The laws for obtaining a Texas liquor license can be confusing and counterproductive to some business owners. It seems that many of the Texas Alcoholic Beverage Code (TABC) provisions are only in place to benefit old favorites and restrain new competitors. However, those days may be coming to an end.

Wal-Mart recently challenged the constitutionality of numerous anticompetitive clauses concerning the sale of distilled spirits for off-site consumption. The problem is also being addressed by new legislation before the state House and Senate.

Texas businesses must get a package store permit prior to selling liquor. Most states require the same type of license, but Texas prohibits companies that are publicly traded from receiving them. Additionally, no individual or company may have more than five liquor licenses.

However, that law does not seem to apply to certain businesses that hold an Austin or Houston alcoholic beverage license. In Austin, for example, there are over a dozen Twin Liquors stores. How do they curry such favor? They merely squirm through a loophole permitting closely related family members to pool their licenses. To make matters even more confusing, hotels are exempt from the five-store limit.

The Houston liquor license laws do not have any basis in public safety or health. A publicly traded company does not have access to liquor that is stronger than the same product sold by a private company. Any sort of protection once afforded by the five-store limit is negated by the large exemptions given to some businesses. It seems the law’s true purpose is to benefit certain companies as opposed to protecting the public health.

This type of regulation smacks of crony capitalism in which businesses enlist the government’s power to protect them from the strains of fair competition, which is nothing new. Taxi companies have entreated cities to regulate Uber enough to force it out of business in their area. Steel companies demand tariffs on steel imports to keep the less-expensive goods out of the U.S.

Rather than improving a product or service in the wake of a competitor’s better offering or lower price, businesses turn to legislators to get the new companies declared illegal. The consumer loses out when these schemes are put into play.

Restriction can stay on the books for decades beyond the point where anyone can recall the reason for their original addition. For instance, the limit of five stores has a grandfathering clause that only applies to stores that have been in business since before 1949.

Litigation seems to be the only recourse to the seemingly arbitrary and outdated TABC regulations. However, lawsuits are expensive and time-consuming. It would make more sense if the Legislature updated the law proactively. Senate Bill 609 and House Bill 1225 aim to end the corporation prohibition and the five-store limit. That would level the playing field for the licensing of spirits sales.

Recent legislation has opened the market for craft breweries in Texas. Microbreweries were restricted by laws that seemed weighted toward the larger breweries. Now, they are able to sell their brews for off-site consumption, which has created an influx of tourists who wish to sample craft beers from Texas. In fact, Texas is embracing a newfound recognition for their numerous craft brews since the laws went into effect. The microbreweries are also enjoying enhanced distribution rights that have encouraged the building of new breweries to cover distribution across the state. These new businesses help to stimulate the economy and create jobs.

A similar type of relaxing of the statutes concerning spirits would modernize the industry and create a more competitive marketplace. Laws must be kept current so that new technologies and established business practices can merge for the benefit of the consumer.

Walmart Stores Inc. is a force to be reckoned with in the boardroom or the courtroom. Their most recent legal obstacle involves various Texas liquor license laws that prevent the company from selling hard liquor in addition to the wine and beer that its stores already stock throughout the state. On February 12, 2015, Walmart and Sam’s Club sued the Texas Alcoholic Beverage Commission (TABC) in federal court. The lawsuit challenges the constitutionality of rules that regulate package store permits.

As plaintiff, Walmart alleges that the rules violate sections of the Constitution that relate to commerce, equal protection and comity, a legal principle that requires Texas to uphold federal laws. Although Walmart would not agree to interviews with an Austin TV station, company spokesman Lorenzo Lopez did provide a written statement. He said that current laws are “counter to Texas’ belief in free enterprise and fair competition.” He added that it “limits our customer’s choice and keeps the price of spirits artificially high.” In the lawsuit, Walmart expressed similar issues by saying that the laws are “irrational, unnecessary and unfair” and “harmful to Walmart’s profits.”

To win the right to sell hard liquor in the state, Walmart must successfully change multiple aspects of the law. First, the TABC does not allow publicly traded corporations with more than 35 shareholders to sell alcoholic spirits. Second, a single company is limited to five package store permits. Walmart currently has 543 wine and beer retailer’s off-premise permits in Texas. Third, rules prevent companies from holding wine and beer permits together with package store permits. If parts of the law change, Walmart could abandon its current permits and apply for 543 new BF beer licenses and 543 new Q permits for selling wine. This option would cost the company an additional $1.3 million. If Walmart were granted package store permits, it would need to build free-standing package store outlets as well.

Walmart has also questioned long-standing loopholes that allow immediate relatives of permit holders to secure an unlimited number of additional permits. This unlimited consolidation loophole can be used legally by any Houston liquor license service. In many ways, current laws support family-owned businesses and protect small companies from competition against national retailers and big box stores. Independent liquor store owners are concerned about what will happen if these laws fall. Sam Issa, who owns a liquor store in Austin’s Allandale neighborhood, said that many family-owned businesses will shut their doors forever. He added that if business slowed, he would not be able to support the same number of employees. His workers would be forced to give up the higher pay offered by independent stores and accept minimum wage if they went to work for Walmart. Issa is also concerned that the state might open the door for everyone to sell liquor, including Walmart, Target and CVS.

This groundbreaking lawsuit is just part of Walmart’s campaign to change laws that regulate the distribution of liquor licenses. The company is also lobbying members of the legislature in a major push to secure an additional Texas alcoholic beverage license for each superstore in the state. Whether or not the suit is successful, this is a big move for the nation’s largest retail chain. Walmart currently has licenses to sell hard liquor in 25 states. However, more Walmart stores and affiliates are located in Texas than in any other part of the country. Walmart’s quest to increase profits at such a large number of stores could open new sales avenues for other national chains while forcing smaller stores to close or keep up with a level of competition that the Texas liquor industry has never seen.

Maintaining a Texas alcoholic beverage license requires strict adherence to the regulations and requirements of the Texas Alcoholic Beverage Commission, more commonly referred to as TABC. Consumers can file complaints against restaurants, bars, stores and nightclubs that fail to comply with TABC rules. Common violations include the following:

• The sale of alcoholic beverages to minors
• Engaging in illegal activities that may include drug use, gambling or prostitution
• Over-serving customers or selling alcohol to intoxicated patrons or customers
• Selling alcohol without a TABC permit
• Serving non-members with alcoholic beverages inside a private club

These violations can result in the loss of the Texas liquor license held by the individual or company. Depending on the severity and type of the offense, the individuals responsible may also face criminal prosecution for their actions.

Filing a Complaint with TABC

TABC offers residents of Texas a variety of ways to file a complaint against individuals and establishments that violate the agency’s regulations.

• The TABC mobile application allows convenient access to the complaint center on the go. Designed to work with most Android smartphones, this app makes it easy to report violations quickly for the most effective response by the agency.
• E-mail complaints can be submitted to complaints@tabc.state.tx.us for review by TABC staff members.
• Residents and guests to the state of Texas can also fill out a form for mailing, faxing or personal delivery. The form is available in Microsoft Word or Adobe PDF for optimal convenience and compatibility.

The TABC website provides address and fax number information for those interested in filing a complaint. It also allows residents and guests to identify the closest TABC office for in-person delivery.

Making an Anonymous Complaint

In some cases, Texas residents and visitors may be intimidated or frightened to make a liquor license complaint against a particular individual or business. This is especially true for those employed by companies that violate liquor license regulations or for those who live in close proximity to these businesses. The repercussions to these whistle-blowers can be serious and may include the loss of their jobs or threats against themselves or their families. The TABC allows for anonymous complaints to provide added protection for these Texas residents and advises those who wish to remain anonymous to provide only their personal email address to the agency. Personal email addresses are considered confidential under the Public Information Act and will not be released to the public upon request.

Staying on the Right Side of the Law

Texas establishments must maintain their liquor license in good standing to sell alcoholic beverages within the state. These bars, restaurants and stores can promote compliance with TABC regulations in a number of ways:

• Educating servers and cashiers regarding potential violations of the liquor license code, including over-serving customers and setting a cut-off point for patrons in the restaurant and bar environment
• Requiring identification from all customers who appear to be under the age of 30 to prevent the sale of alcohol to minors
• Maintaining a clean and legal environment throughout the store or establishment premises to avoid legal entanglements and ensure full compliance with TABC rules
• If complaints do occur, resolving them quickly and effectively is the best way to retain the right to sell alcoholic beverages in the state of Texas.

Working with a professional Houston liquor license service can provide added help for restaurants, bars, nightclubs and stores that sell alcoholic beverages in Texas. These experienced consultants can offer assistance in setting up employee training plans, establishing ground rules and navigating the liquor license permit process. By enlisting the help of these knowledgeable professionals, businesses in Houston and the surrounding communities can ensure full compliance with TABC and can avoid the stress and inconvenience of complaints against their establishments.