What are tobacco bonds?
To become a manufacturer of tobacco products, an export warehouse proprietor, or a manufacturer of cigarette tubes and papers, you must post a tobacco bond at the federal level. The Alcohol and Tobacco Tax and Trade Bureau (TTB) sets this requirement as part of the permitting process. Other names for this bond may include tobacco tax bond and cigarette tax bond.
A federal tobacco bond ensures your business pays all applicable taxes, penalties, and interest and follows federal laws and regulations for the industry. You must obtain your bond before commencing business operations.
You may also have state-level (and sometimes local-level) bonding requirements to manufacture or sell tobacco products or operate an export warehouse. State laws require payment of sales tax on cigarette and tobacco sales.
A tobacco bond guarantees the government that you will pay all taxes you owe by the filing deadline each year. This tobacco bond is a type of sales tax bond.
Get Your Tobacco Bond:
- To become a manufacturer of tobacco products, an export warehouse proprietor, or a manufacturer of cigarette tubes and papers, you must post a tobacco bond at the federal level.
- You may also have state-level (and sometimes local-level) bonding requirements to manufacture or sell tobacco products or operate an export warehouse.
- If you break your bond agreement by failing to pay enough taxes or conducting your business unlawfully, you could face bond claims.
Who needs a tobacco surety bond?
You will likely need at least one tobacco bond if you’re required to pay sales tax related to tobacco products or cigarettes. Sometimes you’ll need a bond at both the federal and state levels. Other times, you may need multiple bonds to comply with state requirements. For example, some states require two separate bonds if you plan to sell cigarettes and other tobacco products.
How do tobacco bonds work?
Tobacco bonds are three-party contracts involving a surety, an obligee, and a principal.
- The surety is the organization that issues and financially backs the bond.
- The obligee is the entity that requires the bond (a federal, state, or local governing agency).
- The principal is the party that must purchase the bond and abide by its terms to avoid claims.
As the principal, breaking the bond agreement by failing to pay enough taxes or conducting business unlawfully could result in a claim against your bond. If the claim is valid, your surety will pay out the approved claim and seek reimbursement from you. You could be liable for any amount up to the total value of your tobacco bond.
How much do tobacco tax bonds cost?
The cost will depend on the bond amount required, which differs based on the type of permit you need.
Bond Amount Required
|One factory of a manufacturer of tobacco products||$1,000 – $250,000|
|More than one factory of a manufacturer of tobacco products (operating under more than one permit)||See form for details|
|Proprietor of an export warehouse||$1,000 – $200,000
|Manufacturer of cigarette tubes and papers||$1,000 – $20,000|
If you have a high credit score, you could pay as low as 1-5% of the bond amount required. For example, if you need a $20,000 bond, you might get bonded for just $200 yearly at a 1% premium rate.
Tobacco Bond & Permit Requirements
To successfully apply for a tobacco manufacturing or export warehouse proprietor permit, you must submit the following items to the TTB.
- Application for a permit
- Tobacco bond (two originals)
- Personal questionnaire
- Diagram of the factory premises
- Environmental information
- Information on water quality considerations
- Signing authority (if necessary)
You’ll find a complete list of requirements, instructions for permitting, and a handy checklist on the TTB website. Here are some other resources you may find helpful:
Required documents for applying for a permit online
Frequently Asked Questions
You may still be able to get the bond you need if you have a low credit score. If you have questions or concerns about your application, feel free to call ZipBonds at (888) 435-4191. Our agents are always ready to help! We’d be happy to help you with your application over the phone.
Simply start your tobacco bond application online or call us at (888) 435-4191. We’ll ask for credit and financial information. Once your application is approved, you can pay for and print your bond!
How to Get Your Tobacco Bond
ZipBonds offers the fastest and most secure option for getting the surety bonds you need. Our all-digital platform is intuitive and straightforward. Apply online or call us at (888) 435-4191 to speak with an agent directly. We’ll help you get bonded in a zip!
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.