A TTB bond protects the federal excise tax on product you are holding before the tax is paid. Too little coverage puts your permit at risk; the wrong type leaves gaps. Here is how bonds work for wineries, breweries, and distilleries, what your coverage has to account for, and a quick estimator to see if yours is in the right range.
Since January 1, 2017, many small producers are exempt. If you were liable for $50,000 or less in federal excise tax in the prior year, and reasonably expect $50,000 or less this year, on beer, wine, or spirits, you generally are not required to hold a federal bond. You still have to notify TTB and be approved for the exemption; it is not automatic.
Above that threshold, a bond is required, and the coverage has to be enough to protect the tax on everything you are holding. Distilleries are the important exception: because of the value of spirits sitting in bond, most distillers carry a bond regardless, and coverage is easy to underestimate once you start aging inventory.
The trap: a producer qualifies for the exemption, grows, crosses $50,000, and never puts a bond in place, or holds an old bond that no longer covers a warehouse full of aging product. Both are exactly the kind of gap a TTB audit finds.
This is the point producers most often miss. Bond coverage is not based on how much you produce. It is based on the total federal excise tax value of all product sitting in bond on your premises at any given time, before that tax has been paid. That total includes:
So a distillery that makes a modest amount but ages years of inventory, or takes in bulk spirits by transfer, or warehouses for other brands, can carry a far larger tax value in bond than its production alone would suggest, and its coverage has to match that value at its peak, not its average.
A rough, order-of-magnitude estimate of the coverage your operation may need. Not a determination, TTB sets the final penal sum.
The bond forms, the types of coverage, and what each one actually protects, broken out by winery, brewery, and distillery.
Distilled spirits carry the highest tax per unit, so bonds matter most here. A DSP files a Distilled Spirits Bond and the required coverage depends on the operations on your permit: most distilleries register as distiller, warehouseman, and processor, and there is a $5,000 minimum per operation, so a typical new DSP carries at least $15,000 in operations coverage.
Coverage is figured at the standard rate. The bond protects the government's full potential tax exposure, so spirits coverage is generally calculated at the standard $13.50 per proof gallon, not a CBMA reduced rate you might ultimately pay at removal. Your bond has to cover the full value of what you are holding.
Bonded wine premises use the Wine Bond. Since the 2017 exemption, a winery expecting $50,000 or less in wine excise tax generally does not need one, which covers a large share of small wineries. Above that, the bond has to protect the tax on wine held and removed before payment.
Wine tax rates vary by class (still, sparkling, hard cider) and by CBMA credits, but as with spirits, the point of the bond is to cover the government's exposure on product you are holding, not just your net-of-credit liability.
Brewers use the Brewer's Bond. The same $50,000 exemption applies, so many small breweries operate without a federal bond. Historically brewers held bonds with flat penal sums; above the exemption, coverage must be sufficient for the beer you hold and remove before paying tax.
Beer is taxed per barrel, and CBMA reduced the rate on the first tiers of production for many brewers. Even so, if you exceed the exemption, you need a bond sized to the tax on beer you are holding and deferring, calculated to protect the full revenue at stake.
Transfer in bond is moving product between bonded premises without paying tax at the point of transfer, spirits between DSPs, wine between bonded wine premises, beer between breweries. The tax obligation travels with the product until it is finally removed for consumption or sale and the tax is determined.
Why it matters for your bond: if you receive product in bond, that product is now on your premises and its tax value counts toward the coverage you need. It is easy to have a bond sized for your own production and then quietly outgrow it once you start taking in transfers, or accumulating aging stock, or storing for someone else as a warehouseman. Coverage should reflect everything you hold, not just what you distilled, fermented, or brewed yourself.
Common questions about when you need a TTB bond, how much coverage, and what it has to cover.
Since January 1, 2017, if you were liable for $50,000 or less in federal excise tax in the prior year and reasonably expect $50,000 or less this year, you generally do not need a federal bond on beer, wine, or spirits. Above that threshold a bond is required. Note the exemption is not automatic, you have to notify TTB and be approved for it.
Enough to cover the federal excise tax on the product you are holding before tax is paid. For distilled spirits, operations coverage is estimated from the proof gallons on hand and in transit times the tax rate, and there is a $5,000 minimum per operation (so a typical DSP with distiller, warehouseman, and processor operations carries at least $15,000). Wineries and breweries size coverage to the wine or beer they hold and remove before payment. TTB sets the final penal sum.
No. This is a common misconception. Your bond is based on the total federal excise tax value of all product you hold in bond at any given time, not your production volume. That includes product you produced and are aging, product you received by transfer in bond, product you store for others as a warehouseman, and product in transit to you. A small producer that ages years of inventory or warehouses for other brands can need far more coverage than its output alone would suggest.
Bond coverage is generally figured at the standard tax rate, not a reduced CBMA rate you might ultimately pay at removal. The bond exists to protect the government's full potential tax exposure on product you are holding, so coverage for spirits is typically calculated at the standard $13.50 per proof gallon. Your bond has to cover the full value of what is in storage, regardless of the rate you expect to pay.
Operations coverage protects the tax value of product on your premises or in transit to you, before tax is determined. Withdrawal coverage protects the tax on product from the moment it leaves your premises until you pay. For distilleries, withdrawal coverage is optional if you prepay tax on or before removal, but many carry both under one unit bond.
Yes, significantly. As barrels of spirits or tanks of wine accumulate, the tax value sitting on your premises grows, and your operations coverage has to keep pace. A bond sized for a new operation can quietly become insufficient once you build up aging stock. This is one of the most common ways producers end up under-bonded without realizing it.
Transfer in bond moves product between bonded premises without paying tax at the transfer. If you receive product in bond, it is now on your premises and its tax value counts toward the coverage you need. A bond sized only for your own production can become insufficient once you take in transfers or store product as a warehouseman for others.