South Carolina Tobacco Tax Bond: A Comprehensive Guide
August 24, 2022
This guide provides information for insurance agents to help their customers obtain a South Carolina Tobacco Tax bond.
At a Glance:
- Average Cost: Between 1.5% to 4% of the bond amount per year based on the applicant’s credit history
- Bond Amount: Determined on a case-by-case basis (more on this later)
- Who Needs it: All businesses that purchase, sell, or distribute cigarettes in South Carolina as well as certain businesses that deal in other tobacco products
- Purpose: To ensure the state will receive compensation for financial harm if the business fails to pay all required taxes
- Who Regulates Tobacco Taxes in South Carolina: The South Carolina Department of Revenue
South Carolina requires all businesses that purchase, sell, or distribute tobacco products to obtain a license from the Department of Revenue. The South Carolina legislature enacted the licensing requirement to ensure that businesses that deal in tobacco products pay all required taxes. To provide financial security for the enforcement of the licensing law, all businesses that purchase, sell, or distribute cigarettes, as well as certain businesses that deal in other tobacco products, must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the South Carolina Tobacco Tax Bond?
South Carolina requires businesses that purchase, sell, or distribute tobacco products to purchase a surety bond as part of the application process to obtain a license. The bond ensures that the Department of Revenue will receive compensation for financial harm if the business fails to abide by the regulations outlined in South Carolina Statute 12-54-200. Specifically, the bond protects the department if the business fails to pay all required taxes. In short, the bond is a type of insurance that protects the Department of Revenue if the business violates the terms of its license.
How Can an Insurance Agent Obtain a South Carolina Tobacco Tax Surety Bond?
BondExchange makes obtaining a South Carolina Tobacco 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?
The Department of Revenue will determine the bond amount on a case-by-case basis based on the amount of taxes the business is forecasted to owe. However, South Carolina Statute 12-54-200 dictates that the limit on the tobacco tax bond may not exceed three times the business’s estimated tax liability for each filing period.
Is a Credit Check Required for the South Carolina Tobacco Tax Bond?
Surety companies will run a credit check on the owners of the business to determine eligibility and pricing for the South Carolina Tobacco 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 South Carolina Tobacco Tax Bond Cost?
The South Carolina Tobacco Tax Bond can cost anywhere between 1.5% to 4% 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 Tax Bond Cost
|Credit Score||Bond Cost (1 year)|
|650 – 799||$200|
|600 – 649||$400|
*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?
South Carolina requires all businesses that purchase, sell, or distribute cigarettes to purchase a surety bond as a prerequisite to obtaining a license from the Department of Revenue. Additionally, businesses that deal in other tobacco products may be required to purchase a bond if they fail to pay all required taxes for two filing periods within a 12-month period. The following businesses are subject to the bonding requirements:
- Wholesalers of tobacco products
- Retailers that purchase untaxed tobacco products
- Vending machine operators that sell tobacco products on another person’s property
- Sales representatives for manufacturers of tobacco products
Exemptions to the bonding and licensure requirements include:
- Retailers that purchase taxed tobacco products
- Vending machine operators selling tobacco products on their own property
- Persons selling or distributing leaf tobacco
- Churches, schools, or charitable organizations operating booths
How do South Carolina Businesses Apply for a Tobacco Products License?
Businesses in South Carolina must navigate several steps to obtain a tobacco products license. Below are the general guidelines, but businesses should refer to the application form for details on the process.
Step 1 – Contact the Department of Revenue
Businesses should contact the Department of Revenue before applying for a Tobacco Products License. The Department will walk them through the application process and answer any questions they may have.
Step 2 – Complete the Application
All South Carolina Tobacco Products License applications should be mailed to the following address:
SC Department of Revenue
P.O. Box 125
Columbia, SC 29214-0400
No application fee is required to obtain a South Carolina Tobacco Tax License.
Step 3 – Purchase a Surety Bond
After reviewing their application, the Department of Revenue will inform the applicant of their required bond amount.
What are the Insurance Requirements for the South Carolina Tobacco Products License?
South Carolina does not require businesses to purchase any form of liability insurance as a prerequisite to obtaining a Tobacco Products License. All businesses that purchase, sell, or distribute cigarettes must purchase and maintain a surety bond. Additionally, certain businesses that deal in other tobacco products must purchase a bond as well.
How do South Carolina Businesses File Their Tobacco Tax Bond?
Businesses should mail their completed bond forms, including the power of attorney, to the following address:
SC Department of Revenue
P.O. Box 125
Columbia, SC 29214-0400
The surety bond requires signatures, including witness signatures, from both the surety company that issues the bond and from a representative of the business. The surety company should include the following information on the bond form:
- Legal name and address of the entity/individual(s) buying the bond
- Surety company’s name and state of incorporation
- Bond amount
- Location where notices of noncompliance can be sent
- Date the bond is signed
What Can South Carolina Businesses do to Avoid Claims Against Their Tobacco Tax Bonds?
To avoid claims made against their Tobacco Tax bonds, businesses in South Carolina must ensure that they pay all required taxes on time and in full.
What Other Insurance Products Can Agents Offer Businesses in South Carolina?
Most reputable businesses 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 South Carolina Businesses That Deal in Tobacco Products?
South Carolina conveniently provides a public database of active businesses in the state that purchase, sell, or distribute tobacco products. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.