What is a Liquor Bond?
An alcohol surety bond, also known as a liquor license bond, is a type of compliance license bond. These liquor bonds provide a guarantee that the licensee will abide. By all applicable statutes, laws and regulations that apply to their liquor license.
Different states feature various types of alcohol bonds. Some of these are: Alcohol manufacturing, warehousing, wholesaling, and transporting bonds. As well as liquor license bonds for retailers that serve alcoholic beverages.
Certain businesses, such as wineries, breweries, liquor stores and restaurants need an alcohol surety bond. This is to obtain a liquor license and they must maintain the liquor bond to operate. Liquor surety bonds are often paid on an annual basis, though the renewal requirements vary from state to state.
What does a liquor bond cover?
A liquor bond ensures that a business selling alcohol pays all of their liquor taxes. In the event that the principal does not pay their alcohol taxes, or falsifies sale records. And the obligee can make a claim on the alcohol tax bond to collect the unpaid taxes. Then, the principal would be obligated to reimburse the surety for the amount paid out in the claim against the bond.
The amount a liquor bond is written for varies from state to state. And by the type of alcohol tax bond that is required. Usually, the amount corresponds to the penalty for a licensee that fails to follow applicable laws and regulations.
Like other bonds, the Liquor Bond is a three-party agreement between you (your liquor business) as the Principal, the State or Federal Government (Obligee) and the Insurance Company (Surety).
Unlike other surety bonds, the Liquor Bond (Alcohol Tax Bond) acts as a financial guarantee which is a bond type that most often is avoided by sureties. That is due to the fact that they involve a higher level of risk, since they entail financial reimbursement rather than a full performance of services or abiding by certain laws & regulations. However, in the case of a Liquor Bond, the state is the Obligee and taxes are usually collected and stored separately, which reduces the risk of fraud.
The bond for Arizona runs to:
STATE OF ARIZONA DEPARTMENT OF LIQUOR LICENSES AND CONTROL
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