You're finally on the verge of owning that restaurant, brew pub, club or bar you've always dreamed of -- so it's high time you educated yourself on how to get started as a seller of alcoholic beverages. Here are three important rules to digest before your patrons start digesting your drinks.
1. You Need a Liquor License
If you plan on selling alcohol at your establish, you'll have to go through the necessary steps to obtain a liquor license. (Additionally, on-site owners or managers who sell alcohol on your behalf must have a service permit if they're not specifically listed by name on the liquor license.) These licenses are granted by the state in which you do business, either through its alcohol and tobacco agency or through a specially-designated department. Some states require both a federal permit and a state liquor license, so be sure to ask your state agency about this. You may also need to choose the specific type of liquor license that describes your establishment and intentions, such as a Hotel and Restaurant License, a Brew Pub License, a Club License, or a license to serve beer and wine only.
If you're purchasing an existing business that serves alcohol, you can arrange to have the business's liquor license transferred to you. But watch out for tiny glitches in the application process that can create massive delays, temporarily forcing your new restaurant to become a "B.Y.O.B." establishment. Any mistakes or omissions in your personal disclosures, or any typos that cause a mismatch between the application and the establishment's on-file data, could force you to submit an all-new application and endure the waiting period for approval all over again.
2. You Must Pay Taxes (Unless Your Inventory Is Wiped Out)
Each state charges its own excise tax percentages on beer, wine, and spirits sold by businesses. You also have to pay federal excise taxes collected by the Alcohol and Tobacco Tax and Trade Bureau, a division of the U.S. Treasury. Even if you include "complimentary" drinks as part of another service, the money made on that service is considered taxable as a kind of alcohol retail by the government. Failure to pay your liquor taxes on time will make you vulnerable to financial penalties or even criminal prosecution -- so never let this aspect of your business slide.
What if your stock of alcoholic beverages is destroyed? Depending on the circumstances, you may not have to pay taxes on the lost inventory. The TTB allows business owners in your sad position to file an application for relief from your usual tax burden. If you've already paid taxes on the lost alcohol, you can apply for a refund. If you have yet to pay taxes on it, you can apply for an "Allowance of Loss" that cancels your liability for the specific amount of alcohol destroyed. As an alternative, you can also apply for a credit on your future tax payments.
3. You Should Insure Yourself Against Customer Liability
Alcohol sometimes gets people into trouble or causes them to do crazy things. Unfortunately, if they get into trouble or do those crazy things while drunk on the beverages you sold them, there's always the chance that you might be slapped with a civil lawsuit. A barroom brawl, for example, could leave you holding the bag for damages, while an auto accident might be connected to alcohol consumed in your club. That's why it's a smart idea to cover yourself by taking out Liquor Liability insurance -- in fact, many states actually require their liquor retailers to take out such a policy.
You can obtain a policy that offers financial protection against assault and battery, legal costs, and any civil damages the court might award the plaintiff. Be aware, however, that Liquor Liability insurance won't cover you under every circumstance. For instance, if you give alcohol to a minor, that illegal action (and any consequences) won't be included in your coverage.
Selling alcohol can be a complicated business. But proceed with the proper care and attention to detail, and you may find it a highly profitable one as well.