Learn more about brewers bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.
What Are Brewers Bonds?
Breweries are licensed at the federal level by the Alcohol and Tobacco Tax and Trade Bureau (TTB), which issues the Brewer’s Notice that every brewery in the country must have in order to operate legally. One of the requirements for obtaining the necessary Brewer’s Notice is the purchase of a brewers bond, which is a type of alcohol bond.
The bond guarantees that the brewer will pay the production tax, a federal excise tax on beer. State and local governments also require a surety bond as a guarantee that the taxes they levy on brewers will be paid.
Who Needs Them?
The exact bond requirements for a given brewery vary depending on the brewery’s location, as different states and municipalities have different requirements. But all breweries must purchase a federal brewers bond to obtain a Brewer’s Notice from the TTB.
How Do They Work?
The obligee is the TTB, or a state or municipal government. The principal is the brewery, and the surety is the company that underwrites and issues the bond. The terms of each bond specify the contractual obligations of all three parties.
If a brewery fails to pay its tax obligation, commits tax fraud, or otherwise violates the terms of the bond, the obligee can file a claim against the bond. The surety will pay whatever the brewer legitimately owes to the obligee, and the brewer, as principal, must then reimburse the surety for that amount.
TTB bonds are good for four years. By the expiration date, the principal must purchase and file a Brewers Bond Continuation Certificate with the TTB.
What Do They Cost?
There are two cost factors: the required bond amount and the percentage of that bond amount that the principal will pay as the premium for the bond.
The amount of the federal bond required by the TTB depends on the brewery’s excise tax liability, which is calculated based on production. For breweries with an excise tax liability of less than $50,000 for the current and prior year, the required TTB bond amount is $1,000. (The bond amount for larger breweries will be determined by the TTB.)
The required TTB bond amount goes up as production goes up, so it needs to be recalculated quarterly if production is anticipated to increase. Not maintaining a large enough bond amount to cover anticipated tax liability is a violation of the bond terms. When a shortfall is anticipated, additional coverage must be purchased in the form of a “strengthening bond”—or the original brewers bond must be replaced with a “superseding bond.”
Applicants with good credit will pay as little as 1% of the bond amount as the annual premium for the bond.
Reach out to us for help obtaining a federal TTB bond or a state or municipal brewers bond. Simply complete our convenient online application form to get started.