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What is a Liquor Tax Bond?
Alcohol and liquor tax bonds guarantee payment of taxes or fees imposed by state or local law for the sale, manufacture or warehousing of liquor and other alcoholic beverages. The type of surety bond is a financial guarantee that protects the obligee, which in this case is the government entity that requires the bond, from falsified records of sale, or an inability to pay requisite taxes on previous sales.
These bonds are also referred to as Alcohol Ordinance Tax Bonds, Beverage Tax Bond, Brewer’s Bond, Distilled Spirits License Bond, Liquor License Bond, Malt Beverage License Bond, and Wine Bond
How Do Surety Bonds Work?
Surety bonds are required to protect the public. They guarantee obligations will be fulfilled, whether it’s a contract bond guaranteeing a public construction project will be completed, or a license bond guaranteeing a beverage manufacturer will abide by the laws. These specific examples are a small overview of the hundreds of surety bonds out there, but they all have one thing in common; they protect the public, not you.
Your Surety Bond is a Form of Credit
You might wonder “how does paying for a surety bond guarantee anything or protect the public?”, and that’s a great question! When a surety company provides you with a surety bond, which you learned is a guarantee; they are vouching that you will follow the bond terms. If the bond guarantee is not fulfilled and damages are caused, a claim can be filed.
Next, let’s make a distinction between surety bonds and insurance, each of which has distinct and differing purposes.
Surety Bonds vs Insurance
A surety bond is a contract involving three parties: the person or entity performing the service (principal), the person or entity for whom the service is performed (obligee) and the entity that guarantees the principal will perform as agreed (surety). In the event of a loss or failure to perform, the surety bond pays the obligee, not the principal.
Surety bonds work more like credit than insurance. Insurance is an agreement between two parties where the entity paying the premium receives the benefit in the event of a loss. See the difference?