Liquor Bonds

What Parties Are Involved in Liquor Tax Bonds?

When a liquor tax bond is written, there are usually three parties involved in the bond:

• The insurers that issues the bond
• The retailer that purchases the bond
• The state that might receive payments from the bond 

The retailer may be called the “obligee” of the bond, and the state is frequently called the the bond’s “principal.”

What Businesses Need Liquor Bonds?

While laws vary from state to state, businesses that sell alcohol to customers are usually required to have liquor bonds. Without one, it’s often impossible to for a business to get a liquor license.

Some examples of businesses that sell alcoholic beverages to consumers and, therefore, may need a liquor license and bond include:

• Liquor, beer, and wine stores
• Nightclubs and bars
• Restaurants where alcohol is served
• Cafes that offer adult beverages in addition to specialty coffees
• Event venues that have their own bars
• Caterers who serve alcohol at client’s events

Do Insurers Conduct Credit Checks When Issuing Liquor Bonds?

Some insurance companies check credit scores when underwriting liquor tax bonds, but not all do.  

Any business owner who’s concerned about the potential effect that a credit check may have on their business’ bond rates should express this concern to their independent insurance agent. Their independent agent will be able to compare bonds from multiple insurers and help determine the most affordable way to obtain a liquor tax bond with a business’ credit history.

How Long Does It Take to Get a Liquor Bond?

The process can vary some from state to state, but it normally doesn’t take too long to get a liquor tax bond. Most insurers make the application process easy and respond quickly to completed applications. The longest step in the process is often waiting for a state’s response after all required paperwork has been submitted to the state. How long this step takes depends on what state a business is getting a bond in.

How Can Businesses Get Help Finding Liquor Bonds?

For help finding a liquor bond, business owners should contact an independent insurance agent. The right agent will be licensed in the state a business wants to sell alcohol in, and the agent will specialize in liquor tax bonds. An agent who meets these requirements will be able to easily walk business owners through the process of applying for and getting a bond and help them find an affordable one.