TTB Requires Surety Bonds for Manufacturers and Exporters of Tobacco Products

Manufacturers of tobacco products, export warehouse proprietors and manufacturers of cigarette papers and tubes are required to have surety bond before they can operate a business.

Obligee and Bond Conditions:

The Obligee (the TTB) is the entity that requires the bond or collateral in order to make or export tobacco products. The bond ensures the principal (you, the applicant) will comply with federal laws and provide payment of any tax liabilities due to the US Department of Treasury. Failure to comply or perform in the manor prescribed by the TTB may result in a claim to be filed against the bond or financial security. In the instance of a surety bond, if the TTB files a claim against the surety bond, the tobacco manufacturer or exporter (named as the principal on the bond form) will be responsible for repayment of the claimed amount to the surety if the claim is paid out.

The surety bond or collateral must be in place from the time of the initial permit and long as the business remains in operation. The surety bond premium will renew on the bond on an annual basis. Failure to pay the renewal premium annually will result in the termination of the bond.

Surety Bond Requirements:

A surety bond is required based on the TTB’s requirements. The bond amount is determined by the type of business operation and the estimated tax liability amount.

• An individual factory that manufactures cigarette papers or tubes is required to have a minimum $1,000 surety bond. The bond amount may need to be increased or decreased based on the tax liability in a calendar month. The maximum bond amount will not exceed $20,000.
• Proprietors of export warehouses are required to have a minimum $1,000 surety bond. After the initial year, the bond amount may need to be increased or decreased based on the tax liability of stored and to be stored products. The maximum bond amount will not exceed $200,000.
• An individual factory that manufactures cigarettes or a combination of tobacco products is required to have a minimum $1,000 surety bond. After the initial year, the bond amount may need to be increased or decreased based on the tax liability. The maximum bond amount will not exceed $250,000.
• An individual factory that manufactures tobacco products other than cigarettes is required to have a $150,000 surety bond.
• Manufacturers having more than one facility producing tobacco products must meet the individual factory requirement AND obtain a blanket bond based on the following tax liability:
• Tax liability for all locations is less than $250,000 requires a $250,000 surety bond.
• Tax liability is more than $250,000 up to $500,000- a surety bond in the amount of 50% of the total amount over $250,000 plus $250,000.
• Tax liability is more than $500,000- a surety bond in the amount of 25% of the total amount over $500,000 plus $350,000.

If providing collateral instead of a surety bond, the collateral will be in an amount equal to the surety bond.

How Much Will This Bond Cost?

The premium that you pay for a TTB Tobacco Surety Bond is dependent on credit and the amount of tax liability. For bond amounts over $50,000, personal and business financial statements will be required. Our rates start at 1% of the bond amount with good credit.

Did You Know?

You must mail the original surety bond and a duplicate original signed copy to: TTB National Revenue Center, 550 Main Street, Suite 8002, Cincinnati, OH 45202-5215.

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