North Carolina Tobacco Products Tax Bond: A Comprehensive Guide

July 12, 2022

North Carolina Tobacco Products Tax Bond

This guide provides information for insurance agents to help their customers obtain a North Carolina Tobacco Products Tax bond

*This page focuses exclusively on the bonding and licensing requirements for wholesale dealers, retail dealers, and manufacturers dealing in tobacco products other than cigarettes. To learn more about the requirements for cigarette distributors, check out our North Carolina Cigarette Distributor Tax Bond page.

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: Between $2,000 to $2 million (more on this later)
  • Who Needs it: All wholesale dealers, retail dealers, and manufacturers who sell or deal in non-tax-paid tobacco products, other than cigarettes, in North Carolina
  • Purpose: To ensure that the Department of Revenue will receive compensation for financial harm if the dealer/manufacturer fails to pay all required taxes
  • Who Requires the Bond: The North Carolina Department of Revenue

Background

North Carolina Statute 105-113.36 requires all dealers and manufacturers of non-tax-paid tobacco products, other than cigarettes, operating in the state to obtain a license with the Department of Revenue. The North Carolina legislature enacted the licensing requirement to ensure that dealers and manufacturers of non-tax-paid cigarettes pay all required taxes. To provide financial security for the enforcement of the licensing law, dealers and manufacturers must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the North Carolina Tobacco Products Tax Bond?

North Carolina requires dealers and manufacturers of non-tax-paid tobacco products, other than cigarettes, to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that the Department of Revenue will receive compensation for financial harm if the dealer/manufacturer fails to abide by the regulations outlined in the North Carolina Statute 105-113.38. Specifically, the bond protects the department if the dealer/manufacturer fails to pay all required taxes. In short, the bond is a type of insurance that protects the Department of Revenue if the dealer/manufacturer violates the terms of their license.

North Carolina Tobacco Products Tax Bond Form

North Carolina Tobacco Products Tax Bond Form

How Can an Insurance Agent Obtain a North Carolina Tobacco Products Tax Surety Bond?

BondExchange makes obtaining a North Carolina Tobacco Products Tax Bond easy. Simply login to your account and use our keyword search to find the “Tobacco” 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?

North Carolina Statute 105-113.38 dictates that the bond amount must be equal to two times the dealer’s or manufacturer’s average expected monthly tax liability. The statute also dictates that the bond must be a minimum of $2,000 and a maximum of $2 million.

Is a Credit Check Required for the North Carolina Tobacco Products Tax Bond?

Surety companies will run a credit check on the applicant to determine eligibility and pricing for the North Carolina Tobacco Products Tax 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 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 North Carolina Tobacco Products Tax Bond Cost?

The North Carolina Tobacco Products Tax Bond can cost anywhere 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. The chart below offers a quick reference for the cost of a $10,000 bond requirement.

$10,000 Tobacco Products Tax Bond Cost

Credit Score Bond Cost (1 year)
720+ $100
680 – 719 $150
650 – 679 $200
600 – 649 $400
550 – 549 $1,250

*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 wholesale and retail dealers of non-tax-paid tobacco products, other than cigarettes, to purchase a surety bond as a prerequisite to obtaining a business license. To paraphrase North Carolina statute 105-113.4, a dealer is any person that sells tobacco products to other retailers, wholesalers, or the end consumer.

Additionally, manufacturers that sell non-tax-paid tobacco products to licensed retailers and/or wholesale dealers must purchase a bond and obtain a license as well.

How Do Tobacco Products Dealers Apply for a License in North Carolina?

Tobacco products dealers and manufacturers in North Carolina must navigate several steps to obtain a license. Below are the general guidelines, but applicants should refer to the application form for details on the process.

License Period – All North Carolina Tobacco Products Licenses expire on June 30 of every year and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Dealers and manufacturers must purchase and maintain a surety bond in an amount equal to two times their average expected monthly tax liability. The bond must be a minimum of $2,000 and a maximum of $2 million.

Step 2 – Complete the Application

All North Carolina Tobacco Products License applications, including a completed service of process form, should be mailed to the following address:

North Carolina Department of Revenue
3301 Terminal Drive, Suite 125
Raleigh, NC 27604

Dealers and manufacturers must complete the application in its entirety, and pay a $25 fee. North Carolina requires applicants to obtain a separate license for each place of business they operate.

How do North Carolina Tobacco Products Dealers Renew Their Licenses?

Dealers and manufacturers should mail their completed renewal applications to the following address:

North Carolina Department of Revenue
3301 Terminal Drive, Suite 125
Raleigh, NC 27604

All North Carolina Tobacco Products Licenses expire on June 30 of every year and must be renewed before the expiration date.

What are the Insurance Requirements for Tobacco Products Dealers in North Carolina?

North Carolina does not require dealers and manufacturers to obtain any form of liability insurance as a prerequisite to obtaining a Tobacco Products License. Dealers and manufacturers must purchase and maintain a surety bond in an amount equal to two times their average expected monthly tax liability. The bond must be a minimum of $2,000 and a maximum of $2 million.

How Do North Carolina Tobacco Products Dealers File Their Bonds?

Dealers and manufacturers should mail their completed bond forms, including the power of attorney, to the following address:

North Carolina Department of Revenue
3301 Terminal Drive, Suite 125
Raleigh, NC 27604

The surety bond requires signatures from the surety company that issues the bond and from the applicant. 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 North Carolina Tobacco Products Dealers do to Avoid Claims Made Against Their Bonds?

To avoid claims against their bonds, tobacco products dealers and manufacturers in North Carolina must ensure that they pay all required taxes on time and in full.

What Other Insurance Products Can Agents Offer Tobacco Products Dealers in North Carolina?

Although not required, most reputable tobacco products dealers and manufacturers will 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 Tobacco Products Dealer Customers?

North Carolina unfortunately does not provide a public database of active tobacco products dealers and manufacturers in the state. We suggest contacting the Department of Revenue’s Excise Tax Division at (919) 707-7500 to obtain this information. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

2022-07-14T18:12:23-04:00