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Found 7 results

  1. InsuranceMan

    PATH Act and Lower FET rates

    Good Day ADI Forum Members, I wanted to do a post today in regards to the new regulations that have taken effect in regards to the PATH Act and the new lower FET rates that have been implemented and how that may affect your need for a bond. This seems to be a hot topic currently so I thought I would address a few issues here. As you all are aware, the PATH Act and the lower FET rates have kicked into effect for the next two years, and there are many of you that are super excited to cancel or terminate your current DSP bond. Well, let’s just hold on a second and think about what these new changes really mean. In the PATH Act, it was determined that any distillery that has less than $50,000 worth of taxable withdrawal in a year’s time no longer is subject to a bond requirement. Then, the new legislation has gone ahead and lowered the FET from $13.50 per proof gallon down to $2.70. That is wonderful, and a boon for distilleries that will allow for growth, capital investment, the hiring of staff, etc. Both the PATH Act and the reduction of the FET’s are fantastic ……………… HOWEVER ………….. The only item that was really contemplated in the PATH Act was the "Withdrawal" amount; the act never specifically said anything about the operations side of the bond. The operations side of the bond is comprised of the "Distiller / Warehouseman / Processor" portion. This portion of the bond covers for items that you have on hand that is either bottled, in process, being held in totes, or aging/maturing on site. In fact, ALL distilleries still have this exposure being that everyone has product on site in one fashion or another, and many of you have a considerable amount of product warehoused at your facilities. Think about this, if for some reason your product on hand were to be lost, stolen, or hijacked the government could still charge the full amount of taxation that would have been due. Yes, the Federal Government reserves the right to still collect the taxation that WOULD have been collected on that product! Sure, there is a repeal process that you could potentially go through to have the taxation abated or forgiven, but there is no guarantee that the TTB would waive these charges, it is done on a case by case basis. In some instances, the taxes may be due upfront until the repeal process can go through the proper channels, and that process can take a while. Although these situations are rare, they can happen. It is also rare for distilleries to blow up or burn to the ground, but that does not mean that you should not carry insurance. For this reason alone, it may be beneficial to keep your bond in place. If a situation such as this were to occur, and you have cancelled your bond, you would have to come up with the cash to pay for the taxation of the lost product. That could certainly become an issue and cause a lot of heartburn in an already stressful situation. In most cases your federal TTB bond should not be costing you more than a few hundred dollars a year, and that is fairly cheap for your piece of mind. As well, the reduced FET’s are only certain for 2018 and 2019, after that, who knows. It could be determined that the rate will go back to $13.50 or even higher, we don’t know, maybe they will leave it alone forever, God willing. Another potential reason to keep an active bond may be that it is easier to increase an already existing bond than it is to go through the entire bonding process again when you get to a point that you have to have one. If you have a history with a surety company of having a bond in place, it is a fairly easy process to issue a superseding bond to increase the amount needed. If you cancel your current bond, and for some reason your financials are not as strong in the future, obtaining a bond for a higher amount (Operation plus your need for over $50,000 in withdrawal) could be difficult. I do want to be clear, I am not trying to be a “fear-monger”, whether you keep your bond in place or not is a personal preference and I would never "twist" someones arm to keep a bond in place if they did not see the need to have one. I just want to make certain that people are educated in this arena prior to making a decision that could potentially have a severe impact on the businesses you all have worked so hard to build. Also, please keep in mind that having a bond in place is not “free money”. By that I mean, as owner of the bond you are indemnifying yourself to the surety. This means that if the surety has to make payment on your behalf, the surety will make every attempt to collect the funds that they paid out to the TTB. They can seize assets of the distillery, your personal assets, etc. The bond is simply there to make payment on your behalf if you cannot at that time. Sooner or later you will have to reconcile with the surety. If you don’t have a bond in place, you will be reconciling with the government. Either way, eventually you will be paying someone back! The long and the short of it is, just because the taxation rate is less for the next two years, and just because you may not hit $50,000 in withdrawal, you may be money ahead to keep your bond in place, especially in regards to the operations side of things. Just "booze for thought".
  2. InsuranceMan

    Technology Woes

    Dear ADI Forum Members, I wanted to let everyone know that over the weekend my iPhone had a major malfunction and is currently not operating. Apple has been amazing and they are getting a new one to me as fast as they can. However, in the meantime, I do not have access to retrieve any voicemails left at my 307-752-5961 number. If you have recently left me a voicemail on my cell phone please also give me a call at the office at 307-673-2496 (or toll free at 1-800-300-4370), or send me an email at aaron.linden@hubinternational.com . Also, do yourselves a favor out there ....... if you rely heavily on your phone and technology, PLEASE back up your files and have a secondary access point. I remember the day when I knew the phone number for everyone that I would call, and know I don't know any of them. Siri is a great assistant, until she is not there anymore!!!!!!!!! LOL!!!!!
  3. Happy 11/11 everyone!!! It has been a little while since I have posted anything new here on the forums and I thank you all for that based on the fact that ADI members have been keeping me VERY busy with insurance and bonding needs. Speaking of bonds, what a segue into the hot topic of the day. On 11/7/17 the TTB released new information in regards to the "Information for Alcohol Excise Taxpayers and Applicants for Permits and Brewers’ Notices Regarding Internal Revenue Code Amendments Affecting Excise Tax Due Dates and Bond Requirements". Specifically they cite the "Protecting Americans from Tax Hikes Act of 2015 (“the PATH Act”) (Public Law 114-113). Section 332 of the PATH Act amends the Internal Revenue Code of 1986 (IRC) to change excise tax due dates and remove bond requirements for certain eligible taxpayers (see 26 U.S.C. 5061 and 5551)." Are you sleeping yet? Still with me????? OK ............ This bulletin they released specifies new "Excise Tax Due Dates" that basically say that if you were not liable for more than $50,000 of taxable liability for the calendar year prior, and you don't think you will be above that amount this year, then you can pay your taxes on a quarterly basis beginning 1/1/17. That's cool. It also says that if you reasonably (can someone define what that may mean?? "reasonably" according to who???) expect to not be liable for more than $1,000 in taxes this year as well as in the prior year, you can now pay those taxes annually rather than quarterly. No offense here, but if you have less than $1,000 in taxable liability as a distiller, you have to be quite small as that is only about 463 bottles a year, or in other words, just under 40 bottles a month. Ok, on to the "beefier" subject of this information and what you are really wanting to know; who is exempt and no longer needs this pesky bond stuff anyway!??!!?!? Well, staring as of 1/1/17 it says, " ..... taxpayers who pay taxes annually (so anyone paying less than $1,000 a year, my words here, not theirs) or quarterly (so those folks doing less than an $50,000 a year in taxable liability) will be exempt from the requirements to file bonds covering operations or withdrawals of distilled spirits or wines for nonindustrial use, or beer." Based on the fact that taxable liability only comes into play when spirits are withdrawn (yes, in some cases destroyed, but lets not focus on the negative here people) for distribution/sale (not a transfer in bond, I know my stuff), then as long as you will have less than $50,000 in taxable liability you are good to go without a bond. So is this as clear as mud yet!?!?!?! Basically what is being said here is that if you are going to have less than $50,000 in taxable liability this year (and you had less than that last year) you do not have to have a bond any longer. "BONDS!??! WE DON'T NEED NO STINKING BONDS!!!!!!!!!!" WooHoo, right!?!?!? Well ................... not so fast there speedy. There are a few things to consider before making the call to your agent and telling them to cancel that money sucking bond (actually, my bonds are the lowest in the country so they are not "money sucking" at all). First off, are you close to that bond limit of $50,000? If you are close, or expect to be "reasonably" (hahahaha) close, you may want to leave it in place, just in case. You do not want to cancel the bond only to have to turn around a few months or a few quarters later because you have increased your sales/distribution which equates to withdrawal, and now need to be bonded again. Another aspect to consider is this, when does your bond term come due? I have a lot of folks who will fit the requirements to cancel their bond, however their bond terms renew in November or December. According to the stipulations, they need to renew and keep their bond up until 1/1/17, so they MUST renew it. Here is another caveat to that, depending on the surety carrier that issues the bond, the premium may be pro-rated (you can get money back for the unused portion of the term once you cancel) but they may keep a minimum of $100 service fee ............ or ............. if the premium is 100% full earned, you may not get anything back. Well, why cancel the bond at that point?!?!?! The other issue is that the TTB will not allow you to cancel the bond until all unpaid taxes are rectified from 2016. Once they are you can file for a bond exemption with the TTB through the PONL system but they never specify how long that process will take. So here again is something to watch out for. What if your bond term is after the 1/1/17 date and you file for the exemption but it takes them 6 months (for whatever reason) to process it. Do you need to renew your bond while this is in process? At this point in time I would suggest that you do renew it since you do not want to be out of compliance during the processing time. See, this is not as simplistic as it is made to sound. Obviously, these scenarios are all in regards to existing DSP proprietors. So what about new applicants. Well, for new applicants, since the current processing time for a permit is over 200 days, you should be able to apply for your permit and ask for the exemption during the permitting process. That part actually does sound simplistic and appears to be pretty straightforward. There is a first time for everything!!! So what does this all mean, in real facts and figures and how do you know if you will be below the magical $50,000 mark? Well here is a quick mathematical computation for you (keep in mind these numbers are rounded for simplistic purposes): Current excise tax liability = $13.50 per proof gallon (proof gallon defined as 50% ABV or 100 proof) Taxes are only due when spirits leave the plant, so anything in holding/process does not count against this amount Most spirits go out the door at 80 proof, so the tax rate then would be $13.50 x .8 = $10.80 per gallon (since it is proofed down) Therefore, $50,000 / $10.80 = 4,629 gallons a year or roughly 23,000 bottles of booze, or nearly 2,000 bottles a month Here are pretty much the same numbers but done in actual proof gallons (not rounded): $50,000/$13.50 = 3,703.7 p.g. One case of 12-750’s at 80 proof = 1.902 p.g. per case 3703.7 p.g./1.902 p.g = 1,947 cases or 23,364 bottles per year (cases rounded down to full case) 1947/12 = 162.25 cases per month 23,364/12 = 1947 bottles per month So there you have it folks. A long run for a short slide as it were. The just of all of this is that some of you may not need a bond if you are just getting going and some of you may not need a bond even if you are operating, however make sure you understand where you stand and when the bond term comes due before cancelling you bond. As always, if you have any questions please feel free to reach out to me with any questions. I can be reached here on the forums, via email at aaron.linden@hubinternational.com , or give me a call or shoot me a text at 307-752-5961. I am always more than happy to assist you with your bonding questions and do keep in mind ***** I OFFER A FULL LINE OF ALL DISTILLERY INSURANCE NEEDS, AS WELL, I HAVE THE BEST RATES IN THE COUNTRY. ***** Just sayin'. Best, Aaron
  4. InsuranceMan

    ADI Convention in San Diego

    Dear Forum Members and Anonymous Info Gatherers, I am so very excited to announce that I will be in attendance at this years convention in San Diego and I look forward to seeing all my old friends and meeting so many of you that I have either communicated with already, or have yet to meet. I will be on the Expo floor located at booth #531 and I encourage all of you that are attending to stop by and introduce yourselves!!!! This year is going to be GREAT!!!!! Since I am always striving to be on the cutting edge of all things insurance and TTB bonding (if you have not read my whitepaper posted in the forums, go, read it right now! Actually, you can wait until you finish reading all of this post first, but then go immediately and read it!) I am super excited to announce that not only will I be in attendance this year, but as well I will have the incomparable Richelle Smith with me as well. Richelle is my TTB Bond underwriter and not only will she be there to assist in answering questions, SHE WILL ALSO BE ABLE TO UNDERWRITE AND ISSUE BONDS ON THE SPOT should you have a need. We will have all of the applications on hand as well as the ability to run all of the needed information and issue bonds right then and there. So, no matter if you are a "first timer" needing a bond for your up and coming distillery, or if you are just in need of a larger bond that you cannot procure though your "normal" channels, we have you covered. Oh, and BTW, our rates are the cheapest in the country for the last year and a half running. So you totally need to swing by and check that out as well since we do more of these than anyone else out there and we are fast, fun, friendly, and did I mention "cheap"!!!!!!!!! Last thing for your consideration, I will also be giving a presentation at the breakout session on Tuesday April 5th at 10:30 entitled, "Insurance: What you know, don't know, need to know" and I would love to pack the room! I promise it will be fun and not "boring old insurance", trust me, I get that insurance can be boring and a horrible topic. Not with me though, I hit all the fine points, the good stuff that you need to know and I keep it light unless you want very specified details. I can do that as well, but I like to keep that for only those that really want to know more as we get into the "nitty gritty" later on. Anyway, please, everyone stop by the booth, say "hi", get a bond while you are in the neighborhood (I want to keep Richelle super busy), and come listen to and interact with me during my presentation. I simply cannot wait to see everyone and I look forward to meeting many of you for the first time.
  5. InsuranceMan

    45 States and Counting

    Dear ADI Forum, I wanted to take a few moments to send out a heart-felt "THANK YOU" to the many of you that have made my exclusive distillery insurance program so successful to date! I just entered into my 45th state of distillery business and could not be any more pleased with the success that we have had and it is all thanks to you fine folks in the forums. You have been wonderful to work with, you have supported me from the beginning and have shared my information with others outside of the forums as well. I have had the great pleasure of getting to know many of you, watch you get going or grow over the last few years. As many of you already know, I have worked with distillery clients for many, many years, but not until I became involved with ADI and the forum was I able to connect with so many great people. I cannot think of any other way to put it besides just saying, "Thank You all so much, you mean the world to me."
  6. InsuranceMan

    Insurance Discussion PodCast

    Good Day Everyone, As many of you may know, I was out of the office the last several weeks traveling around with the fam and just taking a bit of much needed R&R. Timing is everything though, and in this case I missed the timing. So, for those of you in the know, maybe you have already been hip to the recently released podcast that came out on 7/22/15 on the Firewater Network featuring yours truly. If not, that is why I am posting this here and now. If you would like to tune in at your leisure and listen when you like, I have included the link below of my interview with Zachary Farley of Firewater Network where we cover pretty much everything you want to or need to know about your distillery and the insurance and bonding aspect. I hope you give it a click and give it a listen. It is informative and gives you a pretty good understanding in regards to what you will need or possible what you may need to change about your current insurance program. http://firewaternetwork.us9.list-manage1.com/track/click?u=72f3e834e2ba795522e617a94&id=5105256efe&e=8d0f2409c3
  7. Insurance: a three tiered step-by-step guide for your distillery I am asked constantly by folks from all parts of the globe (literally) as to how the insurance process should go, what they need, and at what point do they need it. Actually, I am asked about this so often that I decided to sit down for a few minutes and put it into post since there must be more folks out there wondering the same thing. For the purpose of this post I am going to only address the process for the US at this point and do so at a 30,000’ perspective as to not bog anyone down in the minutia of deeper subject matter. However, if you are in “some other place” or would like a deeper understanding of some piece of insurance please feel free to message me or email me as I do have quite an extensive knowledge of the process in several other lands and a deep understanding of the nitty-gritty nuances of all of the insurance aspects. Anyway, on to the process. The typical insurance process, step one: You are applying for your DSP and you run into the section where it is calling for the DSB (Distilled Spirits Bond) that you need to give to the TTB in order for them to process your permitting. This aspect of the “insurance” side of things is perceived as one of the scariest and most difficult processes to struggle through. I am here to tell you that simply is not the case. Many people have horror stories or have heard from someone that this was the worst part of the whole process. That the bonding screwed up everything and set them back months, or that when they were finally able to get through this horrible process the bond ended up costing them an insane amount of money. Although many of those stories are true and oftentimes people do lose precious time or they indeed pay an incredible amount of money for their bond, it all boils down to one thing; the person they are working with. Knowledge and relationships are king when it comes to bonding and anyone that has worked with these types of bonds for years on end should be able to assist you through the process in the matter of a few minutes. From assisting in the figuring of the taxable liability amounts, to the application process, this truly should not take longer than about 15-30 minutes start to finish. Once those “meat and potatoes” aspects are figured out and the applications are complete you should be able to have the executed bond form in your hands and ready for submittal within 24-48 hours. If you are working with someone who has the knowledge and relationships in this industry, the bond should be a done deal within a day to possibly a few days and should never come back to haunt you. Don’t get me wrong, there is a myriad of things that can go wrong and many ways that the bond can mess things up. If you have an insurance professional though that knows their way around the bonding and what the TTB is looking for and how to avoid the pitfalls and snares, it really is a one-and-done deal. It really is that simple. Find someone who knows what they are doing and you will not lose any time and it will be the cheapest thing that you purchase for your distillery, hands down. The typical insurance process, step two: You have either acquired a building or are obtaining a lease on a space and there is an insurance requirement. If you are buying a location it may be that the lending institution is requiring that they be named “loss payee/mortgagee” on your insurance as well as possibly “additional insured” status and they want a certificate or evidence stating such. If you are signing a lease, the landlord may have a requirement to be listed as “additional insured” or at the very least require a certificate showing that you have insurance. Again, if you are working with someone who has an understanding of distilleries and has a great product where you can add and subtract coverage’s, this should be a very easy step to accomplish. If you are in a “triple net lease” situation and are required to insure the building, again, it should not be an issue. This is basically all there is to the second step, the securing of insurance for the location and your business. The typical insurance process, step three: You are ordering your equipment and items you will need in order to get set up and running. Once you have a policy put in place to satisfy those items discussed in step two, this is a no-brainer. The equipment and contents side of the policy is one that should be very simple to accomplish. Watch out however as to how these items are listed and what “perils” or coverage is being offered and/or excluded. This is one area where a deeper knowledge of how things work within an insurance policy is key. Someone who knows what they are doing should be able to provide you with a better and lower premium on the equipment than what is available in regards to standard “contents” coverage. Without divulging all my trade secrets here I will simply say that there are a variety of “legal and ethical” tricks that can be used to keep your costs down while actually providing you better coverage. As well, at this time you may be in need of securing many other types of coverage in order to make sure that you are properly insured and protected moving forward. Liquor liability; Cargo coverage; Products and Complete Operations; Workers Compensation; and Product Valuation among many other things may need to be considered at this point. An agent with experience in this arena should be taking the time to discuss your business plan with you. They should find out where you are at currently in regard to your needs and where you see things progressing to anywhere from 6 – 18 months from now. This process will not only assist you with the “realization” of timeframes and considerations, but it will also allow the insurance professional the ability to plan ahead with you or address commonly overlooked insurability issues. Again, watch out for how these coverage’s are written. The product valuation is one of the biggest issues that I see being overlooked. Almost ever carrier in the country uses the same endorsement form to insure your product and for the most part it is very lack-luster. I personally have developed and had adopted an endorsement form that gives true value to your product in the way in which you and I decide it should, not how the insurance company “may” decide to value it. God forbid the unforeseen happens and you lose everything, including your product. That is not the time to ask the question as to how you were insured and what you can expect in the way of coverage. In conclusion, this is a rather simplistic overview of an overall more involved process. With that said though, if you are working with someone that knows what they are doing, it actually can be this easy. A few things to keep in mind: 1.) Know your insurance professional and their background/knowledge. Ask the hard questions, find out how much experience they have in doing this type of work and how many other distilleries they write. YOU DO NOT WANT TO BE THE GUINEA PIG! This is your business, your baby. Treat it as such. If you are not comfortable with their answers, move on. Beware of the agent that says, “Well …… I have written a brewery before. How different could it be?” R U N !!!!! I know I am preaching to the choir, but a breweries and distilleries are VASTLY different in so many ways, and the insurance is certainly one of those ways; 2.) Know what you are purchasing. People have a view of insurance often times that it is just “throwing money down a rat hole”. That it is one of those things that costs a lot of money and they never get anything for it. I understand, but keep this in mind ….. If you know what you are purchasing and the value it brings to you, you will not feel this way. As well, in a perfect world you hope it works out that way. That you pay money in for the whole life of your business and never get anything back from the insurance company. If they have to make a pay out that means that you have either hurt or killed someone or you have sustained an incredible life altering loss to your business. I am not talking about the roof claims or hail type situations, I am talking catastrophic here. If your insurance person makes you full aware of what you are buying, you should never feel as though you are getting ripped off. 3.) Keep in communication with your insurance folks. When you make a change or even better, when you are thinking about fixing to get ready to make a change, give them a call. There may be insurability issues in what you are thinking about. Even if there are no issues, you need to be sure that you have the protection you need to cover the change. Often times the insurance folks are the last to know and that is not good. Loop them in at least every 6 months or each time there is a “big” change coming. 4.) Do it well and do it up front. If you have a good professional that is more a business partner in a way than just an “insurance agent” you should be able to confide in them, tell them exactly what you are doing and what concerns you have. You should not feel like you need to hide anything or not give them all the details. Work with them as you would a CPA or lawyer. They are (or should be, if they are not, run again) a professional and will treat your information with the utmost confidence. Be open an honest and trust them implicitly. If you don’t, why are you doing business with them at all? 5.) **** DO NOT “SHOP IT OUT” **** This is one of those areas that really does not make sense to anyone in the insurance industry. There are people out there that will call 5 different agents and ask them for a quote. They want to “keep everyone honest” and they think by doing so it will ensure they get the best deal if they have multiple people involved. Stop. If you find someone that you are comfortable with that has the background and knowledge and that you trust implicitly, let them shop it for you. Bringing in multiple people only confuses things. Insurance carriers only allow one quote to go out to the first agent in the door. So if you go to five different people they are all going to try to get it out first and block the markets anyway resulting in what you hoped to avoid in the first place. You will then be forced to sign Agent of Record letters to allow other agents to obtain other quotes that some other agent blocked, blah, blah, blah. It is a nightmare for you, the agents and the carriers. Just don’t do it. Pick someone, one agent and work with them exclusively, end of story. I hope this information is helpful and valuable to anyone reading it. The insurance and bonding process should be easy and can even be fun if you get the right person. If you have any further questions or if you view me as being “that person” to assist you with your insurance needs please reach out to me. You can PM me here on the forums, email me at aaron.linden@hubinternational.com or call or text my cell at 307-752-5961. I truly am here to help in any way that I can and I am always happy to answer any questions that you may have. Have a great Memorial Day Weekend! Best, Aaron “InsuranceMan” Linden
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