5 Tips for Getting (and Keeping) A Liquor License in a State With a Quota

By Gene Richard, Esq., Wayne, Richard & Hurwitz, LLP

 

A business can’t legally sell alcoholic beverages to consumers without a valid liquor license. Since profits from sales of alcoholic beverages can make or break a restaurant, hotel, club or package store, getting that retail liquor license is important—only second to keeping it. Here’s what you need to know.

 

1. Availability varies.

 


Retail liquor licenses are issued by each city or town, with the approval of the state Alcoholic Beverages Control Commission (ABCC). That means only limited numbers of each type of license are available in each municipality.

 

A town or city that is “below quota” can issue a new license directly to qualified applicants. However, once a town or city is “at quota,” an unlicensed business has to wait for an existing license to be turned in, or pay an existing licensee to transfer the license to a new holder.

 

New licenses typically cost two or three thousand dollars, and that’s just for application and annual license fees. The cost to buy an existing license involves the same fees, plus whatever price the existing licensee charges, which varies based on location and type of license (however, a head’s up: It can run well into the six-figure range).

 

 

2. Make sure you go over the nitty-gritty details.

 

Applications for new licenses or license transfers must be made via forms from the ABCC. The basic forms are available on the ABCC’s website, along with a helpful checklist of documents that need to be submitted with each type of application. Remember to check in with licensing authorities in your municipality, just in case additional forms are required. More tips about applications:

 

1. Fill the forms out completely. Failure to disclose relevant facts can be grounds to deny the application, or revoke a license that was already granted.

2. Attach copies of your lease or other evidence of your right to occupy the property. Although premises can be under construction at the time of application, no license will be issued until the premise has been inspected by the authorities.

3. Each person with an interest in the license must be disclosed and approved. That includes: Individual owners, those working with a corporation, LLC, partnership, or association (including officers, directors, and shareholders), and the applicant’s landlord (if the lease includes a rent provision that is based on the sale of alcoholic beverages).

4. Corporate licensees must designate and disclose an individual manager.

5. The initial costs and financing for the license have to be included: Your application needs to show all the costs involved in obtaining the license and getting the businesses up and running.

6. Individuals who have an interest in the licensee have to sign and submit personal information forms (PIFs) and criminal records requests (CORIs) as part of the application. This includes your landlord if that aforementioned rent provision is in play, and might also include owners and entities that own stock in the licensee.

7. Apply for a tax Certificate of Good Standing. The ABCC can’t approve a license issuance if either the new or the old licensee owes taxes to the state.

 

 

3. Pay wholesalers.

 

Your “purchase and sale” agreement with the former licensee should include that the new licensee is not accepting liabilities of the original business. Make sure to check whether the license is on the “delinquency list” kept for liquor wholesalers, and ensure that wholesalers on the list are paid before the transfer.

 

4. Prepare to go through the process again in the future.

 

Once your application is approved and the license is issued, you might have to go through the process all over again for any number of reasons. For example, if your manager quits, you’ll need a new license, and to get that manager approved. Approval has to be obtained for a change in location or new stock, too.

 

5. Remember to renew annually.

 

Check in with your local licensing authorities in your municipality for specifications on “automatic renewal” or submitting a renewal application. Most municipalities require that documentation of liquor liability insurance and inspection certificates are included with the renewal form, and you’ll still need to be up-to-date on your taxes and payment of the annual license fee.