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Wine

How to Get Your License Bond when Opening a Winery

Scenario:

I get an Email, asking if I would want a story by Vic Lance, founder and president of Lance Surety Bond Associates, a surety bond expert who helps small businesses get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business. He was offering information of getting a license bond when opening a winery.

My answer: “Just send what he’d write, I’ll do the rest, okay?”  The rest was sent. As I read it, I realized that it was a really well written advertisement, which was the ulterior motive. But, this one was so well written and completely out of my purview.

Decision:

Print it as it exists. It is a good public service announcement. My labor for this blog came from changing the code, behind the scenes, so that when you click on links, you also don’t have to leave the page.

I declare that this is not an endorsement. I don’t know Vic Lance, but biography is formidable, and all pdf. files are good links for you.

Vic Lance of Lance Security Bond Associates

If you’re in the wine business, chances are you could be described as “detail-oriented.” Anyone who’s opened their own winery knows the importance getting every last detail right. But, while you might be more worried about varietals and cultivars, have you studied up on getting your liquor bond?

The liquor bond, also called an alcohol bond or a liquor tax bond, is required by the federal government for any legally-operating winery. Whatever you call it, it serves as a guarantee to the government that your business will pay all its required taxes. In many cases, your state or county authority will require a separate liquor or wine bond for your winery, in addition to the federal requirement.

While the process of getting bonded isn’t complicated, there’s a little more to it than simply filling out a form and paying a fee. We’ve created this handy guide to getting your liquor bond, so you can get the best value and protect your business.

Getting licensed with the TTB

The first step is to get licensed with the Alcohol and Tobacco Tax and Trade Bureau (TTB). Officially, if you’re producing your own wine for commercial sale, the TTB considers your business a “bonded winery.” As such, you’ll need a basic alcohol permit from the Federal Alcohol Administration, and a permit to establish and operate wine premises

Why is the liquor bond required?

Along with the permit applications, you’ll have to submit proof of your wine bond. Should you fail to pay your taxes, the government can file a claim against your bond, which the surety will pay, up to the full amount of the bond. You’ll be required to pay the surety back in full, however, and a claim against your bond can have otherwise grave consequences for your business. If you avoid claims and stay on top of your taxes, the liquor bond requirement should be a relatively minor, and hassle-free, part of doing business.

Estimating the cost of your wine bond

The amount of your federally-required bond can vary widely, based on the size of your winery and how much tax liability you will have at a given time. Generally, wineries with stock valued below $50,000 follow slightly different rules than larger wineries. The cost of your bond will only be a percentage of your total bond amount, depending primarily on your credit score. Applicants with good credit, and a sound history of money-management, usually pay between 1% and 4% of the total amount.

You may have heard a rumor that anyone with bad credit can kiss their dreams of winemaking goodbye. In fact, with a reputable surety provider and a solid plan for your financial future, you can still get bonded with less-than-perfect credit. Premiums are generally higher, between 5% and 15% of the total bond cost, to mitigate the risk to the surety. Nonetheless, you will still be able to open your winery, and improve your financials over time.

In addition, remember that your state or county may have additional bonding and licensing requirements.

Getting the right bond for your money

Not all liquor bonds are created equal, and you want to be sure that the TTB recognizes yours as legitimate. Since surety companies don’t deal directly with the public, look for a surety bond agency that works only with A-rated, Treasury-listed surety companies. A reputable surety bond agency will shop around to get you the best rate on your bond, and can offer more personalized service for each applicant.

Giving your winery room to grow
Since your wine bond will be calculated based on your tax liability, an honest, accurate assessment of your business is a must. Plan carefully when it comes to where your product will be stored, and if you can hire a CPA with some winery expertise, then so much the better.

Remember, it’s better for your business to be bonded above your actual tax liability than below. The wine business can fluctuate drastically, and your tax rate can change from one year to the next, based on how much wine you make, or even a wine’s alcohol percentage per volume. You don’t want to be caught with a bumper crop, or a sudden surge in production, without adequate bond coverage. If you’re unsure about the year’s business forecast, give your winery a little room to grow.

Questions?

The process of getting your winery licensed and bonded might seem intimidating at first. If you have any questions about how to get bonded, you can always leave a comment below.

Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps small businesses get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.

4 Responses to “How to Get Your License Bond when Opening a Winery”

  1. Vic,

    I’m a vineyard owner looking to expand. I’m working on plans to build a home and I want to use the basement as my first winery. Can a basement be bonded in Michigan if its sole purpose is winemaking?

    If so, what services do you offer and what are your fees?

    Best,
    Joe

  2. John Self Jr says:

    Hello My name is John.

    I am in the task of starting a small farm/winery business.
    The tax rate in the state of Arkansas is $7.50 per barrel of 30 gallons.
    We are not a huge operation here i may be lucky to make 5,000 barrels to start.
    That is a lot of wine and that number would be per year. It will be just me there is no big office or building or factory just me making wine daily going through the task of hand bottling and racking for 1 year before the wine will be sold.
    So here is the question since the farm is small and then the task is ether by fruit or concentrate, whichever i can get at the time because in the winter months there is little fruit to be had other than apples we were planning to plant back berry and blue berry and raspberry bushes as well anyhow I am so new to this ad trying to get the federal licenses and then i can apply and get a state licenses but i must have the federal first in the state of Arkansas. I hear the bond if under 50,000 will soon not be needed that rule changes in 2017 so if you could help me to understand what I need to do should i still get bonded? or should i Waite and apply after the 2017 mandate?
    I relay could use some advice being a small winery that wants to sell their wine and as i have said there is no big factory all of the making is done by hand one step at a time so if you could give me some help or information on what i will need to do to get the federal licenses I have not applied yet i am in this task gets a little easier as we get down to getting all the paper work done.

    John Self JR

  3. Jo Diaz says:

    Hi, John,

    You have a huge task ahead of you. Of all the jobs I’ve had at a winery, compliance has never been one of them. Let me see if I can get some advice from someone I know in compliance. I’ll get back in a bit, when this person has time to answer your question.

    Good one! — jo

  4. Jo Diaz says:

    According to my source:

    Best bet is to direct him to the TTB and start the process there. http://www.ttb.gov
    He will need to apply for the bonded winery permit.

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