The Alcohol and Tobacco Tax and Trade Bureau (TTB) is the government agency tasked with regulating and licensing the tobacco industry. Per Title 27, Chapter 1, subchapter B of the Code of Federal Regulations, anyone who wishes to conduct business as a manufacturer of tobacco products or export warehouse proprietor, shall file, in connection with his application for permit, a surety bond. The purpose of this surety bond is to provide the government with a guarantee that all taxes owed will be paid and assurance that the principal (manufacturer or exporter) will comply with federal laws and regulations. If the principal fails to pay their taxes or conduct business in a lawful manner, the harmed party can file a claim with the surety company. If the claim is validated, the surety company will pay out up to the penal sum of the bond and any monies paid out must be reimbursed by the principal.
The bond amount for this type of bond varies and is based on the following:
Manufacturer of Tobacco Products: Total tax liability on all tobacco products manufactured in the factory, received in bond from other factories and from export warehouses, and released to them in bond from customs custody.
- Manufacturer producing or receiving cigarettes in bond: $1,000 to $250,000 Bond
- Manufacturer producing or receiving cigars, smokeless tobacco, pipe tobacco or roll your own tobacco in bond: $1,000 to $150,000 Bond
- Manufacturer producing or receiving any combination of tobacco products in bond: $1,000 to $250,000 Bond
Export Warehouse Proprietor: Total tax liability on all tobacco products, and cigarette papers and tubes in the export warehouse
- $1,000 to $200,000 Bond
When the amount of the bond on file is no longer sufficient to cover the tax liability, the manufacturer or exporter must immediately file a strengthening bond or a superseding bond in an appropriate amount. The first bond filed is an original, a superseding bond replaces that bond and a strengthening bond strengthens the amount of the one that is on file. If a manufacturer of tobacco products operates more than one factory, a blanket bond is available in lieu of filing separate bonds for each facility. Please consult the TTB for information regarding your specific needs before bonding.
Pacific Surety offers industry low rates and can obtain approvals for almost all credit situations. Once our simple application has been completed, we can have pricing to you within hours. If you have any specific questions, please contact our knowledgeable underwriting staff.