What is a Brewers Bond?
A brewers bond is a legally binding contract required for brewers to operate legally in certain states and municipalities. This bond is a type of alcohol tax bond that protects the public by ensuring you pay the necessary taxes when operating your brewery.
A brewers bond protects the public in various ways. For example, if you commit tax fraud, a claim can be filed on your bond. The surety who wrote your bond will initially pay the claim, but the surety will ultimately look to you for reimbursement.
If you're unsure whether you need a brewers bond, you can select your state from the list below to view bond requirements.
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If you would like to learn more about what surety bonds are and how they work, you can read our detailed guide here.
How Does a Brewers Bond Work?
A brewers bond is an agreement between the three separate parties outlined below. All parties benefit from the agreement and work together to make customers happy while allowing the brewery to run properly under the law.
The Obligee
The obligee can be a federal authority or an authority in the state requiring the brewery to obtain the bond. The Alcohol and Tobacco Tax and Trade Bureau (TTB) may require a brewers bond so that the brewery obeys federal and state laws and pays necessary taxes.
The Principal
The principal is the person applying for the brewers bond as part of the licensing process.
The Surety
The surety is the company providing the brewers bond to the principal as a form of protection for customers. If any financial problem occurs between the principal and a customer, the customer can file a claim against the bond and the surety will pay the claim. The surety will then seek repayment from the principal.
How Much Does a Brewers Bond Cost?
The TTB determines the cost of your brewers bond based on your brewery’s excise tax liability. Your excise tax liability is calculated based on production. If you apply for a state or municipal brewers bond, the cost of your bond may be determined by other factors.
Regardless of your total bond amount, you won’t have to pay the total sum at once. The surety company will determine a percentage of your total bond amount based on your personal credit score and other financials. The percentage amount you pay can range from one to 10 percent.
Can I Get a Brewers Bond with Bad Credit?
If you have poor credit or a bad financial history, you are considered a greater risk to the surety company offering your brewers bond. Although it is still possible to get a brewers bond with a bad credit score, the percentage you pay for your brewers bond will rise as your credit score lowers.
How Do I Renew My Brewers Bond?
Brewers bonds expire four years after they are issued. To renew your brewers bond, you must file a continuation certificate or apply for a superseding bond well in advance of your expiration date.
If you let your brewers bond expire, you won’t be allowed to conduct brewery operations, produce beer, or remove beer from the premises. If you miss your expiration date, you must re-qualify for a new brewer’s bond.
