4 Facts To Know About Tobacco Tax Bond

Tobacco Tax Bond is surety bonds that are important in most states so that they can sell cigarettes and other tobacco-based products without external intervention. This bond guarantees the individual to make the necessary tax based payments for all the local government based agencies. These federal bonds are very important for all the vendors who are dealing with tobacco-based products in different states. In most usual cases, the government agency who requests for the bond works as the obligee of the contract with the surety bond providing company.

Here, in this post, we will be dealing with the few prominent facts about the tobacco tax bond. It will help you to gain a clearer idea regarding the taxation policy and the benefits of taking up the bond.

What are the different types of Tobacco Bonds?
Well, the regulations of the state vary greatly based on the range of products that you can sell under a single surety bond. Under certain content, you may even require a separate bond for the different types of tobacco products your business deals in. For a few states, an additional non-cigarette bond is also required for such products.

Every state has a particular agency which deals with the requirements related to the tobacco tax bond. For instance, it can be said that the Tobacco Control Board acting on your bond in a particular state can be the attorney general in another state while a part of the Department of Revenue in some other place.

What is the usual price of the bonds?
The cost of these Tobacco Bonds depends directly on the risk amount which the surety company will have to pay in case of claims. If a particular business is assessed with a pretty lower risk, they are required to pay around one to four percent of the bond amount every year. The clients with a higher risk are usually charged higher. The average charge in such conditions ranges between five to fifteen percent of the total face value of the bond. The surety companies provide exact quotes that help in determining the amount of the premium.

How do these bonds help in risks?
The company providing surety assesses the risk of the bond based on the financial condition of the business and its experience in the market. The personal credit ratings of the individual also play an impactful role if the financial statements of the business are not stable enough to create an image.

The budding companies usually make use of the résumés of the managers to fulfil that gap as they do not own a solid history. The surety company considers all of these details and expertise while calculating the risks. The situations of high risk like bad credit, bankruptcy, civil judgments against the business also increase the cost.

What are the procedures of claims?
If you stand bankrupt or do not pay the cigarette taxes to the agency who holds the bond, the agency can file a claim with the company and get you released for the liability of payment. Moreover, the surety company also recovers the amount of payment which is due from you along with other legal and processing charges.