What are TABC Rules and Regulations?
Navigating the web of state regulations and insurance requirements for events with alcohol being served can be difficult. Terms such as TABC certification, liquor licensing, liquor liability coverage and party host coverage are all relevant yet extremely different terms. However, once you understand the underpinnings of both the regulation and the insurance aspects, you should be able to successfully answer client questions and concerns.
What you need to know about TABC for your party
TABC stands for Texas Alcohol & Beverage Commission. It is the state regulatory body which both (A) collects taxes on the sales of alcohol and (B) upholds the state regulations and training pertaining to the sale and service of alcohol. Understanding this dual role is important because it defines the goals and priorities for the agency with regard to your party or establishment.
Does TABC require a TABC-certified bartender for my party?
Technically bartenders and servers are not required to have a SELLER-SERVER TABC CERTIFICATION. Rather it is establishments and licensed entities that are required to have TABC-trained and certified staff, thus indirectly the bar and server staff then are required to be TABC certified. And while TABC certification does not impart blanket indemnity to a host, a company or establishment (dram shop laws) in a civil matter arising from damage caused by an alcohol-related accident; hiring staff that are TABC certified for an event does show “due diligence” in the eyes of the law and may eventually assist in the extrication or lessening of liability of a party from a civil suit of this sort.
Who does TABC regulate in Texas
In addition to the seller-server training, TABC regulates the sale and resale of alcohol in the state. Distributors, such as Ben E Keith and Andersons broker the sale of alcohol to state-licensed entities such as restaurants, caterers, hotels and liquor stores. Each licensed entity that wishes to purchase alcohol from a distributor and resell that alcohol must apply to TABC and be approved for a license (ex LIQUOR LICENSE) of which there are several types (See list here –https://www.tabc.state.tx.us/licensing/license_and_permit_description.asp). Through this LICENSE, an entity pays a yearly flat fee and also pays tax on every bottle purchased. Each bottle is tagged with a label that notes who the licensed purchaser/owner of that bottle is. These labels are destroyed when the bottle is emptied to prevent their reuse.
TABC Licensing and what not to do
Licensing is not transferrable to a third-party entity. Only alcohol purchased through an entity can be considered “licensed” under that entity’s licensing. For example, alcohol cannot be donated to a charity by a broker, then stated to be “licensed” (usually to establish liability coverage) through a third-party licensed entity. Some organizations have been known to skirt this technicality by having a licensed entity “purchase” the alcohol from the distributor/broker who wished to donate it, then the organization pays the licensed entity for their “purchase” from the distributor/broker, then the distributor/broker reimburses the organization. This is “circle of payments” may circumnavigate the rules, however, because this scenario is usually attempted to impart liquor liability coverage, if the ruse is discovered from a post-event insurance claim or civil case, it may not bode well.
How do I get a permit from TABC for my party?
For events where alcohol is to be sold, such as with a cash bar, both the licensing for the entity selling the alcohol must be in place and additionally, a TEMPORARY PERMIT for the specific day and location must be applied for. The process for a licensed entity to request a temporary permit takes about 3-5 days and must receive approval from TABC.
TABC regulations for special events
Some organizations and consultants have devised alternative ways to get around the distinction of “private party with free alcohol” versus selling alcohol at a “cash bar”. These include ideas such as charging for entrance to the party in order to pay for the decor, lighting, DJ, catering, and rental equipment and then giving the alcohol away for free. Also used is to charge a flat “service fee” for access to the bartender and again the alcohol is free. Again, while these are technical roundabouts to the law, it is not recommended to attempt them as they are thinly-veiled regulatory violations.
Rules for selling alcohol versus a private party
All of these TABC regulations do not apply to public and private parties where the alcohol is NOT BEING SOLD but is rather being GIVEN AWAY. Alcohol purchased from a liquor store has had the taxes already paid by the liquor store when they purchased it from the distributor. In this scenario, no duty is owed to TABC as long as the alcohol is not being sold by the end-user. Using a TABC certified bartender is still the host’s best line of defense against someone being over-served or minors being served. Again, hiring a TABC-certified bartender shows “due diligence” and may assist to lessen liability. But other than the certified staff, TABC does not regulate this kind of private event, even if they are held at a rented venue.
Liquor liability insurance and the role of TABC in liquor distribution
Alongside the state regulations, being knowledgeable about the LIABILITY and INSURANCE aspects to alcohol sale, service and consumption are important. Liquor liability insurance is an often misunderstood type of insurance that a licensed entity can and should purchase to cover claims arising from their sale of alcohol. Where the misunderstanding arises is in the following two ways. First, liquor liability coverage can only be purchased by an entity licensed by the state to resale alcohol, because the premiums that the entity pays to the insurance broker and underwriter are based upon the entity’s annual alcohol sales. Without alcohol sales, an insurance underwriter cannot establish a baseline for its exposure and has no way to adjust the entity’s premiums properly.
Liquor liability coverage not extendable to third party entities
If the alcohol was not purchased by the licensed entity from a distributor (thus paying taxes to the state on that alcohol) and then resold by the licensed entity to its client or an end user, then its liquor liability coverage cannot be extended over a party. The reasons are straightforward:
- To do so would open the insurance underwriter up to additional exposure from unvetted, unknown third parties.
- To extend coverage when no alcohol sale is being made is defrauding the insurance underwriter because it would reduce the insured entity’s annual sales, thus their premiums paid to the insurance underwriter, while at the same time broadening the exposure of the unknowing underwriter.
Host party coverage a good alternative
An alternative has been created for individuals, hosts, companies, etc that need to placate an event venue, mall, government building, or otherwise that is requiring some sort of liquor liability coverage for their event because of the inherent liability associated with serving alcohol. It is called “host liquor liability coverage” or “party host coverage” and it is offered through vendors on the internet. This may be the best way to put in place some sort of special event liability insurance coverage if a state-licensed alcohol resale entity is not going to be used but insurance is still required by either the venue or another party to the event.
Learn more about TABC rules in Texas
While this is a great beginning to this discussion, certainly do your own research online with regard to TABC certifications, licensing, permits, sale and resale of alcohol. Additionally, doing your own additional research into a liability, insurance, and the different types of coverage that you can purchase will assure you that you have all of your bases covered. Thanks and I hope this helps!
