How to Get a Liquor License in Tennessee: A Step-by-Step Guide
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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. Last week, we shared an article, “How to Apply for a Beer Permit in Nashville, TN,” covering permits for beer and other alcoholic beverages under 10.1% ABV. This article focuses on selling wine, spirits, and other alcoholic beverages of 10.1% ABV or higher.
Step 1: Identify Your Type of Hospitality Business
Are you starting a bar, nightclub, restaurant, liquor store, wholesaler, distillery, winery, catering company, hotel, cigar shop, nail salon, or barber shop? These are some of the types of businesses that serve alcohol in TN. In addition, if you plan to host a special event, such as a festival, you may be able to serve alcohol.
The type of business you are starting will determine which license you 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: Form Your Corporate Entity
It is generally a good idea to form a corporate entity when starting a business that will serve food and drink to 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 (TABC). 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: Ownership & Background Disclosures
While an LBD license is issued to the business, each individual owner who owns more than 5% of the business must provide background information for the business to obtain an LBD license. Each owner will need to complete and provide:
- Questionnaire
- Government issued identification (example: state issued drivers’ license)
- List of Corporate Officers
Step 4: Prepare and Inspect Your Location
The business's building and premises must be inspected and approved before an LBD license is issued. Documentation required includes:
- Lease and/or deed
- Health inspection
- TABC inspection
- Zoning approval
- Final Use & Occupancy
- Food menu
- Price schedule of drinks
- Bond
Any construction must be complete for an LBD license to be issued. It is recommended that the LBD application be initiated and submitted at least 4 weeks prior to construction completion.
Step 5: Understanding Liquor License Fees
How much does an LBD license cost? That depends on two factors. The first is which 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 (must have a minimum of 40 seats for a bar or restaurant at tabletops or bar that knees can fit under the tabletop or bar) or how much hot, prepared food the establishment will sell. If the establishment plans to sell less than 50% of its overall gross sales in food, then they are considered a bar or a limited service establishment, and the license fee is determined by the 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 derives over 50% of its gross sales from food, it is considered a restaurant, and the license fee is determined by the number of seats it 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.
Step 6: Renewal and Ongoing Compliance
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:
- Application
- 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) years 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
