If you are starting a hospitality business and want to sell alcohol you are going to need to understand the ins and outs of getting a liquor license. This article will focus on selling alcoholic beverages of 10.1% ABV or higher (i.e. wine and spirits, NOT beer).
If you are wanting to sell beer (i.e. hard ciders, hard sodas and beer less than 10.1%), you will need to get a beer permit. Click here for details about obtaining a beer permit in Nashville, Tennessee.
Step 1: What kind of hospitality business are you starting?
Are you starting a bar, nightclub, restaurant, retail store, wholesaler, distillery, winery, catering company, bed & breakfast, cigar shop, nail salon or barber shop? These are some of the types of businesses that serve alcohol in TN. In addition, if you are planning on hosting a special event such as a festival, you might be able to serve alcohol.
Depending on what type of business you are starting will determine which license you will need. The most common license is the liquor-by-the-drink (LBD) license. This license allows customers to consume alcohol on the premises. Examples of businesses that would need an LBD license include caterers, nightclubs, hotels, bars, restaurants, and special events. The remainder of this article will discuss the details of applying for an LBD license.
Step 2: Corporate Setup
It is generally a good idea to form a corporate entity when starting a business that will serve food and drink to be consumed by the public. Once you have chosen and formed your corporate entity, you will need to provide all documentation of your business to the Tennessee Alcoholic Beverage Commission. You will need to provide:
- Corporate formation document
- Certificate of existence
- Business License
- Certificate of Registration
If you are starting a new business you will need to provide a business plan.
Step 3: Officers and Owners
While a LBD license is issued to the business, each individual owner who owns more than 5% of the business will need to provide background information in order for the business to obtain an LBD license. Each owner will need to complete and provide:
- Declaration of Citizenship form including two (2) forms of identification
- List of Corporate Officers
Step 4: Location, location, location
The building and premises of the business will need to be inspected and approved before an LBD license will be issued. Documentation required includes:
- Lease or deed
- Health inspection
- TABC inspection
- Zoning approval
- Final Use & Occupancy
- Food menu
- Price schedule of drinks
Any construction must be complete for an LBD license to be issued. It is recommended that the LBD application be started and submitted at least four weeks prior to completion of construction.
Step 5: Liquor License fee
How much does an LBD license cost? That depends on two factors. The first is what subcategory of LBD is the establishment. If the establishment is either a bar or restaurant the license fee is determined by either how many seats the establishment will have or how much hot, prepared food the establishment will sell. If the establishment plans to sell less than 50% of their overall gross sales in food, then they are considered a bar or a limited service establishment and the license fee is determined by what percentage of food sales the establishment estimates it will sell. For example, if the establishment estimates that it will serve between 0-15% of gross food sales, the license fee is $5,000.00 per year.
If the establishment will serve over 50% of its gross sales in food then it is considered a restaurant and the license fee is determined by how much seating the establishment has. For example, if the establishment has 40-74 year-round seats (outdoor seating only counts if patrons can enjoy the patio year-round), the license fee is $650.00 per year.
The license fees for other types of LBD establishments are listed on the TABC website: https://www.tn.gov/abc/public-information-and-forms/fees.html.
Step 6: Liquor License Maintenance and Renewal
LBD licenses must be renewed each year. The renewal date is printed on the license which must be displayed publicly in the establishment. TABC will inspect an establishment about four weeks prior to the renewal date. In order to renew, the establishment must provide the following:
- List of officers and owners
- Food Affidavit
- License fee
Some other things to keep in mind while maintaining your license:
- Your license must be publicly displayed in the establishment along with your business license and certificate of registration
- If you change prices on drinks, add drink specials or happy hours, you will need to submit a new price schedule to the Dept. of Revenue
- Check IDs of EVERYONE! While TN law states that a server is not required to check the identification of a person who “reasonably demonstrates an age of fifty (50) year or older”, the law is written in such a way as to expose a business to liability should they not check the identification of someone due to their age.
- If there is a substantial change to the business you will need to alert the TABC and possibly apply for a new license. Examples of changes include:
- Changing the name of the establishment
- Adding or subtracting owners
- Adding or subtracting to the physical premises.
For assistance in obtaining any liquor license, please call or email Schaffer Law Firm PLLC