A surety bond is an agreement between 3 parties:
Obligee – The state, municipality, or other entity requiring the purchase of the bond
Principal – The business seeking the surety bond
Surety – The bonding company that executes the bond and provides a guarantee to the Obligee that the Principal will fulfill their requirements.
As municipalities and the Bureau of Cannabis Control begin to issue licenses or permits for the recreational use of marijuana, businesses looking to participate in the industry will have requirements relating to sales tax (surety bonds) and insurance that must be fulfilled. According to the Bureau of Cannabis Control, the California state entity tasked with developing the regulations pertaining to recreational marijuana and medical marijuana, each license holder will need to fulfill two requirements:
(1) Obtain a Bond in the amount of $5,000 payable to the state of California. The Surety Bond acts as a promise/guarantee to the state (Obligee) that the Principal will remit all applicable taxes.
(2) Obtain a Commercial General Liability Insurance policy with a limit of no less than $1 million per loss, and $2 million aggregate. For more information regarding the insurance requirements, please click here.
In addition to the requirements outlined by the Bureau of Cannabis Control, each municipality has the ability to set their own surety bond requirements. For example, although the BCC may only require a $5,000 Surety Bond, the municipality you choose to operate in may require a Surety Bond with a limit higher than $5,000.
Getting in touch with a trusted insurance professional to help guide you, the business owner, through the process of properly fulfilling those requirements is crucial. Click here to get in touch with your trusted insurance agent today.Filed Under: Business Insurance