California Tobacco Manufacturer and Importer Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a California Tobacco Manufacturer and Importer bond.
At a Glance:
- Lowest Cost: $100 per year or $10 a month
- Bond Amount: Determined on a case-by-case basis (more on this later)
- Who Needs It: All newly qualified and elevated-risk nonparticipating manufacturers operating in California
- Who Regulates Tobacco Manufacturers/Importers in California: The California Department of Tax and Fee Administration (CDTFA)
- Purpose: To ensure the CDTFA receives compensation if the cigarette and tobacco distributor fails to pay all necessary taxes or other fees
Background
California Code 30165.1 requires all newly qualified and elevated-risk nonparticipating manufacturers operating in the state to obtain a license from the Department of Tax and Fee Administration. The California Legislature enacted the licensing requirement to ensure qualified tobacco manufacturers/importers do not engage in unethical business practices. To provide financial security for the enforcement of the licensing law, certain tobacco manufacturers/importers must purchase and maintain a surety bond to be eligible for licensure.
What Is the Purpose of the California Tobacco Manufacturer and Importer Bond?
California Code 30165.1c4A requires all newly qualified and elevated-risk nonparticipating manufacturers to purchase a surety bond as part of the application process to obtain a license. The bond ensures that restitution is available to the Department of Tax and Fee Administration should the tobacco manufacturer/tobacco fail to abide by the regulations outlined in the California and Tobacco Products Law, Revenue and Taxation Code. Specifically, the bond ensures that the CDTFA receives compensation for any unsatisfied escrow obligations, taxes, or other fees the licensee failed to pay. In short, the bond is a type of insurance that protects the CDTFA and the public if the tobacco manufacturer/importer violates the terms of their license.
How Can an Insurance Agent Obtain a California Tobacco Manufacturer and Importer Bond?
BondExchange makes obtaining a California Tobacco Manufacturer and Importer bond easy. Simply log in to your account and use our keyword search to find the “tobacco manufacturer and importer” 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 (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?
According to California Code 30165.1c4A, the Tobacco Manufacturer and Importer bond requires a $50,000 minimum limit or must be equal to the amount of escrow the manufacturer was required to deposit as a result of the largest of its most recent five calendar year’s sales in the state.
Is a Credit Check Required for the California Tobacco Manufacturer and Importer Bond?
Surety companies will run a credit check on the tobacco manufacturer/importer to determine eligibility and pricing for the California Tobacco Manufacturer and Importer bond. Licensees with excellent credit and work experience can expect to receive the best rates. While applicants with poor credit may be declined by some surety companies or have to pay higher rates. The credit check is a “soft hit,” meaning that the credit check will not affect the applicant’s credit.
How Much Does the California Tobacco Manufacturer and Importer Bond Cost?
The California Tobacco Manufacturer and Importer bond can cost between 2% and 10% of the bond amount per year. Monthly subscription options are also available. Insurance companies determine the rate based on several factors, including your customer’s credit score and experience. The chart below briefly references the approximate bond cost on the $10,000 requirement.
$10,000 California Tobacco Manufacturer and Importer Bond Cost
| Credit Score* | Bond Cost (1 Year) | Bond Cost (1 month) |
|---|---|---|
| 720+ | $100 | $10 |
| 680 – 719 | $150 | $15 |
| 650 -679 | $200 | $20 |
| 600 – 649 | $400 | $40 |
| 550 – 599 | $750 | $75 |
| 500 – 549 | $1,250 | $125 |
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to years of experience and underlying credit factors contained within the business owner’s credit report.
Who Is Required to Purchase a California Tobacco Manufacturer and Importer Bond?
Applicants that have been deemed as newly qualified and/or an elevated-risk nonparticipating manufacturer by the California Department of Tax and Fee Administration or Attorney General must purchase and maintain a Tobacco Manufacturer and Importer bond for the entire duration of their license.
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 Tobacco Manufacturers/Importers Obtain a License in California?
Tobacco manufacturers/importers in California must navigate several steps to obtain a license. Below are the general guidelines, but applicants should refer to the CDTFA’s Registration webpage for details on the process.
License Period – California tobacco manufacturer/importer licenses expire annually and must be renewed on or before the licensee’s expiration date.
Step 1 – Purchase Surety Bond
California tobacco manufacturers/importers must purchase and maintain a surety bond for the entirety of their license period.
Step 2 – Complete Online Registration
The California Department of Tax and Fee Administration requires applicants to register via the Online Services portal. In addition to a copy of the surety bond, a one-time registration fee is also required.
How Do Tobacco Manufacturers/Importers Renew Their California Licenses?
California tobacco manufacturer/importer licenses expire annually and must be renewed on or before the licensee’s expiration date. Licensees should utilize the Department of Tax and Fee Administration’s Online Services portal for their renewal needs.
What Are the Insurance Requirements for Tobacco Manufacturers/Importers in California?
California does not require tobacco manufacturers/importers to purchase any form of liability insurance as a prerequisite to obtaining a license. Tobacco manufacturers/importers must purchase and maintain a surety bond.
How Do California Tobacco Manufacturers/Importers File Their Bonds?
Tobacco manufacturers/importers in California should submit their completed bond forms, including the power of attorney, electronically when submitting their license applications through the Department of Tax and Fee Administration’s Online Services portal.
The surety bond requires signatures from the surety company and the tobacco manufacturer/importer. The surety company should include the following information on the bond form:
- Legal name and address of the individual buying the bond
- Surety company’s name
- Date the bond is signed
What Can California Tobacco Manufacturers/Importers Do to Avoid Claims Made Against Their Bonds?
The best way to avoid a claim against a California Tobacco Manufacturer and Importer bond is to follow all license rules and regulations, specifically paying all taxes and other fees due to the Department of Tax and Fee Administration.
What Other Insurance Products Can Agents Offer Manufacturers/Importers in California?
Most reputable tobacco manufacturers/importers will purchase business 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 California Tobacco Manufacturer/Importer Customers?
California conveniently provides a public database to search for active tobacco manufacturers/importers in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.