§ 3102. Licensing and bonding of distributors

(a) Before commencing business, on application, a distributor shall first procure a license from the Commissioner permitting him or her to continue or to engage in business as a distributor. Before the Commissioner issues a license, the distributor shall file with the Commissioner a surety bond in a form and with sureties as the Commissioner may require for a sum based on an estimate of the tax liability for a two-month period, but not to exceed $700,000.00, conditioned upon the issuance of the report and the payment of the tax, penalties, and fines provided in this subchapter. Upon approval of the application and bond, the Commissioner shall issue to the distributor a nonassignable license which shall continue in force until surrendered or revoked.

(b)(1) The amount of the surety bonds required shall be reviewed annually in September. If the Commissioner retains or reimposes a bond requirement, the amount required shall be the sum of the highest two months' payment during the preceding year or $1,000.00, whichever is greater, but in no case shall it exceed $700,000.00.

(2) A distributor may request release or reduction of the bond if the distributor has complied with all licensing and reporting requirements for at least the last three consecutive years. If the Commissioner determines that release or reduction of the bond will not unreasonably jeopardize State revenues, the bond shall be released or reduced, notwithstanding subdivision (1) of this subsection. Upon a finding to the contrary, the Commissioner shall retain the bond. If a bond is released or reduced under this subdivision, the Commissioner may reimpose a bond or increase the bond in accordance with subdivision (1) of this subsection if he or she determines that a material change in circumstances has occurred and State revenues will be unreasonably jeopardized without the reimposition or increase. A distributor aggrieved by a decision of the Commissioner to retain, reimpose, or increase a bond may request a hearing, which shall be conducted in accordance with sections  105-107 of this title, and appeals shall be governed by section 3115 of this chapter.

(c) Notwithstanding the limits established in subsection (b) of this section, if payments and reports are delinquent for more than 10 days for more than one reporting period in a calendar year, the bond amount shall be increased to be the sum of the tax liability for the highest four months of the year. A distributor aggrieved by a decision of the Commissioner to increase the bond under this subsection may request a hearing, which shall be conducted in accordance with sections  105-107 of this title, and appeals shall be governed by section 3115 of this chapter.

(d) All distributors shall submit financial statements on an annual basis. If the distributor does not wish to submit a financial statement, a bond in the amount established in accordance with subsection (c) of this section shall be required.

(e) As used in this section, the term surety bond may also include, in the discretion of the Commissioner as to the best interest of the State, other good and sufficient surety instead of a bond. (Added 1985, No. 207 (Adj. Sess.), § 1; amended 1991, No. 122 (Adj. Sess.), § 1, eff. March 5, 1992; 1999, No. 154 (Adj. Sess.), § 39; 2005, No. 188 (Adj. Sess.), § 8; 2013, No. 189 (Adj. Sess.), § 21.)