Surety Bond Encyclopedia

Cigarette and Tobacco Products Tax Bond - Statewide in California

Brief Summary

A California cigarette and tobacco products distributor license will not issue until security is on file, and the $1,000 minimum is only the starting point. Distributors who defer payment for tax stamps post security tied to those deferred purchases, which can reach twice the deferred amount. A surety bond meets that requirement for an annual premium instead of tying up cash with CDTFA.

Revenue and Taxation Code Section 30141 requires every applicant for a California cigarette and tobacco products distributor license to file security with CDTFA in the amount and form CDTFA prescribes. Section 30142 sets a $1,000 minimum for every licensed distributor and higher amounts for distributors who defer payment for stamps and meter register settings. CDTFA's guide states there are no security deposit requirements for retailer, wholesaler or manufacturer and importer licenses, so this bond is a distributor obligation.

We can help with all California bonds!

How to Apply for a Cigarette and Tobacco Products Tax Bond:

Confirm you are applying for a distributor's license. Retailer, wholesaler and manufacturer or importer licenses carry no CDTFA security deposit.
Decide whether you will defer payment for stamps monthly, twice monthly or weekly, since that sets the higher security tier.
Confirm the security amount CDTFA has fixed for your account, never less than $1,000.
Provide the legal entity name and each licensed location exactly as on the CDTFA application.
Have an admitted surety insurer issue the bond payable to the State of California for the amount CDTFA set.
File the bond with CDTFA before the license is issued, and increase it if CDTFA raises the amount.

Detailed Information About the California Cigarette and Tobacco Products Tax Bond:

Distributors post it, wholesalers do not

Applicants often mix up the license types. Under Section 30140, every person who wants to sell cigarettes or tobacco products as a distributor files an application with CDTFA, and each place of business needs its own license. Section 30141 requires every distributor applicant to file security. CDTFA's getting started guide says a distributor must post a minimum $1,000 security deposit before the license can be issued, and that there are no security deposit requirements for a retailer's, wholesaler's, or manufacturer's or importer's license. Section 30156 adds that no bond may be required for a wholesaler's license.

The tiers

Section 30142(a) says CDTFA fixes the amount for each distributor, may increase or reduce it at any time, and requires at least $1,000 from every licensed distributor. If the distributor elects under Section 30168 to defer payment for stamps and meter register settings, Section 30142(b) sets the security as a share of the deferred purchases, as fixed by CDTFA:

Monthly payments: not less than 70 percent and not more than twice the amount.
Twice-monthly payments: not less than 50 percent and not more than twice the amount.
Weekly payments: not less than 25 percent and not more than twice the amount.

The deferral exception

Under Section 30142(d), CDTFA may authorize deferral with no additional security if the distributor's average monthly purchases over the previous 12 months do not exceed 72,000 stamps or meter register settings, and the distributor has been licensed for at least five years, has not been delinquent in filing or in paying tax for the preceding three consecutive years, keeps an email address on file for payment information, and meets any other criteria CDTFA requires. The $1,000 base security still applies.

Forms of security and what a lapse does

Section 30141 accepts cash, insured deposits in banks or savings and loan institutions, or a bond executed by an admitted surety insurer and payable to the state, conditioned on payment of all taxes, penalties and other obligations. A surety's withdrawal takes effect on the first day of the next calendar month if CDTFA receives notice by the 15th, under Section 30143. Section 30144 suspends the distributor's license when the bond is canceled or becomes void or unenforceable, or when the distributor fails to pay amounts due. Under Section 30146, CDTFA can collect certified delinquencies from deposited security.

Term and release

A distributor's license runs for the calendar year, January through December, and is renewed every year. CDTFA's manual says mandatory distributor security is released in a timely manner if the account is in good standing when the close-out review is complete.

Eligibility and Requirements for a California Cigarette and Tobacco Products Tax Bond:

Minimum security of $1,000 for every licensed distributor under Revenue and Taxation Code Section 30142(a).
Deferred stamp payment security of 70, 50 or 25 percent minimum, up to twice the deferred amount, depending on payment frequency.
Bond executed by an admitted surety insurer, payable to the state.
A separate distributor license for each place of business.
Annual license renewal on the calendar year.

California Cigarette and Tobacco Products Tax Bond FAQs:

Is the bond always $1,000?

No. $1,000 is the minimum for every licensed distributor. CDTFA fixes the amount for each account and can raise it at any time, and distributors who defer payment for stamps post security of at least 70, 50 or 25 percent of the deferred amount, depending on whether they pay monthly, twice monthly or weekly.

Which license types post this security?

Distributors. Section 30141 requires security from every distributor applicant. Section 30156 says no bond may be required for a wholesaler's license, and CDTFA's guide lists no security deposit for retailer or manufacturer and importer licenses.

Can a small distributor defer stamp payments without extra security?

Yes, with CDTFA's authorization, if average monthly purchases over the past 12 months do not exceed 72,000 stamps or meter register settings and the distributor has five years of licensure and three clean years of filing and payment, among the other conditions in Section 30142(d).

What happens if the bond is canceled?

Section 30144 suspends the distributor's license when the bond is canceled or becomes void or unenforceable. Replace the bond before the surety's withdrawal takes effect.

Do I need one bond for each location?

Each place of business needs its own distributor license under Section 30140. Ask CDTFA how it wants the security for your locations structured before the bond is issued.