What is a cigarette and tobacco distributor bond?
Cigarette and tobacco distributor bonds (also known as cigarette tax bonds) are legally binding agreements between three parties: retailers selling tobacco products, the local government agency responsible for regulating cigarette tax collection (typically the Department of Revenue), and a surety company.
The government agency is the Obligee and establishes the obligations that the tobacco retailer (the Principal) must follow. The surety (also called bonding company) issues the bond guaranteeing the performance of the retailer.
Why do you need a cigarette and tobacco distributor bond?
Cigarette and tobacco distributor bonds are required in most states for retailers, distributors, and wholesalers selling tobacco products. When the surety company issues the bond, they provide the government agency a guarantee that they will receive payment for financial losses resulting from a retailer failing to pay tax on the sale of tobacco products.
If the retailer fails to pay their tobacco products tax, the surety will pay out any damages up to the bond amount. The tobacco retailer is liable for the losses and is legally required to reimburse the surety company for any damages paid under the bond.
How much does a cigarette and tobacco distributor bond cost?
Cigarette and tobacco distributor surety bond costs vary depending on the total bond amount and the premium rate. The government agency sets the required bond amount and the surety company determines your premium rate, which is the percentage of the total bond amount you pay as the premium.
Premium rates for cigarette and tobacco distributor bonds typically range between 2% and 8% of the total bond amount. Most cigarette tax bonds require credit checks. Applicants with good credit generally receive the lowest rates, however, bad credit will not prevent you from securing a cigarette tax bond. EZ Surety still offers competitive rates to individuals with low credit scores or other financial issues.
Below are the lowest premiums EZ Surety has issued for cigarette tax surety bonds in popular states.
- EZ Surety has issued cigarette tax bonds in the State of Florida for premiums as low as $100
- EZ Surety has issued cigarette tax bonds in the State of Georgia for premiums as low as $85
- EZ Surety has issued cigarette tax bonds in the State of North Carolina for premiums as low as $100