Alabama Transient Merchant Bond: A Comprehensive Guide
January 26, 2022
This guide provides information for insurance agents to help their customers obtain an Alabama Transient Merchant Bond
At a Glance:
- Average Cost: Either $100 or 1% of the bond amount, whichever is greater
- Bond Amount: $2,000 or 5% of the wholesale value of any merchandise or services offered for sale, whichever is less
- Who Needs it: All transient merchants operating in Alabama
- Purpose: To ensure the public will receive compensation for any damages should the transient merchant fail to pay all required taxes and fees
- Who Regulates Transient Merchants in Alabama: The probate office of the county in which the merchant is operating
Alabama statute 34-35-3 requires all transient merchants operating in the state to obtain a license in each county they operate in. The Alabama legislature enacted the licensing laws and regulations to ensure that transient merchants engage in ethical business practices. To provide financial security for the enforcement of the licensing law, transient merchants must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Alabama Transient Merchant Bond?
Alabama requires transient merchants to purchase a surety bond as part of the application process to obtain a business license for the county they are operating in. The bond ensures that the county will receive compensation for financial harm if the merchant fails to comply with the regulations set forth in Alabama statute 34-35-7. Specifically, the bond protects the county in the event the merchant fails to pay all required taxes and fees. In short, the bond is a type of insurance that protects the county if the merchant violates licensing laws.
How Can an Insurance Agent Obtain an Alabama Transient Merchant Bond?
BondExchange makes obtaining an Alabama Transient Merchant bond easy. Simply log in to your account and use our keyword search to find the “transient merchant” bond in our database. Don’t have a login? Enroll 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.
Is a Credit Check Required for the Alabama Transient Merchant Bond?
No, a credit check is not required for the Alabama Transient Merchant bond. Because the bond is considered relatively low risk, the same low rate is offered to all transient merchants operating in the state, regardless of their credit history.
How Much Does the Alabama Transient Merchant Bond Cost?
The Alabama Transient Merchant Bond can either cost $100 or 1% of the bond amount, whichever is greater.
Who is Required to Purchase the Bond?
Alabama requires transient merchants to purchase a surety bond for each county they operate in. If the merchant operates in two counties then they need two bonds, if they operate in three counties they need three bonds etc. To paraphrase Alabama statute 34-35-1, a transient merchant is any person or business entity that sells goods or services, in a location that they do not own, for a period of 6 months or less.
Exemptions to this definition include:
- Civic and nonprofit organizations, wholesale sales to retail merchants by commercial travelers or agents selling in the usual course of business
- Wholesale trade shows or conventions
- Sales of goods, wares, services, or merchandise by sample catalog or brochure for future delivery
- Fairs and convention center activities conducted primarily for amusement or entertainment
- Any general sale, fair, auction, or bazaar sponsored by a church or religious organization
- Garage sales held on premises devoted to residential use
- Sales of crafts or items made by hand or sold or offered for sale by the person making the crafts or items
- Duly licensed flea markets operating from a fixed location
- Sales of agricultural products, except nursery products and foliage plants
- Sample sales made by a seller at residential premises under an invitation issued by the owner or legal occupant of the premises.
How do Transient Merchants Apply for a License in Alabama?
Transient merchants must obtain a business license for every county in which they solicit business. To obtain a license, merchants should contact the county’s probate office and request an application. All transient merchant business license applications must, at a minimum, contain the following information.
- The merchant’s, and their registered agent’s, name and permanent address
- A statement describing the kind of business the merchant will conduct, the length of time the merchant will be conducting business in the county, and the business’s proposed location
- Proof that the merchant has obtained all required licenses and permits
- Names company’s owners/officers and its state of incorporation (if applicable)
Merchants must pay a $250 fee when submitting their application. All licenses expire 90 days from the date of issuance.
How Do Alabama Transient Merchants Renew Their License?
To renew their license, transient merchants must file a renewal request with the county’s probate judge and pay a $25 renewal fee.
What are the Insurance Requirements for Transient Merchants in Alabama?
There are no statewide insurance requirements for transient merchants in Alabama. However, certain counties may require merchants to obtain insurance coverage prior to receiving a license. Transient merchants must purchase and maintain a surety bond with a limit of $2,000 or 5% of the wholesale value of any merchandise or services offered for sale, whichever is less.
How Do Alabama Transient Merchants File Their Bond?
Transient Merchant should submit their completed bond form, including the power of attorney, to the probate office of the county in which they are operating.
The surety bond requires signatures from both the surety company that issues the bond and from the transient merchant. The surety company should include the following information on the bond form:
- Legal name and location of entity/individual(s) buying the bond
- Surety company’s name and location
- Name of the county the merchant is operating in
- Bond amount
- Date the bond is signed
What Can Alabama Transient Merchants Do to Avoid Claims Against Their Bonds?
To avoid claims on their bonds, transient merchants in Alabama must ensure that they pay all required licensing fees and sales tax owed to the county in which they are operating.
What Other Insurance Products Can Agents Offer Transient Merchants in Alabama?
There is no statewide liability insurance requirement for transient merchants operating in Alabama. However, most reputable merchants will seek to obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue liability 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 Transient Merchant Customers?
Agents should contact county probate offices to obtain lists of merchants operating in the area. The optimal times to prospect for transient merchant customers are when large events or festivals are taking place, as merchants are typically in attendance. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.