Do You Need A Liquor License?
Before the TABC will issue you a liquor license, it needs to know that your business concept fits within one of the liquor licenses that are available under Texas law. But let’s back up a second here. First, make sure that you even need a liquor license.
There’s a short answer here. If you want to sell alcohol in Texas, you first need a liquor license.
To go into a little more detail, let’s go through why you need a liquor license, and, if you think you might not be selling alcohol, what that really means.
The TABC regulates every phase of the alcoholic beverage industry in Texas. It is divided into three tiers: manufacturing, wholesale and retail.
If you want to be in the business of buying, selling, storing, transporting or doing any business activity related to the sale of alcoholic beverages in Texas, you must have a TABC liquor license that authorizes your specific business activity. In other words, if your business concept does not fit into the structure of an existing TABC liquor license, that business is probably not legal in Texas.
If it does fit into one of the existing liquor licenses, you need that liquor license.
Who Does NOT Need a Liquor License?
First, BYOB. Bring your own beverage. If you want to allow people to bring their own alcoholic beverages to your establishment, you do not need a TABC permit. As long as you aren’t selling alcohol, you do not need to have a TABC permit.
Next, people who are giving away alcohol for free do not need a liquor license. Some restaurants, for example, give away alcohol while they are waiting for their TABC permit to be approved. Note that once your permit does issue, you are restricted from giving away free adult beverages, with limited exceptions.
So the common thread is this -- if you are not selling alcohol, you can skip the liquor license. And no, this is not a loophole. If you are giving away alcohol, it really has to be free. A “free margarita with purchase of a meal” is not free. A “free beer” with a cover charge at the door is not free.
Here’s an example. Have you seen hotels advertise “free happy hour”? A lot of them do not have liquor licenses. TABC agents have actually been known to go in and ask for a drink. If they are turned away because they are not paying guests of the hotel, they consider that an unauthorized sale of alcohol, and they can cite you for it.
Again, if you are selling alcohol in any sense of the word, you need a liquor license to do so.
So Which Liquor License Do I Need?
This is one of the most common questions we get asked, and our Retail Permit Summary is our most often downloaded resource. Here is a quick overview of Texas retail liquor licenses.
If you intend to sell alcohol at retail, you probably want to open a bar or restaurant. We all know that those are concepts that can definitely work in Texas. While there are over thirty different liquor licenses available in Texas, there is just a short list of those that will work for a bar or restaurant. They are:
Mixed Beverage Permit
Mixed Beverage Permit with a Required Food and Beverage Certificate
Wine and Malt Beverage Retailer’s Permit
Retail Dealer’s On-Premises License
Private Club Permit
The TABC also issues permits that allow for off-premises consumption (such as permits for convenience stores or liquor stores), but we will cover those in an upcoming blog.
Primary Permits
The TABC calls the liquor licenses listed above “primary permits,” and each of these allows for the sale of alcoholic beverages for on-premises consumption -- people can hang out at your spot and drink your drinks.
The right permit for you depends first on what alcohol you intend to sell and how you want to sell it, and second, on what permits are authorized at your specific location.
These are easier to look at altogether, so we’ve put together a table for you.
First, let’s look at the permits that allow you to sell everything: Mixed Beverage Permit, with or without a Food and Beverage Certificate, and Private Club Permit.
We will not be getting into the details of Private Club Permits. Know that this is the only permit available if you want to provide all types of alcohol for on-premises consumption in a dry area. With this permit, you aren’t technically “selling” alcohol, but “serving” it to members of the private club. It’s complicated and involves setting up multiple companies with multiple contracts and multiple bank accounts. We recommend talking to a lawyer about this one if it ends up being your only option.
Liquor License to Sell Liquor. The Mixed Beverage Permit is the only permit that allows you to sell liquor for on premises consumption in a wet area. Assuming you are not in a dry area, the Mixed Beverage Permit is the only permit that allows you to sell liquor for on premises consumption. It’s what any bar or restaurant holds if it sells tequila, vodka, and other types of distilled spirits.
Liquor License to Sell Beer and Wine. If you want to skip the liquor and just sell beer and wine, the Wine and Malt Beverage Retailer’s Permit works for you. You can also get a Mixed Beverage Permit instead and simply not purchase liquor.
Note that the name of this permit is new as of September 2021. It has long been called a Wine and Beer Retailer’s Permit. One of the many changes happening to the Alcoholic Beverage Code is that the term “beer” is largely being changed to “malt beverage.”
Liquor License to Sell Beer. If you only want to sell beer, you need the Retail Dealer’s On-Premises License. Again, you can also choose either the Mixed Beverage or Wine and Malt Beverage Retailer’s Permits, and choose to only sell beer.
You don’t have to make use of all of the rights that a liquor license grants you; you just can’t go outside the bounds of what your liquor license allows.
If you do go with one permit and later decide you would like to switch to another, know that you basically have to apply for a completely new license. There isn’t an easy switch. If you do it right, you can avoid interrupting the operations of your bar or restaurant, but you will need to go through the whole process again.
Subordinate Permits
In addition to the primary permits, you can also apply for subordinate permits. These are also sometimes called secondary permits. Subordinate permits, like the name implies, cannot exist alone. They are an add-on to primary permits.
Food and Beverage Certificate. We've already mentioned the Food and Beverage Certificate. It can be required as part of a primary permit. This requirement has to do with either the wet/dry status or zoning of your location.
You can also have a Food and Beverage Certificate if you just want to have one.
If you choose to hold a Food and Beverage Certificate where one is not required, this is basically a TABC acknowledgment that you are a restaurant. The whole “restaurant status” got really confusing during the COVID-19 pandemic, so let’s just put that out of our minds.
The TABC has recently updated the requirements for a Food and Beverage Certificate. Here is a YouTube video that provides a summary of the eligibility requirements.
Here are the benefits that might be available to you if you do have a Food and Beverage Certificate.
First, if you hold a Food and Beverage Certificate, you don’t have to post the otherwise required conduct surety bond.
Next, if you are applying for a Food and Beverage Certificate, you may be exempt from some of the notice requirements that would be otherwise required as part of your application, such as notifying residents living within 300 feet of your location.
Another reason that you might need or want a Food and Beverage Certificate is if you have a child-care or day-care center near your location. Without a Food and Beverage Certificate at your location, the city or county can prohibit you from getting a TABC permit.
Alcohol-To-Go. Maybe the biggest reason you may want a Food and Beverage Certificate is if you would like to sell alcohol-to-go. Under the new alcohol-to-go law, Mixed Beverage Permit holders can sell alcohol-to-go where they could not before. We aren’t going to get into all the details of alcohol to go here, but know that if you have a Mixed Beverage Permit you have to also have a Food and Beverage Certificate in order to sell alcohol-to-go. The TABC has a really helpful summary of alcohol-to-go that is linked here.
So, a Food and Beverage Certificate might be required due to your location. Where they aren’t required, you may still want to hold one to sell alcohol-to-go or to avoid getting a conduct surety bond, having to send out certain notices or having a problem with a protected place.
Other Subordinate Permits
In addition to the Food and Beverage Certificate, there are a couple of other subordinate permits available: the Late Hours Permit, Local Cartage Permit and the Brewpub License.
The Late Hours Permit allows you to stay open later than midnight. This is available in the bigger cities. Otherwise, it’s only available where cities have decided that they want it.
The Local Cartage Permit authorizes the holder of a Wine and Malt Beverage Permit to deliver alcohol to its customers.
The Brewpub License can be added onto a Mixed Beverage Permit or a Wine and Malt Beverage Retailer’s Permit and allows the holder to engage in brewery-like activities.
Just because a TABC permit fits your business plan, doesn’t mean your local city or county will allow that specific permit at your specific location. We recommend starting with the alcohol that you want to sell when deciding what permit will work, keeping in mind that you may find out from the city or county that the particular permit may not work at your location for a variety of reasons. It’s a bit of a chicken or the egg problem as far as whether to think about the type of alcohol you want to sell or your location first, so start with whichever approach makes the most sense to you.
Important Restrictions
Finally, let’s talk about a few restrictions you should keep in mind as you plan your operations.
Know that the person or company to whom the TABC issues the liquor license must always be in control of the business of the liquor license, including the purchase, sale and storage of the alcoholic beverages. And, with few exceptions, all of that activity has to happen on the Licensed Premises. The permit holder is responsible in every sense for the business of selling alcohol at the Licensed Premises, including ensuring the safe sale of alcoholic beverages.
The permit holder must control the sale of alcohol. We’re assuming that if you are reading this blog, you are trying to set up a traditional bar or restaurant, in the sense that you will offer alcohol and possibly food for sale and consumption at the premises, and your staff will serve those items to your customers. Your servers should be seller server trained and should refuse service to intoxicated people and minors.
Not only does the permit holder have to be in charge, but the permit holder also cannot transfer that duty to another. Sure, you can hire people to manage, serve, and otherwise operate your bar or restaurant. What we’re talking about is selling or otherwise transferring your permit to someone else. TABC permits cannot be bought and sold. There are a couple of workarounds here, but know that a straightforward sale of your alcoholic beverage permit is prohibited. As long as your permit is active, the applicant turned permit holder is responsible for it.
One last note. TABC permits have a two-year lifespan. Renewing your permit is pretty easy and can be done online, but do not forget to do it. The TABC offers a grace period, but once you pass that, the TABC will cancel your permit, and there is no turning back that action. You will have to start over and get a new permit, which can take up to 90 days.
Still have questions about whether you need a TABC liquor license or which type of permit or license is right for you? Know what liquor license you need but need to hand it off and focus on running your business? Book a consultation with Ashley.
Disclaimer: Nothing in our articles or on our website is legal advice and should not be taken as such. Please address all legal questions to your counsel.
