The Basics of Alabama’s Alcohol Laws
The authority and power to establish rules and regulations for the sale, distribution and taxation of alcoholic beverages in Alabama is vested entirely in the State of Alabama. No county or municipality may license the sale of alcoholic beverages or otherwise regulate its sale, except to impose restrictions not in conflict with the Alcoholic Beverage Control laws.
The Alabama Alcoholic Beverage Control Board (hereinafter "ABC Board") is the State agency that regulates and enforces the laws governing the importation, sale, manufacturing and distribution of beer, wine and distilled spirits as well as the sale of alcoholic beverages to and through the food service industry. The ABC Board is vested with broad legislative authority over all alcoholic beverages. Although there are a limited number of counties and municipalities that are dry or partially dry, meaning that there is a prohibition on all or some alcoholic beverages, it is the ABC Board that is charged with the responsibility of enforcing such restrictions.
The Alcoholic Beverage Control laws are contained in Title 28 of the Code of Alabama 1975, which requires strict compliance with the letter of the law and places a duty of knowledge as to the provisions of the law upon anyone licensed to sell or distribute alcoholic beverages. Accordingly, all first-time violators of these laws may expect not only a fine for the violation, but also the imposition of an administrative action from the ABC Board.
When assessing penalties for violations of the Alcoholic Beverage Control laws, the ABC Board has considerable discretion. It may impose a fine or a suspension of the license for a stated period of time with the option for the violator to pay an equivalent cash penalty in lieu of the suspension. While suspensions of licenses typically do occur, fines in lieu of suspension are also quite common . In determining whether to issue a fine in lieu of suspension, the ABC Board will consider prior licensee conduct, the severity of the violation, profit from the violation, other mitigating factors and whether the licensee has agreed, in light of the particular circumstances, to forego a hearing and to comply with the penalty amount recommended by staff.
In considering a suspension of license, the ABC Board will consider all of the facts of the case including, but not limited to, any prior licensee conduct and whether the licensee has committed similar violations. In addition to prior violations, the frequency and number of violations and the frequency that the violations occurred are also taken into consideration. The ABC Board will also consider the public need for the business and whether revocation of the alcohol retail license would force admission of underage minors to other establishments due to their closing.
Whether the ABC Board imposes a fine or a suspension of license, the ABC Board will assess costs in each case, which includes the costs of prosecuting the case before the ABC Board and conducting the hearing. Case costs typically range from $650.00 to $1,000.00. In addition to these costs, the ABC Board will impose its attorney fees and other legal fees and expenses incurred in connection with prosecuting the case. Case costs and attorney fees are assessed equally against all licensees under suspension and are added to the fine assessed. ABC Board hearings are open to the public and are recorded electronically. A written transcript of the hearing may be purchased from the recorder of the ABC Board in order to preserve all testimony presented to the Board.
Notwithstanding these sanctions, however, the ABC Board intends for the severity of the violations to dictate the penalty. For example, while significant punishments are administered for violations related to the sale of alcohol to minors or supplying minors with alcohol, accidental conduct is likely to result in less severe penalties.
Alcohol Licenses: What You Need to Know
On the federal level, a restaurant must obtain a Federal Alcohol Special Tax (S. Tax) as well as a state alcohol license. On the S. Tax, Alabama has no alcohol excise taxes, so no excise tax is required of an Alabama corporation.
At the federal level, the Alcohol and Tobacco Tax and Trade Bureau (TTB) regulates beverage alcohol products. The TTB lists seven license types that may be granted to manufacturers, importers, exporters, wholesalers, and retailers: A manufacturer license authorizes the licensee to engage in one or more manufacturing operations. This includes wineries, breweries, distilleries, rectifiers or blenders, bottlers, packers, and repackers (for wine, distilled spirits other than rectified spirits, or beer). The manufacturer license authorizes all operations pertaining to the manufacture and storage of wines, distilled spirits, and beer, and the sale of those products to wholesale or retail trade.
A wholesaler license authorizes the licensee to buy the products of different manufacturers to sell to retailers. The standard wholesaler license authorizes the licensee to sell all the beverages alcohol products included in domestic trade.
A retailer license authorizes a licensee to sell alcohol beverages for consumption on the premises or for off-premises use. A restaurant license authorizes the licensee to serve alcohol beverages to customers on the premises, provided the licensee meets the requirements of State law. Typically, retail industry establishments are required by the states to be open for business each day at least five hours a day outside of midnight to 7 a.m., with at least 80 percent of total sales in foods and nonalcoholic beverages. A restaurant license does not authorize the licensee to sell for resale.
Before applying for a rural grocery store license, an applicant should review the requirements of State laws and local ordinances to ensure that the business meets these requirements. An applicant must have an established place of business in a rural area that is regularly and primarily engaged in the retail sale of food and grocery items, less alcoholic beverages, as a convenience to the public; derives a minimum percentage of revenue from the sale of food and grocery items as determined by state law or local ordinances; maintains a minimum square footage in food and grocery sales space, not including any space allocated to the sale of tobacco products or alcohol beverages; and is in compliance with state law or local ordinances regarding permits from the department of revenue and the state board of health.
An importer license authorizes the licensee to import into the U.S. bulk alcohol beverages upon payment of an Internal Revenue Service (IRS) registration fee, as well as a TTB application fee when submitting an application for an importer license.
An exporter license authorizes the exportation of tax-free alcohol beverages to foreign countries or to U.S. possessions, islands and territories. The exporter license does not authorize the exportation of alcoholic beverages to U.S. states.
An American Indian excise tax license is available to applicants that are American Indians (from tribes recognized by the U.S. Department of Interior) involving transactions related to alcohol beverages excise taxes.
A collateral brewer’s and beer importer’s license allows the licensees to pay their federal excise taxes through a bond posted by a third party. The collateral license is intended to facilitate the tax payment to reduce the regulatory burden to small producers.
Should an Alabama restaurant owner be interested in importing alcohol into the state for resale purposes, it will also make sense for them to seek a separate wholesale license.
Restaurant Alcohol Hours
The permitted hours for selling alcohol can vary quite a bit, depending on your county and city. Generally, alcohol must only be sold during the hours prescribed by local law. However, even if that is the case, sometimes liquor can be served later than local laws allow.
The following generally applies to counties and cities that are in a wet county and/or city:
Restaurants that serve beer, wine, taxing jurisdiction regulation time permitting, can serve alcohol from 10:00 A.M. until 12:00 Midnight, except on Sundays, when alcohol can be served from 10:00 A.M. until 10:00 P.M.
Restaurants that serve only wine for consumption on the premises, taxation jurisdiction regulation time permitting, shall only serve wine until 10:00 P.M., but can serve wine from 10:00 A.M. until 12:00 Midnight on Mondays through Saturdays, subject to the local law.
Restaurants that serve spirits and wines but not beer, taxation jurisdiction regulation time permitting, shall only serve spirits and wine until 10:00 P.M., but can serve wine from 10:00 A.M. until 12:00 Midnight on Mondays through Saturdays, subject to the local law.
Restaurants that serve beer and wine and no spirits, taxation jurisdiction regulation time permitting, shall only serve these products until 10:00 P.M. on Mondays through Saturdays, but that the exemption for the 12:00 Midnight closing on Mondays through Saturdays would apply to restaurants selling beer and wine.
As noted above, the above closing times could apply beyond 12:00 Midnight on Mondays through Saturdays. For example, in many counties and cities, if a licensee sells alcohol beverage for consumption on the premises in a private banquet room or other type of separate area segregated from view of the main dining or public room, the closing hour for serving alcoholic beverages in the segregated or privte area could be extended to 3:00 A.M.
Again, you have to be cautious that your implementation of this rule does not run afoul of legal alcohol hours imposed, whether you believe it to create a lease default or violations of laws or regulations. This will require calling your Alabama Beverage Control Board agent and getting his or her guidance. We’ve had clients call us in this situation and say that their ABC agent has no problem with a little "wiggle room" in the interpretation of the rules, but would like at least a good faith effort to be in compliance. I am always VERY CAREFUL in taking that approach to our guidance as lawyers, when a client has tried this approach the agent has agreed with our representation. On the other hand, you have to make good faith efforts in recommending the approach.
The restaurant industry is one of the most licensed in the country. Be careful about compliance. Some regulators are likely to grossly overestimate the impact of your violations on your permit. In fact, many smug lawyers talk their clients into having major violations without thinking through the consequences of getting shut down for hours, days, weeks and in some cases months for repeat violations.
Restaurant Employee Alcohol Training and Compliance
For any restaurant that is to be allowed to responsibly sell and serve or dispense alcohol on the premises, the personnel of that restaurant must be properly trained via either a licensed alcohol sales training certification program in the State of Alabama, or a third-party recognized training program. Generally, staff must obtain this type of training prior to being permitted by the Alabama ABC Board to serve alcohol on the premises. The most common programs offered in the State of Alabama that provide this type of training certification to those who serve or dispense alcohol including to-go orders include TIPS, ServSafe, Alcohol Server Certification, and Restaurant Association ServSafe. However, any trainer, instructor, or company providing this type of alcohol sales training certification must be first registered with and approved by the Alabama ABC Board. This is interesting for those who regularly deal with Canada’s Alcohol and Gaming Commission, as the ServSafe certification mentioned above is issued by the same organization that issues the Servsafe Alcohol Responsible Beverage Service and Training (RAST) certification program through its collaboration with the National Restaurant Association Educational Foundation (NRAEF). CN compliance officers regularly encounter individuals who possess the ServSafe Food Safety Certification, and will no doubt eventually have to familiarize themselves with the ServSafe RAST certification as well. The Certification is good for three years, at which point it must be renewed. Another interesting aspect of these licenses/permits (whatever you would like to call them) is that it appears based on the Alabama ABC Board Catalog of Permits and Licenses that any employee or staff member responsible for checking customer identification for age is required to have one of these licenses as well. The staff member must also be authorized by the establishment itself to check identification in order to verify an individual’s age for serving purposes.
Typical Violations and Their Consequences
Restaurants in Alabama can run afoul of the state’s alcohol laws in a variety of ways. Some of the most commonly reported violations include: A restaurant found in violation of Alabama’s alcohol laws may be subject to a fine, suspension or revocation of its alcohol license, or any combination of the two. Under Alabama law , the amount of the fine and period of suspension for alcohol licensees under the authority of the Alabama ABC Board is as follows (limited only to the particular violation and not an overall history of violations): After 2 or more convictions for the same offense in a 2 year period, after a first conviction a restaurateur may no longer receive a license to sell alcoholic beverages at restaurants or tasting rooms.
Recent Developments in Alabama Alcohol Laws
The shifting landscape of Alabama alcohol laws brought about by the passage of by-laws in municipalities or counties, and result of court rulings, continues to add to the challenges faced by most restaurants in navigating the somewhat convoluted process of licensing, permitting and operation for on-premise consumption or retail sale of alcoholic beverages. As is often the case in these situations, the laws change on a regular basis, at times leaving proprietors and even the ABC Board confused.
One of the most significant changes affecting restaurants took place in 2009, when the Alabama Legislature passed a law amending Alabama’s Alcoholic Beverage Licensing Code to allow retail licensees the ability to sell Alabama beer and wine on Sundays only. The law was first implemented in January 2010, although many municipalities opted not to put the enabling referendum on the ballot until the November elections. Presently, at least two dozen counties and approximately 30 municipalities have adopted the referendum allowing restaurants (and other retail licensees) to sell alcoholic beverages, not only by the drink, but packaged or otherwise for consumption off of the premises from 12:00 p.m. until 10:00 p.m. on Sundays.
In addition to the recent Sunday sales, there are other recent changes in the status of Sunday sales: this bill also clarified that "alcoholic beverages" include beer, wine and spirits.
House Bill 365, sponsored by Tanya Edwards, changes the definition of "restaurant" for purposes of alcoholic beverage licensing. The new law defines a restaurant to mean a business establishment which is open at least six hours per day in the serving of meals at least five days a week, with an adequate and sufficient food menu and kitchen facilities sufficient to prepare and furnish such meals to all customers thereof. The new amendments also remove the clause "which derives at least forty-five percent (45%) of its gross sales revenue during the preceding calendar year from the sale of food items prepared and served for consumption on the premises," with regard to the definition of a restaurant. Many believed that this change would permit a "restaurant" to obtain an alcohol license, even if the majority of revenues were derived from the sale of alcohol. Interestingly, however, during the public hearings on the bill, the opposition was from proponents of "neighborhood pub" style restaurants, not the larger nightclubs, stating that the intended purpose was to close the loophole to nightclubs with kitchen facilities. The final version of the bill retained the restriction, although with an apparent exception. In any case, the law was signed by the Governor on May 8, 2013 and took effect upon the Governor’s signature.
On the other hand, over the past two years, some municipalities and/or counties have opted to further restrict or even ban the sale of alcoholic beverages within their jurisdictions. In Baldwin County, a band on alcohol has now been lifted, resulting in some $1.5 million in revenues for the county. In Lee County, however, a similar lifting of the ban may be in jeopardy, as the newly elected sheriff has made lifting the ban one of his central campaign promises.
While they may tend to focus on the set up of the system, the ABC Board is actively working to implement an electronic system that would bring consolidates the records of each licensee to reunification in a central database for efficient processing and public access. Certainly it would be a welcome to the Board to have an integrated electronic process that would allow greater public access to the licensees and permitted businesses within the state, while allowing the agency to immediately recognize prior violations. As the saying goes, "to know your enemy is half the battle."
Compliance Tips and Best Practices
Regular internal audits are essential for Alabama restaurants to ensure compliance with Alabama alcohol laws. They should address common compliance issues and track the effectiveness of previous internal controls that have been implemented. Such audits may be performed quarterly or even monthly depending upon the size, type, and volume of the restaurant’s operations and sales. An internal audit will typically include evaluating:
The outcomes of an internal audit should be documented, and where compliance shortfalls are identified, immediate action should be taken to rectify such issues. The underlying issues that led to non-compliance should also be identified and addressed. It can often be helpful to review recent decisions made by the ABC Board or local issuing authorities to determine whether similar practices or procedures have given rise to violations in the past.
After performing a comprehensive internal audit , you may begin to identify areas where corrective controls can be implemented to ensure compliance going forward. These corrective controls should be designed based on lessons learned from any past violations and should be aimed at preventing such violations from occurring in the future.
Working with counsel experienced in the various facets of Alabama alcohol laws can not only help restaurants avoid violations, but can also be invaluable in cases where violations have been committed to minimize any adverse consequences. Such counsel should have working knowledge and understanding of:
Experienced counsel can also work with or provide legal support to an internal audit or controls implementation process by reviewing the results of an internal audit or recommendations from other professionals, and developing objective and workable recommendations to implement new controls. Counsel familiarity with the practicalities and potential disputes that can arise in the ABC regulatory and enforcement process is invaluable in the implementation of new controls. In addition, counsel can assist in implementing proper and effective policies and training programs, risk assessments, information systems, or audits to limit the risk of future violations or minimize the negative consequences of violations if they do occur.
