What is Liquor Bond?
Businesses that sell alcohol to consumers generally have to acquire a liquor license from the state(s) they do business in. In many states, obtaining a liquor license requires having a liquor bond
A liquor bond is a specialized surety bond that’s specifically designed for retailers who sell alcoholic beverages. As is true with most surety bonds, liquor bonds are more akin to lines of credit than true insurance policies -- even though these bonds are usually sold by insurers. The line of credit that a bond provides is guaranteed by the underwriting insurance company.
What a bond is used for is clearly defined by the terms of the bond and the laws of the state a business operates in. In most cases, bonds are used to pay a state if a retailer fails to submit all their required sales tax payments. Sometimes, bonds may be used to provide compensation if a retailer commits another defined infraction.
(Because these bonds are frequently used to guarantee sales tax payments, they’re sometimes referred to as “liquor tax bonds.”)