All terms
Distillery glossary
Bond (Penal Sum)
A distilled spirits bond is a financial guarantee a DSP files with the TTB covering the excise tax on spirits held in storage or in transit. The penal sum is the maximum dollar amount the bond covers.
The bond protects the government's tax interest in spirits that have not yet been taxpaid. Since 2017, small producers below a tax-liability threshold may be exempt from the bond requirement, but those above it must maintain adequate coverage as inventory grows. Knowing the proof gallons and tax value in bond at any moment is what sizes the bond correctly.
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