Connecticut Cigarette Distributor Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a Connecticut Cigarette Distributor 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 Regulates Cigarette Distributors in Connecticut: The Connecticut Department of Revenue Services (CDRS)
- Who Needs It: All distributors who are applying with the CDRS to purchase cigarette stamps on a deferred payment basis in Connecticut
- Purpose: To ensure that the CDRS will receive compensation for financial harm if the licensee fails to pay all required taxes
Background
Connecticut General Statute 12-288 requires all cigarette distributors operating in the state to obtain a license from the Department of Revenue Services. The Connecticut Legislature enacted the licensing requirement to ensure that cigarette wholesalers do not engage in unethical business practices. To provide financial security for the enforcement of the licensing law, cigarette wholesalers must purchase and maintain a surety bond to be eligible for licensure.
What Is the Purpose of the Connecticut Cigarette Distributor Bond?
Connecticut General Statute 12.298 requires all cigarette distributors who are applying with the Department of Revenue Services to purchase cigarette stamps on a deferred payment basis to obtain a surety bond. The bond ensures that restitution is available to the CDRS should the cigarette distributor fail to abide by the regulations outlined in the Connecticut General Statutes Chapter 214. Specifically, the bond ensures that the CDRS will receive compensation for financial harm if the licensee fails to pay all required taxes. In short, the bond is a type of insurance that protects the CDRS if the cigarette distributor violates the terms of their license.
How Can an Insurance Agent Obtain a Connecticut Cigarette Distributor Bond?
BondExchange makes obtaining a Connecticut Cigarette Distributor bond easy. Simply log in to your account and use our keyword search to find the “cigarette distributor” 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 Connecticut General Statute 12.298, the Cigarette Distributor bond limit must be no less than the average sale price of cigarette stamps or decals that the licensee purchases monthly. The surety bond is conditioned upon the payment of such stamps or decals.
Is a Credit Check Required for the Connecticut Cigarette Distributor Bond?
Surety companies will run a credit check on the cigarette distributor to determine eligibility and pricing for the Connecticut Distributor bond. Applicants with excellent credit and work experience can expect to receive the best rates. 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 Connecticut Cigarette Distributor Bond Cost?
The Connecticut Cigarette Distributor 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 Connecticut Cigarette Distributor 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 Connecticut Cigarette Distributor Bond?
According to Connecticut General Statute 12.298, all distributors who are applying with the Department of Revenue Services to purchase cigarette stamps on a deferred payment basis must purchase and maintain a Cigarette Distributor bond.
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 Cigarette Distributors Obtain a License in Connecticut?
Cigarette distributors in Connecticut must navigate several steps to obtain a license. Below are the general guidelines, but applicants should refer to the Department’s Cigarette Tax Information webpage for details on the process.
License Period – Connecticut cigarette distributor licenses must be renewed annually with the Department of Revenue Services.
Step 1 – Purchase Surety Bond
All cigarette distributors who are applying with the Department of Revenue Services to purchase cigarette stamps on a deferred payment basis must purchase and maintain a Cigarette Distributor bond.
Step 2 – Complete License Registration
Cigarette distributor registration application must be completed electronically via the Department’s myconnectCT portal. A registration fee of $250 is also required.
How Do Cigarette Distributors Renew Their Connecticut Licenses?
Renewals for a cigarette distributor license may be completed through the Connecticut Department of Revenue Services’ online myconnectCT portal. Licenses must be renewed on or before their annual expiration date. Renewal fees may apply.
What Are the Insurance Requirements for Cigarette Distributors in Connecticut?
Connecticut does not require cigarette distributors to purchase any form of liability insurance as a prerequisite to obtaining a license. Cigarette distributors must purchase and maintain a surety bond.
How Do Connecticut Cigarette Distributors File Their Bonds?
Cigarette distributors in Connecticut should submit their completed bond forms, including the power of attorney, electronically when submitting their license applications. The surety bond requires signatures from the surety company and the cigarette distributor. 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 Connecticut Cigarette Distributors Do to Avoid Claims Made Against Their Bonds?
The best way to avoid a claim against a Connecticut Cigarette Distributor bond is to pay all cigarette stamp or decal taxes, penalties, and interest that are due to the Department of Revenue Services in full and on time.
What Other Insurance Products Can Agents Offer Cigarette Distributors in Connecticut?
Most reputable cigarette distributors 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 Connecticut Cigarette Distributor Customers?
Connecticut conveniently provides a public database to search for active cigarette distributors 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.