North Carolina Alcohol Tax Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a North Carolina Alcohol Tax bond
At a Glance:
- Average Cost: Between 1% to 12.5% of the bond amount per year based on the applicant’s credit history
- Bond Amount:
- Wholesalers and Importers: Between $5,000 to $50,000 (more on this later)
- Nonresident Vendors: $2,000
- Who Needs it: All beer/wine wholesalers and importers, as well as certain nonresident vendors, operating in North Carolina
- Purpose: To ensure that the Department of Revenue will receive compensation for financial harm if the business fails to pay all required taxes
- Who Requires the Bond: The North Carolina Department of Revenue
Background
North Carolina Statutes Chapter 18B requires all beer/wine wholesalers, importers, and nonresident vendors to obtain a permit with the Alcoholic Beverage Control (ABC) Commission. The North Carolina legislature enacted the permitting requirement to ensure that these businesses engage in ethical business practices.
After obtaining a permit, North Carolina Statute 105-113.83A requires wholesalers, importers, and nonresident vendors to register with the Department of Revenue. The registration ensures that these businesses will pay all required excise taxes. To provide financial security for the enforcement of the registration requirement, beer/wine wholesalers, importers, and certain nonresident vendors must purchase and maintain a surety bond to be eligible for registration.
What is the Purpose of the North Carolina Alcohol Tax Bond?
North Carolina requires beer/wine wholesalers, importers, and certain nonresident vendors to purchase a surety bond as part of the application process to obtain a registration. The bond ensures that the Department of Revenue will receive compensation for financial harm if the business fails to comply with the regulations outlined in North Carolina Statute 105-113.86. Specifically, the bond protects the Department of Revenue if the business does not pay all taxes and file all required reports. In short, the bond is a type of insurance that protects the Department of Revenue if the business violates the terms of its registration.
How Can an Insurance Agent Obtain a North Carolina Alcohol Tax Surety Bond?
BondExchange makes obtaining a North Carolina Alcohol Tax Bond easy. Simply login to your account and use our keyword search to find the “Alcohol” bond in our database. Don’t have a login? Gain access 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?
North Carolina Statute 105-113.86 requires beer/wine wholesalers and importers to purchase a surety bond in an amount that reflects the business’s anticipated tax liability. Specifically, the bond amount is based on the combined tax due by the business during any 3 months in the preceding 12 months, as outlined in the table below.
Table 1
| Combined Tax Due | Bond Amount |
|---|---|
| $5,000 or less | $5,000 |
| $5,001 to $12,500 | $12,500 |
| $12,501 to $25,000 | $25,000 |
| $25,001 to $40,000 | $40,000 |
| $40,001+ | $50,000 |
The bond amount for nonresident vendors is $2,000.
Is a Credit Check Required for the North Carolina Alcohol Tax Bond?
Surety companies will run a credit check on the business owners to determine eligibility and pricing for the North Carolina Alcohol Tax bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit,” meaning that the credit check will not affect the owner’s credit.
How Much Does the North Carolina Alcohol Tax Bond Cost?
The North Carolina Alcohol Tax Bond can cost between 1% to 12.5% of the bond amount per year. Insurance companies determine the rate based on several factors, including your customer’s credit score and experience. BondExchange also offers a monthly pay-as-you-go option for these bonds. The chart below offers a quick reference for the cost of a $25,000 bond requirement.
$25,000 Alcohol Tax Cost
Table 2
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 720+ | $250 | $25 |
| 680 – 719 | $375 | $38 |
| 650 – 679 | $500 | $50 |
| 600 – 649 | $1,000 | $100 |
| 550 – 599 | $1,875 | $188 |
| 500 – 549 | $3,125 | $313 |
*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 the Bond?
North Carolina requires all beer and wine wholesalers and importers to purchase a surety bond as a prerequisite to registering with the Department of Revenue. Additionally, the department has the authority to require nonresident vendors to purchase a bond and will do so if they deem it necessary to ensure the full payment of all excise taxes.
A wholesaler is a business that sells wine/beer to other wholesalers or retail businesses.
An importer a business that receives and stores wine or beer from outside of the United States and sells it to wholesalers for resale.
A nonresident vendor is a business located outside of North Carolina that sells and ships beer/wine to licensed North Carolina wholesalers, importers, or bottlers.
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 Businesses Apply for a North Carolina Alcohol Tax Registration?
Businesses must navigate several steps to obtain a North Carolina Alcohol Tax Registration. Below are the general guidelines, but applicants should refer to the registration statutes for details on the process.
Step 1 – Obtain a Permit
Wholesalers, importers, and nonresident vendors must obtain a permit from the ABC Commission before registering with the Department of Revenue. To apply for a permit, businesses must mail a completed application to the following address:
NC ABC Commission
400 East Tryon Road
Raleigh, NC 27610
Wholesalers and importers must submit the following items with their applications:
-
- $300 application fee
- Inspection/Zoning Compliance Form
- Detailed diagram of the premises covered by the permit
- Company formation documents
Nonresident vendors must submit the following items with their applications:
-
- Federal Basic Permit or Brewer’s Notice
- Company formation documents
Applicants must obtain a permit for each place of business they operate.
Step 2 – Apply for a Registration
Wholesalers, importers, and nonresident vendors may apply for an Alcohol Tax Registration after obtaining their required ABC Commission Permit. To apply for registration, businesses should mail a completed application to the following address:
North Carolina Department of Revenue
Attn: Registration
3301 Terminal Drive, Suite 125
Raleigh, NC 27604
Step 3 – Purchase a Surety Bond
Beer/wine wholesalers, importers, and certain nonresident vendors must purchase and maintain a surety bond (limits outlined in Table 1). The bond amount for first-time registration applicants is determined by estimating their tax liability for the remainder of the calendar year based on their current amount inventory.
What are the Insurance Requirements for the North Carolina Alcohol Tax Registration?
North Carolina does not require beer/wine wholesalers, importers, and nonresident vendors to purchase liability insurance as a prerequisite to obtaining an ABC Commission Permit or Alchohol Tax Registration. Beer/wine wholesalers, importers, and certain nonresident vendors must purchase and maintain a surety bond (limits outlined in Table 1).
How Do Businesses File Their North Carolina Alcohol Tax Bonds?
Businesses should mail their completed bond forms, including the power of attorney, to the following address:
North Carolina Department of Revenue
Attention: Licensing and Bonding Unit
3301 Terminal Drive, Suite 125
Raleigh, NC 27604
The surety bond requires signatures from the surety company that issues the bond, the applicant, and a notary verifying the applicant’s signature. The surety company should include the following information on the bond form:
- Legal name of the entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can Businesses do to Avoid Claims Made Against Their North Carolina Alcohol Tax Bonds?
To avoid claims against their Alcohol Tax bonds, wholesalers, importers, and nonresident vendors must ensure that they pay all required taxes on time and in full and render all required reports to the North Carolina Department of Revenue.
What Other Insurance Products Can Agents Offer North Carolina Alcohol Tax Bondholders?
Most reputable businesses that need an Alcohol Tax bond will also purchase 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 North Carolina Alcohol Tax Bond Customers?
North Carolina conveniently provides a public database of active ABC Commission Permits. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.