Surety Bond Encyclopedia

Alcoholic Beverage Tax Bond - Statewide in California

Brief Summary

California does not demand security from every alcoholic beverage taxpayer. When CDTFA does ask, it sets a figure for your account, and that figure can be raised later. A surety bond lets you meet the demand for an annual premium instead of placing cash or a bank deposit with the state.

Revenue and Taxation Code Section 32102 lets CDTFA require any person subject to the Alcoholic Beverage Tax Law to place security with it whenever it deems that necessary to ensure compliance. Under Section 32103 the amount is fixed per taxpayer at not less than $500 and not more than twice the estimated monthly tax for monthly filers, or twice the estimated tax for the reporting period for those who report less often. A bond executed by an admitted surety insurer and payable to the state is one of the accepted forms.

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How to Apply for a Alcoholic Beverage Tax Bond:

Confirm the security amount CDTFA has set for your account.
Provide your CDTFA alcoholic beverage tax account number and legal name exactly as on your ABC license.
Provide owner or officer information for the surety's underwriting review.
Have an admitted surety insurer issue the bond for the amount CDTFA set, payable to the State of California.
Deliver the executed bond to CDTFA.
If CDTFA later raises the amount, arrange an increased bond.

Detailed Information About the California Alcoholic Beverage Tax Bond:

It is not automatic

The most common mistake is assuming every alcohol licensee posts this bond on day one. Section 32102 was amended by Stats. 1996, Ch. 1087, effective January 1, 1997, and now reads as a discretionary power: CDTFA may require security whenever it deems it necessary to ensure compliance. When it does, it fixes the amount for that account.

Who is subject to the tax

Under Section 32101, issuing a manufacturer's, winegrower's, wine blender's, distilled spirits manufacturer's agent's, rectifier's, wholesaler's, importer's or customs broker's license, or a wine direct shipper permit, registers the holder as an alcoholic beverage taxpayer. Common carriers other than railroads and steamship companies must also register before hauling alcoholic beverages into California. CDTFA tells each new ABC licensee which tax account type it must register for.

How the amount is set

Section 32103 gives CDTFA a range rather than a fixed figure:

Monthly filers: not less than $500 and not more than twice the estimated monthly tax.
Filers on longer reporting periods: not less than $500 and not more than twice the estimated tax for the reporting period.

CDTFA may increase or reduce the amount at any time, so a growing account can be asked for more.

Accepted forms of security

Section 32102 allows cash, insured deposits in banks and savings and loan institutions, or a bond executed by an admitted surety insurer and payable to the state. Whichever form is used must be conditioned on faithful performance of the Alcoholic Beverage Tax Law and expressly provide for payment of all license taxes, penalties and other obligations.

Why a lapse matters

Section 32104 requires every bond to say that a surety's withdrawal takes effect on the first day of the next calendar month if CDTFA receives the notice on or before the 15th, and otherwise on the first day of the second calendar month. Under Section 32107, when a bond is canceled or becomes void or unenforceable, or when taxes or penalties go unpaid, CDTFA must give written notice to the Department of Alcoholic Beverage Control.

Eligibility and Requirements for a California Alcoholic Beverage Tax Bond:

Amount fixed by CDTFA at not less than $500 and not more than twice the estimated tax for your reporting period, per Revenue and Taxation Code Section 32103.
Bond executed by an admitted surety insurer and payable to the state.
Bond conditioned on faithful performance of the Alcoholic Beverage Tax Law and payment of all license taxes, penalties and other obligations.
Withdrawal clause matching the timing in Section 32104.
Bond kept in force as long as CDTFA requires security on the account.

California Alcoholic Beverage Tax Bond FAQs:

When does an ABC licensee have to post this bond?

When CDTFA requires it. Section 32102 lets CDTFA require security whenever it deems it necessary to ensure compliance. Once CDTFA has set an amount for your account, that is the figure to bond.

How does CDTFA decide the amount?

Section 32103 sets a floor of $500 and a ceiling of twice your estimated monthly tax if you file monthly, or twice your estimated tax for the reporting period if you file less often. CDTFA picks the figure within that range.

Can the amount change after I post the bond?

Yes. Section 32103 lets CDTFA increase or reduce the amount at any time.

Can I use cash instead of a bond?

Yes. Section 32102 accepts cash, insured deposits in banks and savings and loan institutions, or a bond from an admitted surety insurer. A bond avoids holding that money with the state.

Will ABC find out if my bond is canceled?

Yes. Section 32107 requires CDTFA to give written notice to the Department of Alcoholic Beverage Control when a taxpayer's bond is canceled or becomes void or unenforceable, or when the taxpayer fails to pay taxes or penalties due.