Structuring the Sale of Alcoholic Beverages in Your Hospitality Company, or How I’ve Learned to Stop Worrying and Love the TABC

05 November 2015 Publication

State Bar of Texas: Legal Issues in the Texas Hospitality Industry

 

I. ABSTRACT

Alcoholic beverage sales in Texas are highly regulated by the Texas Alcoholic Beverage Commission (the "TABC") which regulates all phases of the alcoholic beverage industry in Texas. This Article provides a brief introduction to the area of alcoholic beverage regulation as it applies to the hospitality realm, focusing on licensing requirements and how a TABC permit or license may be lawfully obtained and/or utilized while avoiding potential pitfalls in the regulatory scheme surrounding this area of law. Further, because the hotel segment realm can involve multiple entities operating under the same roof, and because the Texas Alcoholic Beverage Code strictly prohibits the unlawful use of a permit by a non-permittee, special care must be taken to ensure lawful conduct by the permittee.

II. INTRODUCTION

The Texas Alcoholic Beverage Code (the "Code) was enacted to exclusively protect against the involvement of criminal elements in alcoholic beverage trafficking.' Designed to deter organized crime's involvement with alcohol and the foothold criminals had within the industry following Prohibition, the Code was and is meant to exclusively govern virtually all aspects of alcohol, including the manufacture, sale, distribution, transportation, and possession of alcoholic beverages.' As the Code states, "[w]hile the idealistic motives behind Prohibition were noble, a law enforcement nightmare ensued. Otherwise law-abiding citizens routinely violated the law by buying and consuming alcoholic beverages. The demand for the illegal products created an opportunity for criminal elements to develop a national network for the supply and distribution of alcoholic beverages to the populace."' To keep out such criminal elements, the Code forbids the sale or possession of alcohol for purposes of sale without a permit or license (hereinafter a "permit" and maintains strict criteria regarding who may hold a permit.

Permits themselves are considered to be purely personal privileges that are not property, are not subject to execution, and except as expressly authorized, cease on the death of the holder and are not passed by descent or distribution.' Just like other personal privileges such as a driver's license, they may not be transferred or sold in Texas like in other states, and are meant to ensure solely to the benefit of such permittee. A permittee is considered to be the holder of the permit, whether that is an entity or a person, as well as an agent, servant, or employee of  that entity or person." These same persons are termed applicants when applying for a TABC permit.

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