pay 1%-5% of the bond amount. This means qualified applicants could pay as little as $500 annually for a $50,000 Tobacco Bond. To find out how much your Tobacco Bond is going to cost, please complete our online application for your free, no obligation price quote.
Can I get a Tobacco Surety Bond with bad credit?
Pacific Surety offers a wide range of approvals, regardless of credit, for Tobacco Surety Bonds. With our strong surety relationships, we have the ability to approve 99% of applicants regardless of how bad their credit is, and our knowledgeable underwriting staff will work with you to ensure you receive the lowest possible pricing for your bond. To see what rate you will qualify for, please complete our online application for your free, no obligation price quote.
How are Tobacco Surety Bonds purchased?
The first step is to complete our quick online application for your free, no obligation bond quote. Submission takes only five minutes, and our underwriting staff will be in contact with you within a couple of hours with pricing. If you prefer to speak with our knowledgeable staff, please call 1-866-722-7873 and one of our Underwriters will assist you in applying for your bond.
After you receive approval, you must sign an indemnity agreement with the surety and provide payment for your bond premium. In most cases, we can issue bonds the same day we receive your signed documents and payment.