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.
In short: 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.
What does a distillery bond cover?
The bond guarantees the excise tax on spirits held before tax payment; the penal sum is the maximum the surety would pay. Operations bond and withdrawal bond coverage must stay adequate as inventory grows.
Who no longer needs a bond?
Since 2017, DSPs that were liable for $50,000 or less in excise tax in the prior year and expect the same may be exempt from bond requirements. Growth can pull an operation back into needing coverage, so bond adequacy is worth checking against inventory, not assuming.
Tracking this in a spreadsheet? Spirit Sight records it where it happens and builds inventory, compliance, and the books from the same entry. See it on a demo.
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