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Liquor Licenses – An Overview

Introduction

Humans have been creating different forms of alcohol for nearly as long as they have been alive. The first recordings of fermented beverages are at least over 9,000 years old, including barley beer, grape wine, and fermented beverages of rice, fruits, and other crops. With all this brewing and growing of crops for alcoholic consumption, it’s no wonder that laws pertaining to alcohol are also very old!

In the United States, state laws control liquor laws, as opposed to federal laws. However, this hasn’t always been the case. If you recall from your high school history class, the 18th Amendment to the U.S. Constitution (also known as the Prohibition Act or Volstead Act) prohibited the manufacture, sale, and transfer of alcohol. These were known as the "Prohibition Years." But this only lasted about 14 years from 1919 to 1933 until the 21st Amendment repealed the 18th Amendment as passed by Congress. Since then, we’ve went back to granting states the right to control their laws on alcohol.

You might then ask, but why does every state set the minimum drinking age at 21 years old? Great question! In short, this answer is based on federal government mandates. Read Why is the Legal Drinking Age 21 in the United States? for details on this interesting topic, and to learn more about how federal government mandates can do this.

In this article, we’ll explore the basics behind liquor, beer, wine, and spirit licenses (also called permits). We’ll take a look at an overview of liquor law, the step-by-step license application process, how liquor licenses are transferred, an example of one state’s licensing fees, and a hypothetical to put it all together.

Next, we’ll take a brief look at liquor license law.


Liquor License Law Overview

Do you plan on opening a restaurant, bar, club, grocery store, convenience mart, or any kind of business or organization where you will sell liquor, beer, wine, or other kind of alcohol? If so, you’ll need to obtain a liquor, beer, wine or other license (also called a liquor permit) before you can legally sell any alcohol. Additionally, if you plan to manufacture, distribute, import, or deal with alcohol production in any commercial way, you’ll likely need a special type of liquor license or permit before you can create, distribute, import, or otherwise sell alcohol.

Each state creates its own unique set of alcohol and liquor laws, which includes how liquor licenses are distributed. In fact, certain liquor laws are often left for particular counties or municipalities to decide. And some of those counties may be "dry counties." A "dry county" does not allow the consumption of alcohol, but it may allow the production and/or sale of it. Most dry counties in the U.S. are found in the Bible-belt region of the lower 48 states.

NOTE: If it sounds counterintuitive to allow the sale of alcohol but not the consumption of alcohol, you’re right on! Ever hear of Jack Daniels Distillery? I’m sure you have. Well, Jack Daniels Distillery – i.e. where the whiskey is made – is located in the dry county of Moore, in Lynchburg, Tennessee. That’s right! The actual county where Jack Daniels whiskey is made is a dry county. Moore County allows Jack Daniels to make the whiskey, but you cannot drink it there! We know – we’ve been there. Instead of getting a taste of their whiskey at the end of the tour, we got lemonade!

There are also companies that specialize in selling, buying, transferring, and otherwise dealing with liquor licenses! Full liquor licenses (including all the different types of available licenses) in particular counties, can be extremely expensive when sold on the open market, into the thousands and thousands of dollars! It’s amazing how far we have come. Such companies may provide "feasibility studies" on whether to obtain a particular liquor license in a particular area. So, as you might imagine, there is often a lot of red tape when it comes to obtaining a liquor license, and liquor licenses can sometimes take a very long time to obtain. Well, it’s all about the alcohol, right?

Ok, so how does one actually obtain a liquor license? We’ll go over the step-by-step process next.


Step-by-Step Application Process

Here are the basic steps involved in obtaining a liquor license:

1. Determine what type of liquor, beer, wine or other alcoholic license/permit you need.
  • Contact your stage agency (e.g. The Liquor Control Board, Division of Liquor, etc.) to inquire into what type(s) of license(s) and/or class(es) you need for your establishment. The state agency enforces and regulates liquor licenses.
    • There are many, many different types of licenses with different restrictions. You’ll have to make inquiry into your particular state and/or municipality for the details on the exact types of liquor permits you want. For example, there are generally licenses for manufacturing, distributing, retail, restaurants, clubs, hotels, river boats, museums, Sunday sales, etc.
    • Then, within each type of license there are usually different classes. For example, you may purchase a restaurant liquor license in the class of beer only for on premises consumption and/or in the class of wine only on premises consumption until 1:00 a.m.
2. Find out if you can legally obtain a liquor, beer, wine or other alcoholic license
  • Most states and/or municipalities (or other government agencies) set quotas on the number of liquor, beer, wine and other alcoholic licenses that they can distribute. These quotas are generally determined by population.
    • If there are no permits available in your locality, you may just have to wait until there is an opening to obtain your permit.
  • There are also generally restrictions on where you can sell the alcohol. For example, most local governments restrict businesses from selling alcohol within a certain number of feet from schools, churches, playgrounds, public libraries, etc. (e.g. within 500 feet of any school building). If your business is within that distance, you may have to petition for a variance or some other type of action to obtain the license or permit.
  • As stated earlier, some counties, municipalities, and other areas are "dry" where alcohol is prohibited for consumption.
3. Obtain and Complete Application
  • Applications can generally be obtained from your state’s liquor agency.
  • Many applications require a notary public to sign the application.
  • The application generally includes a non-refundable administrative fee, which can be a few hundred dollars.
4. Background Check
  • It’s likely that your local police department or other agency may run a background check on the owners of the business. You’ll have to pass the background check before obtaining the license.
5. Inspection of Premises
  • It’s likely that you’re business establishment will be visited by someone from the state liquor agency to see if you meet all the minimum qualifications to have a liquor license. The requirements vary from jurisdiction to jurisdiction.
6. Wait to Obtain License/Permit
  • This can take anywhere from a few weeks, to a few months, to even a year or longer. It depends on whether anyone objects to you receiving the liquor license/permit, processing time, and various other factors.
7. Pay for the License/Permit
  • This fee is to actually use your license, while the other fee was just for processing the application. (Don’t you love fees!)
  • This fee goes to the state and/or local government.
Now, remember, these steps are just to obtain your license. You can easily lose your liquor, beer, wine or other alcoholic license for many reasons, including selling to minors, selling to those noticeably intoxicated, failing to renew your license, failing to pay your business taxes, failing to send certain updates on your business to the state government, etc. So, make sure to follow your jurisdiction’s laws after you obtain your liquor license.


Liquor License Transfers

You may be able to transfer your liquor, beer, wine, or other alcoholic license to another business. First, check with your liquor agency (or attorney or someone who knows the liquor license law in your jurisdiction) to see if your state allows the transfer of liquor licenses. Most states do allow the buying and selling of liquor licenses because they view liquor licenses as personal property of the owner – which legally allows for the open trade of the license. Some states, however, require the owner of the liquor license to return the license to the state once the owner is done with it. Then, the state reissues the license to the next available recipient.

So, if your state allows you to legally transfer the liquor license, make sure the transfer occurs at the same physical location or locale. Remember, you cannot generally transfer your license to a store/business outside of your liquor license geographic location. That’s because liquor licenses are obtained and maintained within geographical boundaries generally determined by population.

NOTE: Many businesses sell their entire business, including the building and the liquor license to another business.

With that said, there are 3 main types of liquor license transfers:

Person to person (or business to business) in the same location
  • E.g. Sam’s Beer, Inc. sells its building and liquor license to Bill’s Beer, Inc., where Bill’s Beer, Inc. will run its business in the same location as Sam’s Beer, Inc.
Place to place with the same person (or business)
  • E.g. Sam’s Beer, Inc. will move from one location to another and maintain the same liquor license
"Double transfers", where both the owner and location change
  • E.g. Sam’s Beer, Inc. will sell its liquor license to Bill’s Beer, Inc., and Bill’s Beer, Inc. will run its business in a different location than Sam’s Beer, Inc. But these transfers will generally remain in the same geographical locale for where that particular permit was originally bought.
You’ll likely have to pay fees and go through all the other steps for the transfer, but you’ll likely just be able to take over the permit by the previous owner instead of waiting for a new license/permit (of which there may be none left!). And that can be a BIG benefit – especially if there are no permits available at the time. Otherwise, you’ll just be waiting in line for a permit to become available. Then the law of supply and demand takes over. If everyone wants that liquor license, you likely have to pay top dollar for it!

Numerous companies actually host avenues to buy and sell liquor licenses. For example, the American Liquor License Exchange (AMLEX), BizBuySell, and Liquor License Specialists, among others, are engaged in brokering the transactions between buying, selling, and escrowing liquor licenses. That’s because most states allow you to buy and sell liquor licenses as personal property of the owner. Some states, however, require the owner of the liquor license to return the license once it is done with it. Then, the state reissues the license to the next available recipient. However, if your state treats liquor licenses as personal property, fell free to look at sites like AMLEX, BizBuySell, and the Liquor License Specialists as open-markets where you can pursue owners selling their liquor licenses.

So, what do these liquor licenses cost? Again, that varies dramatically from locality to locality based on supply and demand – kind of like buying a house or renting an apartment in different cities. If you want some numbers, check out what you can find on the Internet within your locality.

Next, we’ll look at an example of one state’s license/permit fees.


Example of State Licensing Fees

Here is an example of licensing fees in the State of Ohio (i.e. where licenses are called permits). Also, for each permit notice the different types of classes available:

Types of Permits


Manufacturer

Permit Class

Permit Fee

Description

A1

$3,906

ORC 4303.02 Manufacturer of beer, ale, stout and other malt liquors.

A1A

$3,906

ORC 4303.021 Beer, and any intoxicating liquor by the glass or container on A-1 or A-2 permit premises only until 2:30am.

A2

$76

ORC 4303.03 Manufacturer of wine.

A3

$3,906

ORC 4303.04 Manufacture, import and sell alcohol and spirituous liquor.

A3A

$3,906

ORC 4303.041 Manufacturer of less than 10,000 gallons of spirituous liquor and sale to a personal consumer.

A4

$3,906

ORC 4303.05 Manufacture and sell certain prepared and bottled drinks, import for blended purposes.

B2A

$25

ORC 4303.07 Sale of wine to retail permit holder.

S

$25

ORC 4303.232 Sale of wine to personal consumer via mail order.

W

$1,563

ORC 4303.231 To operate a warehouse for the storage of beer or intoxicating liquor within the state and to sell such products from the warehouse to a B permit holder with Consent to Import on file or to other customers outside this state.

Distributor

Permit Class

Permit Fee

Description

B1

$3,125

ORC 4303.06 Distributor of beer, ale, stout, other malt liquor.

B2

$500

ORC 4303.07 Distributor of bottled wine.

B3

$124

ORC 4303.08 Distributor of sacramental wine.

B4

$500

ORC 4303.09 Distributor of mixed beverages.

B5

$1,563

ORC 4303.10 Distributor and importer and bottler of wine.

Retail Store Carryout

Permit Class

Permit Fee

Description

C1

$252

ORC 4303.11 Beer only in original sealed container for carry out only.

C2

$376

ORC 4303.12 Wine and mixed beverages in sealed containers for carry out.

C2X

$252

ORC 4303.121 Beer in original sealed containers for carry out.

D8

$500

ORC 4303.184 Sale of tasting samples of beer, wine, and mixed beverages, but not spirituous liquor, at retail, for consumption on premises.

Restaurant / Night Club

Permit Class

Permit Fee

Description

D1

$376

ORC 4303.13 Beer only for on premises consumption or in sealed containers for carry out.

D2

$564

ORC 4303.14 Wine and mixed beverages for on premises consumption or in sealed containers for carryout.

D2X

$376

ORC 4303.141 Beer only for on premises consumption or in sealed containers.

D3

$750

ORC 4303.15 Spirituous liquor for on premises consumption only until 1:00am.

D3X

$300

ORC 4303.151 Wine only for on premises consumption only until 1:00am.

D3A

$938

ORC 4303.16 Extend issued permit privileges until 2:30am.

D5

$2,344

ORC 4303.18 Spirituous liquor for on premises consumption only, beer, wine and mixed beverages for on premises, or off premises in original sealed containers, until 2:30am.

D5I

$2,344

ORC 4303.181 (Same as D5). Restaurant meeting certain criteria.

D7

$469

ORC 4303.183 (Same as D5). RESORT area only.

Club

Permit Class

Permit Fee

Description

D4

$469

ORC 4303.17 Beer and any intoxicating liquor to members only, for on premises consumption only until 1:00am.

D4A

$750

ORC 4303.171 Airline club only - Beer and any intoxicating to members and guests until 2:00am.

D5C

$1,563

ORC 4303.181 (Same as D5.)(This class can no longer be applied for.)

D5D

$2,344

ORC 4303.181 (Same as D5) located at airport.

Hotel and Motel

Permit Class

Permit Fee

Description

D5A

$2,344

ORC 4303.181 (Same as D5) for hotel or motel with 50 or more rooms for transient guests.

Enclosed Shopping Mall

Permit Class

Permit Fee

Description

D5B

$2,344

ORC 4303.181 (Same as D5) for enclosed shopping mall.

River Boats

Permit Class

Permit Fee

Description

D5E

$1,219

ORC 4303.181 (Same as D5). Historical river boat owned by charitable organization only.

Marinas

Permit Class

Permit Fee

Description

D5F

$2,344

ORC 4303.181 (Same as D5). Marina restaurant only.

Museums

Permit Class

Permit Fee

Description

D5G

$1,875

ORC 4303.181 (Same as D5 – except sales till one am). National sports museum only.

D5H

$1,875

ORC 4303.181 (Same as D5 – except sales till one am). Fine arts museum only.

Community Entertainment District/Revitalization

Permit Class

Permit Fee

Description

D5J

$2,344

ORC 4303.181 (Same as D5). Community entertainment district.

D5L

$2,344

ORC 4303.181 (Same as D5 – except sales till one am). Retail food establishment or food service operation meeting certain criteria.

Sunday Sales

Permit Class

Permit Fee

Description

D6

$400-c
$500-d

ORC 4303.182 Sale of intoxicating liquor on Sunday between the hours 10:00am or 11:00am and midnight.

Other

Permit Class

Permit Fee

Description

D5K

$1,875

ORC 4303.181 (Same as D5 – except sales till one am). Certain non profit organizations that own and operate a botanical garden.

D5M

$2,344

ORC 4303.181 (Same as D5). Restaurant affiliated with center for the preservation of wild animals.

D5N

$20,000

ORC 4303.181(N) (Same as D5). Casino Operator or Casino Management Company.

D5O

$2,344

ORC 4303.181(O) (Same as D5). Restaurant located in a casino.

E

$500

ORC 4303.19 Railroad car or airline to sell beer or any intoxicating liquor at retail in glass or from container for consumption in such car or aircraft.

G

$100

ORC 4303.21 Retail drug store (alcohol for medicinal, industrial, mechanical, chemical, or scientific purposes).

H

$300

ORC 4303.22 PUCO motor carrier to transport beer, intoxicating liquor and alcohol, also to railroad.

I

$200

ORC 4303.23 Wholesale druggist (purchase - import alcohol for sale at wholesale and retail).

Temporary Permits

Permit Class

Permit Fee

Description

F

$40

ORC 4303.20 Valid for beer only until 1:00am. (Temporary - 5 days).

F1

$250

ORC 4303.201 Temporary "Special Function" permit (3 days) (allows B.Y.O.B. by a nonprofit organization at Municipal Convention Center).

F2

$150

ORC 4303.202 Temporary permit (48 hours) beer and any intoxicating liquor by glass or container on premises only until 1:00am.

F3

$300

ORC 4303.203 Alcohol Beverage Industry Education.

F4

$60

ORC 4303.204 Certain non profit organizations for an event that includes the introduction, showcasing or promotion of wines produced in Ohio; to furnish at no charge 2 oz. samples and sale for on premises consumption and carry out of wine from participating A2 permit holders. The fee is $60 (per day).


Source: http://com.ohio.gov/liqr/PermitClasses.aspx (Obtained 7-20-11)

Next, we’ll go over a liquor license hypothetical to show how this might work in the real world.


Liquor License Hypothetical Scenario

Okay, all of those rules may sound confusing. Let’s go over an example to show how this might work.

Assume John and his buddy Bill want to open up a bar called Lazy Bones Bar. John is the salesman/marketer and Bill is the bartender and cook. John knows nothing about liquor license law so he comes to LegalFlip.com and reads this article. He goes to Step 1 from this article and calls his state agency and finds out many of the details about what licenses are available, the costs, and the different classes of licenses. He feels a little overwhelmed but then goes to his state liquor agency’s website and prints off and reads all the info again. He also calls up a buddy of his that owned a bar near the city where he wants to open shop. His buddy tells him some more info.

John takes what he has learned and talks to Bill about what types of licenses and classes they may want. Bill tells them they definitely need a license for beer consumption on premises to the latest times available for all the young professionals that hang around the area where they plan to open up. Bill also wants a wine and spirit licenses on Sundays, as Bill wants to offer wine, mixed drinks, and mimosas with his Lazy Bones Bar Brunch.

John calls back the agency the next day with Bill’s recommended requests. The agent says that in the county where they plan to open business there are no current licenses available. In other words, they will have to wait for an opening. John asks how long this could take and the agent says maybe 3-6 months. In this state, John could also purchase a liquor license on the open market.

John goes back to Bill and tells him the news. John and Bill then put in a request with the state to obtain a liquor license and begin looking to purchase a liquor license on the open market – to increase their chances of finding a license as quickly as possible.

Now, it’s just a matter of business strategy and negotiation. How much do John and Bill want to pay for the liquor license? If they haven’t purchased or rented a building yet, they could consider purchasing a license from another business that already has a license and is closing down in the location where they want to be. As you can see, obtaining a liquor license comes down to business decisions based on how long they want to wait, what they’re willing to pay, and what type(s) and class(es) of licenses they want for their business.

Finally, we’ll conclude our discussion on liquor licenses with some key points to keep in mind.


Conclusion

In this article, we took a look at an overview of liquor law, the step-by-step license application process, how liquor licenses are transferred, an example one state’s licensing fees, and a hypothetical to put it all together.

You should now have a much better understanding about the process of obtaining a liquor license. And for your attention, you deserve a nice refreshing drink (we’re talking about lemonade, of course)!



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