The tobacco tax bond is just like any other sales tax bond. It is a guarantee bond which the sellers of cigarettes and tobacco products are required to have. It acts as a license which lets them carry out their business. This bond simply works as the three-party contract. The principle here is the business and the obligee represents the entity which requires the business to be bonded. The final party is the surety who guarantees that the bond has been acquired as per the legal terms.
The main purpose of the bond is the protection of the general public and the government from the non-payment of sales tax on cigarette and tobacco products. In case any businessman fails to pay the sales tax, he faces claim against the bond. In some states, the sellers of cigarette and tobacco products need to have separate bonds for both the items while in some states they can carry out both businesses with just one bond.
Who Needs The Tobacco Tax Bond?
The bond is required by both the distributors and manufacturers of tobacco products. Even importers and wholesalers are required to produce this bond in order to carry out business smoothly. This ensures that they comply with the rules of the state and are liable for paying the sales tax to the government on time. However, the terms of requirement of the bond vary from state to state and thus checking the terms is extremely important before you apply for the bond.
Cost Involved In The Tobacco Tax Bond:
The amount involved in obtaining the bond varies as the local requirements of different states. No uniform amount has been fixed for obtaining the bond. Usually, the amount of the bond is calculated on the basis of the previous liability of the business with regard to sales taxes. The bond amount which individuals need to pay is known as the bond premium. While fixing up the amount of the bond, the authority concerned also takes into account the credit score of the applicant, status of business and years of experience in the market. If you have a solid financial position, then the amount to be paid automatically reduces.
Can You Get The Bond With A Bad Credit?
The sureties even grant the bond to people with a bad credit position. However, in such cases, the premium amount to be paid is a little higher which compensates the risk involved. This is just to encourage people to start their business and improve their financial position.
Conclusion:
The application of the tobacco tax bond is quite simple and can be done online. You just need to submit the complete application form in order to find out what exactly your bond price is. If you are a little unsure about the entire process, seeking the help of experts is the best choice.