TABC Licensing Attorney Framework: Strategic Structures That Prevent Enforcement Actions

Several of the risks in a Texas alcohol license come from decisions made before the application: how the business is owned and financed, where it is located, and how ownership will change later. Those risk areas arise under the Texas Alcoholic Beverage Code, some of them justify a review by an attorney before you commit, and choosing that attorney raises questions of its own. The risks fall on owners, buyers, and managers of businesses that hold or will apply for Texas Alcoholic Beverage Commission (TABC) licenses and permits. The step-by-step mechanics of an application are a separate subject.

Statutes are quoted from the published text of the Alcoholic Beverage Code as compiled by the Texas Legislature.

Risk Area 1: Ownership and Financing Across Industry Tiers

Texas separates the alcoholic beverage industry into levels. Section 102.01(a) defines a “tied house” as “any overlapping ownership or other prohibited relationship between those engaged in the alcoholic beverage industry at different levels, that is, between a manufacturer and a wholesaler or retailer, or between a wholesaler and a retailer.”

The prohibitions themselves are in the subsections that follow. Among them:

Ownership interests. A person with an interest in a permit may not “secure or hold, directly or indirectly, an ownership interest in the business or corporate stocks, including a stock option, convertible debenture, or similar interest,” of a permittee at a different level (§ 102.01(c)).
Officers, directors, and employees. “No person may act or serve as officer, director, or employee of the businesses of permittees at different levels” (§ 102.01(d)).
Premises, fixtures, credit, and loans. Subsections (e) through (g) restrict owning another level’s premises or equipment, using another level’s credit, and lending between levels. Under (g), if a permittee secures a loan from outside the state, “there is a presumption of a tied house relationship or subterfuge.”
Control and profit sharing. Subsection (h) prohibits agreements “to control or manage, financially or administratively, directly or indirectly, in any form or degree,” the business of a permittee at a different level, and (i) prohibits profit-sharing agreements between permittees.

The consequence is stated in § 102.01(j): on finding a violation of subsections (c) through (i), the commission or administrator “shall suspend for not less than six months or cancel the permit of any permittee involved,” and a person who held an interest in a cancelled permit “is ineligible to hold or have an interest in a permit for one year after the cancellation.”

A separate section, § 102.07, restricts what manufacturers and wholesalers may do for retailers. A person with an interest in a distiller, rectifier, wholesaler, class B wholesaler, or winery may not, with exceptions the statute lists, “own or have a direct or indirect interest in the business, premises, equipment, or fixtures of a retailer,” “furnish, give, or lend any money, service, or thing of value to a retailer,” or “guarantee a financial obligation of a retailer” (§ 102.07(a)).

The Texas Supreme Court interpreted these tied-house provisions in Cadena Comercial USA Corp. v. Texas Alcoholic Beverage Commission, 518 S.W.3d 318 (Tex. 2017), a case about overlapping ownership between the manufacturing, wholesaling, and retailing segments of the industry.

When this risk justifies attorney review: whenever an owner, investor, officer, director, employee, lender, landlord, or family member of the business has any connection to a manufacturer or wholesaler; whenever financing comes from outside Texas; and whenever an operating agreement gives anyone approval rights or a share of profits.

Risk Area 2: Local Certification of the Location

Before TABC issues certain permits, local officials certify whether the location is in a wet area. Under § 11.37, the county clerk and the city secretary or clerk must each certify, “not later than the 30th day after the date a prospective applicant … requests certification,” whether the location “is in a wet area and whether the sale of alcoholic beverages for which the permit is sought is prohibited” by a commissioners court order or by city charter or ordinance (§ 11.37(a), (b)). TABC’s L-CERT form carries these certifications and cites the statutory sections behind them, including §§ 11.37, 11.39, 11.46(b), 61.37, 61.38, and 61.42, and it includes a page for a Comptroller of Public Accounts certificate.

Two provisions in § 11.37 decide what happens when something goes wrong:

The certification is stable once a permit issues. “Once a permit is issued, the certification that the location or address is in a wet area may not be changed until after a subsequent local option election to prohibit the sale of alcoholic beverages” (§ 11.37(c)).
There is a hearing if the certification is refused. If the clerk or secretary “certifies that the location or address given in the request is not in a wet area or refuses to issue the certification required by this section, the prospective applicant is entitled to a hearing before the county judge to contest the certification or refusal to certify.” The applicant must submit a written request, and “the county judge shall conduct a hearing required by this subsection not later than the 30th day after the date the county judge receives the written request” (§ 11.37(d)).

When this risk justifies attorney review: when a city or county certification is refused, when it is delayed past 30 days, or when it states that sales are prohibited by an ordinance you believe does not apply. The county judge hearing is a contested proceeding with its own timing, and preparing for it is legal work.

Risk Area 3: Distance From Schools, Churches, and Hospitals

Distance rules in Texas are mainly local options. Under § 109.33(a), a commissioners court or city governing body “may enact regulations” prohibiting sales by a dealer whose place of business is within:

“300 feet of a church, public or private school, or public hospital”;
“1,000 feet of a public school, if the commissioners court or the governing body receives a request from the board of trustees of a school district”; or
“1,000 feet of a private school if the commissioners court or the governing body receives a request from the governing body of the private school.”

Four details in the same section can decide the outcome:

How distance is measured. For churches and public hospitals, the measurement runs “along the property lines of the street fronts and from front door to front door, and in direct line across intersections.” For schools, it runs “in a direct line from the property line of the public or private school to the property line of the place of business,” with a different rule for businesses on or above the fifth story (§ 109.33(b)).
Advance notice to schools. An applicant for an original license or permit whose public entrance is within 1,000 feet of the nearest property line of a public or private school “must give written notice of the application to officials of the public or private school before filing the application with the commission,” and submit a copy with the application, with an exception for premises where minors are prohibited (§ 109.33(c)).
Variances. A commissioners court or governing body that has enacted a distance regulation “may also allow variances” on grounds the statute lists, including undue hardship (§ 109.33(e)).
The 50 percent exception. The 1,000-foot rules do not apply to a retail on-premises permit or license holder “if less than 50 percent of the gross receipts for the premises is from the sale or service of alcoholic beverages,” with a parallel rule for off-premises holders (§ 109.33(f)).

The statute also defines “private school” for these purposes as one that offers instruction in kindergarten through grade 12 and “has more than 100 students enrolled and attending courses at a single location” (§ 109.33(i)).

When this risk justifies attorney review: when a school, church, or hospital is near the location; when the jurisdiction has adopted a distance regulation; when your projected sales mix is close to the 50 percent line; or when you need a variance.

Risk Area 4: Local Rules That Go Beyond the Code

Section 109.57 limits local regulation. A local regulation, charter, or ordinance “may not impose stricter standards on premises or businesses required to have a license or permit under this code than are imposed on similar premises or businesses that are not required to have such a license or permit,” except as the Code expressly authorizes (§ 109.57(a)), and the legislature’s stated intent is that the Code “shall exclusively govern the regulation of alcoholic beverages in this state” (§ 109.57(b)).

The section has limits of its own. It does not affect the validity of “a zoning regulation that was formally enacted before June 11, 1987, and that is otherwise valid” (§ 109.57(c)). And it does not affect a governmental entity’s authority to regulate the location of a sexually oriented business, an establishment that “derives 75 percent or more of the establishment’s gross revenue from the on-premise sale of alcoholic beverages,” or an establishment that derives 50 percent or more of its gross revenue from on-premise sales and is located in a municipality or county any portion of which is within 50 miles of an international border (§ 109.57(d)). The Code also grants specific local powers elsewhere, for example allowing a city by charter to “prohibit the sale of liquor in all or part of the residential sections of the city” (§ 109.31).

When this risk justifies attorney review: when a city or county applies a rule to your business that it does not apply to similar businesses without a permit, or when a zoning restriction’s validity depends on when it was enacted.

Risk Area 5: Hours of Sale

Hours depend on the permit and the place. For mixed beverage permittees, § 105.03(b) sets the ordinary hours, and late hours depend on local population or local adoption: in large cities and counties described in § 105.03(c), a mixed beverage permittee with a retailer late hours certificate may sell between midnight and 2 a.m.; elsewhere, the extended hours apply only if adopted by commissioners court order for unincorporated areas or by city ordinance (§ 105.03(d)).

When this risk justifies attorney review: when your business plan depends on late hours, or when you are opening in a jurisdiction where you have not confirmed whether extended hours have been adopted.

Risk Area 6: Employee Sales to Minors or Intoxicated Persons

Texas provides a specific protection for employers. Under § 106.14(a), the actions of an employee in selling or serving to a minor or an intoxicated person “shall not be attributable to the employer if: (1) the employer requires its employees to attend a commission-approved seller training program; (2) the employee has actually attended such a training program; and (3) the employer has not directly or indirectly encouraged the employee to violate such law.”

Signage, written policies, and audit schedules may be good practice, but they are not among the three conditions the statute states.

When this risk justifies attorney review: when a violation is alleged and the business intends to rely on § 106.14, or when you are designing hiring and training procedures and want them to support the three conditions.

Risk Area 7: Changes in Ownership

TABC distinguishes between kinds of ownership change.

Successor in interest. According to TABC, businesses use the Successor in Interest feature to report an ownership change “due to a partnership dissolution, bankruptcy, receivership, or the death of the license or permit holder,” which allows a person or entity “to operate the business during the unexpired portion of the license or permit” (TABC: Report a Successor in Interest). The successor must complete the L-SI request form, have it notarized, and “file the form with the county judge to obtain authorization.” TABC states that “most applicants for successor can operate the unexpired portion of the license only” and that they “must apply for a new license a minimum of 45 days before the expiration date.”

Mergers and acquisitions. TABC describes a separate reporting process for “a merger or consolidation, as outlined in Section 28.14” and for “an acquisition or change of entity type, as outlined in Code Sections 11.12 and 61.14,” after which affected licenses “will be reassigned to the appropriate owner (i.e., surviving) entity after TABC approves the change.”

TABC’s successor page lists four situations. It does not address every kind of sale, so ask an attorney which process applies to your transaction before closing.

When this risk justifies attorney review: before buying a licensed business, before a merger or change of entity type, and immediately after the death of a sole proprietor permit holder.

Due Diligence Before You Buy or Lease

TABC’s Public Inquiry System lets anyone “check the status of pending, active or inactive licenses and permits,” “search for and create lists of licenses and permits with administrative violations,” “find retailers on the agency’s credit law delinquent list,” and “see public complaints lodged against license and permit holders and related violations” (TABC Public Inquiry).

Before committing to a location or a purchase, look up the current and past permits at the address and the seller’s administrative history. The results show what TABC’s public records contain, which is not the same as showing that no other issue exists, so bring what you find to the attorney.

Choosing an Attorney for TABC Licensing Work

Verify the license

The State Bar of Texas offers a Find a Lawyer search on its website. A listing confirms the license; TABC experience has to be learned from the attorney.

Compare how firms describe the work

Because tied-house analysis looks across industry tiers, a firm’s description of its TABC work is a natural starting point for the conflict question. Griffith & Hughes PLLC, for example, publishes material on TABC licensing. Read how a firm presents its practice, note which tiers of the industry it describes working for, and ask in the meeting whether any of those clients could be connected to your business.

Questions that test judgment, not memory

A good TABC attorney does not need to recite subsection numbers in a first meeting. What you want to see is how he or she would approach your facts. Four questions do that.

Start with structure and conflicts together: which parts of your ownership and financing structure could create a cross-tier problem, and what documents would the attorney review first? Listen for a list that reaches past the operating agreement to loans, leases, guarantees, equipment arrangements, and the outside jobs of officers and family members, and for a question about whether the firm itself represents manufacturers, wholesalers, or distributors who could be connected to your business.

Then ask about the location: if the city or county refused or delayed the wet-area certification, or a school sat close to the property line, what would the attorney do first, and in what order? Experience contesting a refused certification shows up as a description of the written request and the hearing timetable; experience with distance rules shows up as questions about where the front doors and property lines are, and what your projected sales mix is.

Ask about the transaction: for the deal you are planning, which TABC process applies, and what would happen to the license between signing and closing? A successor filing, a merger or acquisition report, and a new application are different processes, and the answer should name one.

Finally, ask about enforcement: if an employee were accused of selling to a minor next month, what would the attorney want to see from your training records and practices? An answer built on the three statutory conditions, with a question about how you would prove each one, is the start of a defense.

Scope and fees

Ask for a written statement of scope that says whether the engagement includes the ownership review, local certification follow-up, a county judge hearing if needed, school notice, any variance request, and ownership-change filings. Comparing scope tells you more than comparing hourly rates.

Before You Apply, Buy, or Restructure

Before applying, buying, or restructuring, keep a short register with one line per risk area: tier ties among owners, lenders, landlords, officers, and family; city and county certification; distance rules, school notice, and exceptions at the location; hours; § 106.14 training; the ownership-change process; and what the Public Inquiry System shows for the address and the seller. Mark each line resolved, open, or unknown. Every open or unknown line is a question for the attorney, and the register as a whole is the scope you can ask the engagement to cover.

Legal disclaimer: This framework provides general information about the Texas Alcoholic Beverage Code and TABC processes. It is not legal advice. Statutes and agency procedures change; confirm the current text and process with TABC and a licensed Texas attorney.