Consumption on the Premises - Full Liquor ($10,000) Bond - Statewide in Tennessee

Brief Summary

Two corrections before you buy anything. This bond is filed with the Tennessee Department of Revenue, not with the Alcoholic Beverage Commission, and the two agencies are not interchangeable. And $10,000 is a floor, not a fixed price. The statutory amount is four times your average monthly liquor-by-the-drink tax liability, with $10,000 as the minimum, so a busy room gets a bigger bond after Revenue reviews the first year of returns. New applicants start at $10,000.

Tennessee requires every holder of a licence authorizing consumption of alcoholic beverages on the premises to post a bond with the Department of Revenue. Under Tenn. Code Ann. 57-4-302(3)(A)(i) the amount is four times the average monthly tax liability as determined by the Commissioner, and 57-4-302(3)(A)(ii) sets a separate floor of not less than $10,000 for every on-premises consumption licensee. The Department applies a $10,000 minimum effective July 1, 2024, and reviews bond amounts annually, adjusting them up or down. The bond is a condition precedent to the licence, and forfeiture or cancellation of it automatically revokes the licence.

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How to Apply for a Consumption on the Premises - Full Liquor ($10,000) Bond:

• Confirm the jurisdiction where you will operate has authorized on-premises sales of alcoholic beverages.
• Get the liquor-by-the-drink licence from the Tennessee Alcoholic Beverage Commission first. The bond is filed with Revenue, but the ABC licence comes before it.
• Register for liquor-by-the-drink tax with the Department of Revenue through TNTAP.
• Expect $10,000 as a new applicant, since there is no filing history for Revenue to average yet.
• Legal entity name exactly as it appears on the ABC licence and the Revenue registration.
• Owner or principal information and authorization for a credit review.
• Complete the bond application, review the quoted premium, and pay it.
• Execute the Department of Revenue tax bond form for liquor-by-the-drink rather than a generic bond form.
• File the bond with the Department of Revenue, and post your price schedule with them as well.
• Diary the renewal. Cancellation or forfeiture of the bond automatically revokes the licence under 57-4-302(3)(A)(i).
• Watch for the annual bond review. If Revenue recalculates your amount upward you will need the bond increased.

Detailed Information About the Tennessee Consumption on the Premises - Full Liquor ($10,000) Bond:

The bond goes to Revenue, not to the ABC

Start here, because it is the mistake that costs the most time.

The Tennessee Alcoholic Beverage Commission issues your liquor-by-the-drink licence. The Department of Revenue collects the tax on what you pour, and the bond secures that tax. Tenn. Code Ann. 57-4-302(3)(A)(i) says the licensee posts the bond with the Commissioner, and 57-4-302(3)(A)(ii) says it goes to the department of revenue. Neither one says ABC.

So the sequence runs: confirm your jurisdiction has authorized on-premises sales by referendum, get the licence from the ABC, then register with Revenue through TNTAP, post the bond, and post your price schedule. Sending the bond to the wrong agency does not advance any of that.

$10,000 is the floor, not the number

The statute does not name $10,000 as the bond. It names a formula.

57-4-302(3)(A)(i) requires a bond in an amount equal to four times the average monthly tax liability as determined by the commissioner, or $1,000, whichever is greater. That $1,000 in the statute is not what anybody pays now, because 57-4-302(3)(A)(ii) adds that each holder of a licence authorizing consumption on the premises shall post a bond of not less than $10,000. The Department applies a $10,000 minimum effective July 1, 2024, and its own guidance describes the requirement after the initial year as four times the average monthly tax liability over a twelve month period.

So a new applicant posts $10,000 because there is no filing history to average. After you have been open a year, Revenue looks at your actual returns. If four times your average monthly tax comes to more than $10,000, your bond goes up. Revenue reviews these annually and can move the amount in either direction, and it notifies you when it changes.

Where the $10,000 stops covering you

Worth working out before you sign a lease, because it is arithmetic rather than guesswork.

The liquor-by-the-drink tax under 57-4-301(c) is 15 percent of the sales price of alcoholic beverages sold for consumption on the premises. Four times average monthly tax equals $10,000 when average monthly tax is $2,500, and $2,500 of tax at 15 percent comes from about $16,700 of monthly alcohol sales.

In round terms, a room doing roughly $200,000 a year in alcohol sales sits at the point where the bond starts climbing above the $10,000 minimum. Below that you should stay at the floor. Well above it, plan for a larger bond at your first review and a larger premium with it.

Restaurants do not get a discount below the floor

This one catches people, because there really is a restaurant reduction in the statute and it really does not help here.

57-4-302(3)(A)(i) says that if a restaurant is licensed by the commission under 57-4-101(i), the bond amount imposed shall be one fifth the amount specified in that subdivision. That reduction applies to the (3)(A)(i) calculation.

It does not appear in (3)(A)(ii). The $10,000 floor there is written for each holder of a licence authorizing consumption of alcoholic beverages on the premises, with no restaurant carve out and no reduction. A restaurant should not expect to file $2,000 and be done. If your situation looks like it turns on this, put the question to Revenue in writing before you buy, because the two subdivisions are worded differently on purpose.

Cancelling the bond kills the licence

Read this sentence in 57-4-302(3)(A)(i) carefully: the forfeiture or cancellation of the bond, for any reason whatsoever, shall automatically revoke the licence granted herein.

Automatically. No hearing, no cure period in that sentence. That makes an unpaid renewal premium a licence problem rather than an accounting problem, so put the renewal date somewhere you will actually see it and keep the surety current on your mailing address.

You do not have to use a surety company

The statute gives you options, and they are worth knowing even if most operators still buy the bond.

Under 57-4-302(3)(B), instead of a corporate surety the Commissioner may allow the licensee to secure the bond with collateral in the form of a certificate of deposit with a face value equal to the bond amount, deposited with an authorized state depository, and interest on that certificate is payable to the licensee who deposited it. 57-4-302(3)(A)(ii) is broader still and allows a corporate surety bond, a cash deposit, a bond secured by a certificate of deposit, or another form the department authorizes by rule. Revenue publishes a Pledge of Collateral form alongside its tax bond form.

The trade is the usual one. A surety bond costs a premium and leaves your capital free. A cash deposit or certificate ties up the full $10,000 or more but costs no premium and, in the certificate case, still earns you the interest.

One more thing that is not this bond

The annual privilege tax you pay on the licence itself is separate from the bond and separate from the 15 percent tax on sales. Under 57-4-301(b) it is set by licence type and size, so a restaurant pays by seating capacity and a hotel by room count, and the figures differ across categories. Budget the privilege tax, the bond premium and the monthly tax as three different things.

Eligibility and Requirements for a Tennessee Consumption on the Premises - Full Liquor ($10,000) Bond:

• A corporate surety approved by the Commissioner, described in 57-4-302(3)(A)(i) as good and solvent corporate surety.
• Bond amount of four times average monthly liquor-by-the-drink tax liability as determined by the Commissioner, subject to a minimum of $10,000 under 57-4-302(3)(A)(ii).
• The Tennessee Department of Revenue as the filing agency, not the Alcoholic Beverage Commission.
• Conditioned upon the proper payment of all taxes for which the licensee may become liable.
• The Department of Revenue's tax bond form for liquor-by-the-drink.
• A current ABC liquor-by-the-drink licence, and a jurisdiction that has authorized on-premises sales.
• Entity name on the bond matching the ABC licence and the Revenue registration exactly.
• Owner credit review. At the $10,000 minimum credit generally shapes the rate rather than deciding eligibility. Larger bonds driven by high tax liability get a closer look.

Tennessee Consumption on the Premises - Full Liquor ($10,000) Bond FAQs:

Official and Additional Resources for the Tennessee Consumption on the Premises - Full Liquor ($10,000) Bond: