It’s no secret that a liquor license is a prize to be won. With many hurdles to jump and the high-profit margins of serving alcohol, getting a liquor permit for your business is like finding a pot of liquid gold. If you’re looking to learn how to get started, you’re in luck. This complete guide to liquor licenses will compare rules by state, help you determine how much it costs to get a liquor license and teach you all the ins and outs you need to know.
What Is a Liquor License?
In the simplest terms, a liquor license is a legal authorization to serve alcohol. Most states consider it a privilege and have the right to control how they are awarded. A licensing system allows the government to control how alcohol is served. Any restaurant or store that wishes to sell alcohol must first obtain a liquor license or permit. Each state has its own rules to govern how alcohol can be served, and liquor licenses allow them to enforce those rules by asking bars, restaurants and liquor stores to follow regulations.
Liquor licenses are usually hard to obtain. For bars and restaurants, you must gather a host of other permits and information as you apply for a liquor license. Many states even limit the quota of available liquor licenses to curb how alcohol can be bought and consumed. By making permits hard to get your hands on, states ask the food and beverage industry to police itself, making liquor laws much more enforceable.
Alcohol Beverage Control Boards
Alcohol Beverage Control Boards (ABC boards) are the regulatory bodies that oversee the production, sale and distribution of alcohol for each state. State governments have the right to dictate laws regarding alcohol and may be more restrictive than the federal government. Because of this, the terms of a liquor license and the process of getting one vary state by state. Often, the first step to getting a liquor license is contacting your state’s Alcohol Beverage Control Board. You can find a national directory of ABC boards here.
Varying State Definitions
Because state governments issue liquor licenses, there are lots of different definitions of what a liquor license is and can be used for. In some cases, individual towns may also impose liquor laws or ban alcohol sales altogether. Some of the things that impact state definitions include:
- Where and when you can serve liquor
- Containers in which you can serve liquor
- Who can be served liquor
- Who can serve alcohol within your establishment
- How much you can charge for liquor
- How much liquor you can serve a customer at a time
You might also find that your state has various laws specific to bars and restaurants. You should check with your state government to get a better idea of what rules you’ll have to follow. Some things to look for:
- Whether you can offer two-for-one specials or discounts during happy hour
- How many drinks you can serve a customer at once — many states limit this to one or two per customer at a time
- Whether customers can bring unfinished bottles of wine home with them
- When and how late you can sell alcohol throughout the week
You will have to follow all the rules and definitions your state government recognizes to maintain a valid liquor license.
What Type of Liquor License Do I Need?
The type of liquor license you need depends on the type of business you run and what kind of alcohol you want to serve. On-premise licenses, also called on-sale licenses or on-licenses, are for most bars and restaurants, which serve alcohol for consumption on their property. Liquor stores or grocery stores that sell alcohol will instead need off-premise licenses, or off-licenses, to sell alcohol for carryout.
For a restaurant or bar, there are many kinds of on-licenses you might need. Again, these types can vary by state, but here are some of the most basic types:
- Restaurant license: Often called an “all liquor license,” this license allows restaurants to sell beer, wine or hard liquor. While there’s no limit on the kinds of alcohol you can serve, you cannot use a restaurant license if you strictly or mostly serve alcohol. To have a restaurant license, your earnings from alcohol consumption must stay under a certain percentage of your overall revenue, which varies by state.
- Beer and wine license: If you don’t need to serve hard alcohol or spirits at your establishment, you can opt for a beer and wine license. Some permits for beer and wine also include hard cider and are often less expensive than full-service licenses.
- Tavern license: If more of your sales come from alcohol, you can get a tavern license. Most bars that make 50% or more of their revenue from alcohol will need a tavern license. You might see a tavern license called a “limited-service restaurant license.”
There are also some specialty permits you may need outside of the three basic permit types. These specialty licenses vary by state, and some states don’t require them. Here are some of the specialty permits you might qualify for:
- Brewpub licenses are for any food service establishment that makes alcohol. Wineries and distilleries are classified separately. If you have one of these permits, you might have to observe a rule that you cannot brew and serve at the same time.
- Club licenses are for members-only clubs, such as country clubs. Some private organizations may only serve beer and wine, while others can serve hard liquor as well.
- Hotel licenses are specifically for hotels with bars and restaurants which serve alcohol.
How Do I Apply for a Liquor License?
To get a liquor license, you’ll usually follow five steps:
- Contact your state ABC board to confirm the availability of the licenses and which permit you need for your business.
- Prepare and submit your application alongside any forms, documents or other information required by your state. Pay the processing fee.
- Your state ABC board will process your application. Approval can take up to six months.
- When you get approved, you’ll pay the license fee. This cost can range from around $300 to $450,000, depending on your state.
- Once you have a liquor license, you will have to renew it every one to three years.
If you live in a state with limited liquor licenses, there is another avenue. Businesses who have a liquor license can sell them. To find out if any other companies are looking to sell their licenses, check with your state’s ABC board for an updated list of inactive licenses. If you find any available to buy, you can apply through your ABC board. You can also purchase another restaurant that has a liquor license and fill out a transfer application.
Most states require waitstaff members who serve alcohol to be at least 18 years old. However, to get a liquor license for your own business, you must be 21 years old or older.
It’s pretty difficult to over-prepare for your liquor license application. Generally, the more information you can provide, the more likely you’ll be to get approval. Here are some things you may need to provide as part of your application:
- Employer identification number, or EIN, from the IRS, for tax purposes
- Local zoning permit, obtained from the city or town you’re operating in, to make sure you’re legally allowed to serve alcohol in your area — some states don’t allow you to serve alcohol too close to a school zone
- Code compliance certificate from the city or town you’re operating in
- Building permit from your local zoning commission
- Signage permit, also from your local zoning commission
- Business license, which you can get from either your local small business commission or chamber of commerce
- Sales tax permit from your state’s tax agency
- Alcohol tax permit from your state’s tax agency, which you can sometimes apply for alongside your sales tax permit
- Certificate of incorporation from your secretary of state
- Partnership agreement, if applicable, from your secretary of state
- Food handler’s permit issued by your state’s department of health, if you sell food
- Health permit, also obtained from your state department of health
- Photos of the outside of your building
- Your current or proposed food menu
- Floor plan of your bar or restaurant’s interior
- Building title, which can be a copy
- Company constitution
- Details proving your age and outlining your business experience
How Much Does a Liquor License Cost?
Two main costs come with a liquor license. The first is the application or processing fee, which is usually several hundred dollars. The second is the cost of the license itself, which can range from $300 to nearly $450,000, depending on your location. Finally, you’ll pay a renewal fee, which can be anywhere up to the cost of the permit itself. You may also have to pay penalty fees if you are late to renew or be subject to other surcharges. These costs depend on the state.
Varying State Costs
States with different liquor laws can also have very different costs associated with licensing. Usually, states that limit the number of liquor licenses charge more, because they are such a valuable commodity.
Varying License Types
How much a liquor license costs will also vary depending on the kind of license. Usually, a restaurant that only wants to serve beer and wine will pay less for its liquor license than they will for an “all liquor” license. Tavern or bar licenses cost more than restaurant licenses, due to the higher volume of alcohol sales and the greater responsibility required by servers.
How Do State Liquor Licenses Vary?
Many things factor into liquor license laws, which differ by state. Here are a few examples that illustrate how different the costs and rules are in different corners of the United States:
In California, a.k.a. Wine Country, USA, permits are some of the most expensive. California sets quotas for liquor licenses, which drives up the price. For an on-sale restaurant permit, the application fee is $6,000. However, since California limits the number of licenses in the state, to get a new license, an applicant will have to pay for a priority application, which is $15,835. After that, the annual fee for an “all liquor” restaurant permit is $1,235 for a high-density population, as of October 2019. The renewal fee costs less in areas with fewer people.
If your Golden State restaurant has more than one room that houses a bar counter, you must acquire a duplicate license. You can’t buy an on-sale license for a business near churches or hospitals or within 600 feet of schools or public playgrounds. You will have to prove that your business will not disturb residents to operate within 100 feet of a home. Since California has a liquor license quota, you must file for a transfer to acquire a liquor license from another business.
For a state like Tennessee, the unofficial home of moonshine, the cost of a liquor license is much lower. This disparity is because the state doesn’t have set a liquor license quota. So, an “all liquor” license, which the state classifies as a Liquor By the Drink License, for a restaurant that seats 50 people costs $650. You can pay up to $1,2000, depending on how many people your restaurant seats. For a limited-service restaurant, you’ll pay different fees depending on the percentage of your sales that come from alcohol.
The state of Tennessee doesn’t charge an application fee for restaurants, but they do charge a $300 application fee for retailer licenses. In Tennessee, you are free to offer happy hour specials but must provide seating for at least 40 people at your restaurant to keep a liquor license. You can’t sell drinks for less than their cost at any time — i.e. no free drink specials — and cannot serve multiple drinks to one customer after 10 p.m.
Vermont, which has the most craft beer breweries per capita in the USA, also doesn’t have a liquor license quota. So, the costs for a restaurant liquor license are relatively low. The state divides liquor licenses into First Class, Second Class and Third Class licenses. First Class licenses are for beer and wine permits, Second Class licenses are for retailers, and Third Class licenses are for “all liquor” licenses.
Restaurants with a First Class license currently pay a $115 license fee to their city government and another $115 to the Department of Liquor Control. You can pay for a Third Class license for either half a year or a full year, depending on your months of operation. You’ll pay $550 for a half-year license and $1,095 for a full-year license to the DLC. To hold a liquor license of any class, you’re required to complete an educational seminar at least once every two years. In Vermont, you may only serve alcohol between the hours of 8 a.m. and 2 a.m.
Which States Have the Strangest Liquor Laws?
No matter where you operate, holding a liquor license means upholding the local liquor laws. Several states have exclusive control over alcohol sales, meaning you can only buy alcohol for your business through state-run retailers.
Depending on where you operate, laws regarding alcohol consumption can get a little…quirky. Between leftover prohibition laws and other tidbits of local color, here are some of the more unusual liquor laws:
In Indiana, any business that serves alcohol for consumption by the drink must serve food at all times. That means, no closing the kitchen if the bar’s still open! Indiana restaurants serving liquor must have enough food on hand for 25 people at all times. The state also dictates what kind of food you need to provide: hot soups, hot sandwiches, coffee, milk and soft drinks.
While a bit more commonplace, Indiana also has a ban on liquor discounts that aren’t available to all. For example, you cannot have a happy hour special or a “ladies drink half-off” policy. According to the Indiana Alcohol and Tobacco Commission, the quota for licenses in each city is full 99% of the time, so you’ll have to purchase a license from another business.
In Utah, restaurants cannot serve alcohol to patrons who aren’t dining. So, not only must you have food on hand, but you’ll also have to ask guests to order it before you can serve drinks. Beer on draft must contain 3.2% alcohol or less by weight and 4.0% alcohol by volume. Beer can be sold between 11:30 a.m. and 1 a.m. Sale of all other alcohol and bottled beers heavier than 3.2% alcohol must stop at midnight.
If your Texas bar allows minors, parents can legally buy alcohol for their kids under the age of 21. Patrons can’t use a coupon to purchase alcohol, but you can offer a drink special included in a meal package. Five counties in Texas are completely dry, meaning no alcohol can be bought anywhere within county limits. There are a whopping 194 counties that are partially dry and only 55 counties that are 100% wet.
What Other Permits Do I Need to Start a Restaurant or Bar?
If you started looking into your required documentation for a liquor license application, you already know you’ll need a whole slew of permits. Most are other permits you need to run a bar or eatery anyway. Here are some of the most common ones you’ll need:
- Business license: A business license issued by your state tax agency gives you the right to operate a business in your state.
- Food service license: Your restaurant or bar that serves food will need a food service license, called a Servsafe verification, to show you meet industry standards on food prep.
- Food handlers permit: In addition to a food service license, you’ll need to get a food handler’s permit from your state’s department of health.
There are a few other permits that aren’t required, but will certainly help turn your business into a destination:
- Live entertainment: We all know drinks pair best with dinner and a show. However, you might need a permit for that, too. Some states include an add-on for live entertainment licenses when you apply for your liquor license. In other areas, you have to go through your local city or town government.
- Music license: Plan to play copyrighted music for customers? You’ll need to own the rights to play it.
- Pool table: Looking to be the pool shark bar of choice in your city? You might need a permit first! Not every state and county requires a pool table permit. Those that do may only allow pool tables in specific locations or restrict hours where patrons may use the pool table.
- Dumpster: Need a place to dispose of food waste? You can get a state-run dumpster with the right permits.
How PourMyBeer Can Help
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