The TABC and Texas Cities

The Texas Alcoholic Beverage Code (TABC) sets forth the legal framework for alcohol regulation in the state, including licensing, enforcement, and taxation. Texas Alcoholic Beverage Code §§1.01 et seq. In general, Texas municipalities must look to the legislature for a grant of authority to regulate businesses selling alcohol. Courts have interpreted such provisions to mean that municipalities may not be more prohibitive than the TABC.

There are exceptions to this general rule; often based on the percentage of revenue earned from alcohol sales. For example, municipalities may be more prohibitive when regulating the location of businesses that derive 75% or more of their revenue from the sale of alcohol for on-premises consumption. Tex. Alco. Bev. Code Ann. §109.57(d)(2). These regulations can restrict such establishments based on factors like proximity to schools, churches, and residential areas. Texas Alcoholic Beverage Code §109.33. The same regulations are not authorized, however, if a business holds a food and beverage certificate – which (when originally enacted) were only provided to businesses that received less than 75% of their gross receipts in alcohol sales. Texas Alco. Bev. Code Ann. §109.33(h)(1).

Such provisions were presumably intended to allow municipalities the ability to regulate bars, but not necessarily restaurants (at least when it comes to regulating alcoholic beverage sales).  However, the law has since been amended allowing businesses to obtain a food and beverage certificate and operate as a restaurant so long as alcohol sales do not exceed 60% of gross receipts. 16 Tex. Admin. Code § 33.5. And yet, a coordinating amendment toward municipal authority was not enacted – creating a gap in regulation.

Thus, establishments that derive more than 60% but less than 75% of their revenue from the sale of alcohol for on-premises consumption operate in a grey area, as they are not solely classified as bars or restaurants.

So how can Texas cities overcome this gap?

1. Operating Hours and Noise Restrictions: Texas municipalities have the power to establish regulations related to operating hours and noise restrictions for businesses selling alcohol for on-premises consumption. Texas Alcoholic Beverage Code §105.03.
2. Health and Safety Regulations: Local governments can enforce health and safety regulations for establishments serving food and beverages, including those with mixed revenue sources. Texas Health and Safety Code §§437.001 et seq.
3. Protesting with the TABC: In addition to general code enforcement rights, the mayor, city council member, chief of police, city marshal, or city attorney may file a protest with the TABC requesting that a license or permit be denied, suspended, or canceled. Tex. Alco. Bev. Code §11.41 (deny a permit), §11.46 (deny a permit), §11.61 (suspend or cancel a permit), §11.612 (cancel a private club permit), §61.32(deny a license), §61.71 (suspended or cancel a license), and §61.721 (cancel a wine and beer retailer permit or a retail dealer’s on-premise license).
4. Regulation of Private Clubs: Municipalities located in a county with a population of 600,000 or more and adjacent to a county with a population of 2.2 million or more may regulate, in a manner not otherwise prohibited by law, the location of private clubs if: (1) the establishment derives 35 percent or more of the establishment’s gross revenue from the on-premises sale or service of alcoholic beverages and the premises of the establishment are located in a dry area; and (2) the permit is not issued to a fraternal or veterans organization or the holder of a food and beverage certificate. Tex. Alco. Bev. Code Ann. §109.57(e)(2).

Although the TABC largely preempts municipal regulation of alcohol sale, by utilizing powers granted to them under other statutes (as well as within the TABC itself), Texas cities may enact effective regulations governing restaurants, bars, and private clubs that are in the best interest of their citizens and communities.

Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice.