Alabama Beer, Wine, or Tobacco Tax Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain an Alabama Beer, Wine, or Tobacco Tax bond.
At a Glance:
- Lowest Cost: $250 per year or $25 per month
- Bond Amount: At least $25,000 (more on this later)
- Who Needs It: New retail businesses selling beer, wine, or tobacco or existing businesses that have become non-compliant with remitting sales tax payments
- Purpose: To protect the Alabama Department of Revenue from financial harm if the business fails to remit all required sales tax payments
- Who Requires the Bond: The Alabama Department of Revenue
Background
Alabama Statute 40-23-6 requires retail businesses selling beer, wine, or tobacco products to obtain a license from the Department of Revenue. The Alabama legislature enacted the licensing requirement to ensure that retailers pay all required taxes. To provide financial security for the enforcement of the licensing law, new retailers and existing retailers who have become non-compliant must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Alabama Beer, Wine, or Tobacco Tax Bond?
Alabama requires new and certain existing beer, wine, or tobacco retailers to purchase a surety bond as part of the application process to obtain or renew a license. The bond ensures that the Department of Revenue will receive compensation for financial harm if the retailer fails to abide by the regulations outlined in Alabama Statute 40-23-6. Specifically, the bond protects the Department if the retailer fails to remit all taxes. In short, the bond is a type of insurance that protects the Alabama Department of Revenue if the retailer violates licensing law.
How Can an Insurance Agent Obtain an Alabama Beer, Wine, or Tobacco Tax Surety Bond?
BondExchange makes obtaining an Alabama Beer, Wine, or Tobacco Tax bond easy. Simply log in to your account and use our keyword search to find the “tax” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone at (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.
At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.
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How is the Bond Amount Determined?
Alabama Statute 40-23-6 dictates that all new beer, wine, or tobacco retailers must purchase and maintain a $25,000 surety bond for a period of at least two years. Additionally, the statute also requires retailers that have had a license for longer than two years and who have become non-compliant in remitting sales tax payments to purchase a surety bond in an amount equal to their full sales tax liability for the three months immediately preceding the non-compliant period or $25,000, whichever is greater.
Is a Credit Check Required for the Alabama Beer, Wine, or Tobacco Tax Bond?
Surety companies will run a credit check on the owners of the retail business to determine eligibility and pricing for the Alabama Beer, Wine, or Tobacco Tax bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.
How Much Does the Alabama Beer, Wine, or Tobacco Tax Bond Cost?
The Alabama Beer, Wine, or Tobacco Tax surety bond can cost anywhere between 1% to 12.5% of the bond amount per year. Monthly subscription options are also available. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on a $25,000 bond requirement.
$50,000 Public Adjuster Bond Cost
| Credit Score* | Bond Cost (1 Year) | Bond Cost (1 month) |
|---|---|---|
| 720+ | $250 | $25 |
| 680 – 719 | $375 | $38 |
| 650 – 679 | $500 | $50 |
| 600 – 649 | $1,000 | $100 |
| 550 – 599 | $1,875 | $188 |
| 500 – 549 | $3,125 | $313 |
Who is Required to Purchase the Alabama Beer, Wine, or Tobacco Tax Bond?
Alabama requires new beer, wine, or tobacco retailers to purchase and maintain a surety bond for their first two years of licensure. If the retailer remits all required sales tax payments during this period, they will no longer be required to maintain the bond. However, retailers that do not currently have a bond but become non-compliant with their tax payments must purchase and maintain a bond for a two-year period.
Organizations that own at least a 50% share in one or more entities subject to the bonding requirements only need to purchase one bond.
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
How do Alabama Beer, Wine, or Tobacco Retailers Obtain a Sales Tax License?
Retail sellers of beer, wine, or tobacco in Alabama must navigate several steps to obtain a license. Below are the general guidelines, but applicants should contact the Department of Revenue for details on the process.
License Period – An Alabama Sales Tax License issued through the Department of Revenue expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
New license applicants must purchase and maintain a $25,000 surety bond
Step 2 – Obtain a Sales Tax License
Retailers must obtain a sales tax license issued by the Alabama Department of Revenue. Retailers can apply for a license online here.
Step 3 – Obtain a Privilege License
In addition to a sales tax license, retailers must obtain a privilege license from their county probate office.
*Important Note: Tobacco retailers who do not receive their products from Alabama wholesalers must register with the Department of Revenue’s Tobacco Tax Section who can be reached at (334) 242-9627.
How do Alabama Beer, Wine, or Tobacco Retailers Renew Their Licenses?
Alabama beer, wine, or tobacco retailers must renew their state licenses by December 31 of each year and can do so online here. To renew their local privilege licenses, retailers should contact their county probate office.
What are the Insurance Requirements for Beer, Wine, or Tobacco Retailers in Alabama?
The Alabama Department of Revenue does not require beer, wine, or tobacco retailers to purchase any form of liability insurance as a prerequisite to obtaining a state tax license. However, retailers may need to purchase insurance as a prerequisite to obtaining a local business license. New retailers and existing retailers who have become non-compliant must purchase and maintain a surety bond (limits outlined above).
How do Alabama Beer, Wine, or Tobacco Retailers File Their Bonds?
Beer, wine, or tobacco retailers in Alabama should submit their completed bond forms, including the power of attorney, to the Department of Revenue at the following address:
Alabama Department of Revenue
Sales & Use Tax Division
Administration Section
PO Box 327720
Montgomery, AL 36132-7710
The surety bond requires signatures from the surety company and the business owner. The surety company should include the following information on the bond form:
- Legal name, FEIN/SSN, address, and ownership information the individual buying the bond
- Surety company’s name and address
- Date the bond is signed
What Can Alabama Beer, Wine, or Tobacco Retailers Do to Avoid Claims Made Against Their Bonds?
To avoid claims against their bonds, beer, wine, or tobacco retailers in Alabama must ensure that they remit all sales tax revenue owed to the Alabama Department of Revenue on time and in full.
What Other Insurance Products Can Agents Offer Alabama Beer, Wine, or Tobacco Retailers in Alabama?
Most reputable beer, wine, or tobacco retailers will purchase liability insurance. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for Alabama Beer, Wine, or Tobacco Retailers?
Alabama unfortunately does not provide a public database of licensed beer, wine, or tobacco retailers in the state. We suggest contacting the Department of Revenue to obtain this information. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
