FOR ALL YOUR SURETY BOND NEEDS.
These surety bonds are general for all states.
Learn more about tobacco bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.
Tobacco bonds, also known as cigarette tax bonds or tobacco tax bonds, are a type of financial guarantee surety bond. They guarantee that businesses selling tobacco products do so in accordance with applicable laws and remit the proper sales tax to the state. Not all states require these bonds. It’s also important to note that the states that do require them often have different requirements in terms of the bond amount and which businesses must purchase them.
Companies that sell cigarettes and other tobacco products to the public may be required to purchase a tobacco bond. Some states require two separate bonds—one for cigarette sales and one for all other tobacco products, such as cigars, pipe tobacco, and chewing tobacco. Distributors, manufacturers, wholesalers, and importers of tobacco products may also be required to obtain a cigarette and/or tobacco tax bond.
The primary purpose of these bonds is to ensure payment of sales tax on the sale of cigarettes and other tobacco products. The obligee, the party requiring the bond, is the state agency responsible for collecting sales tax payments. The principal is the tobacco vendor or other business entity purchasing the bond, and the surety is the company issuing the bond.
Principals that fail to live up to their obligation to remit sales tax payments to the obligee may have a claim filed against their bond for an amount up to the full penal sum of the bond. The surety will verify the validity of any claim and then make payment to the obligee. The principal is responsible for repaying that amount to the surety.
The cost of a tobacco bond is based on the required amount of the bond and the premium rate established for a given applicant. Most states don’t impose a standard bond amount, as there is a wide disparity in the level of tobacco sales and the sales tax due from one vendor to the next. Therefore, the bond amount is typically based on the principal’s estimated annual sales tax liability.
The surety establishes the premium rate based on several criteria. The bond premium rate is lowest for applicants with good credit and financial stability, usually 1%-3% of the bond amount. Poor credit doesn’t mean you can’t get a bond, but you’ll likely pay a higher premium rate.
Use our convenient online system to apply for a tobacco bond today.
