The Ins and Outs of Getting (and Keeping) a License

Gene Richard, Esq.

By Gene Richard,Esq.

Wayne, Richard & Hurwitz, LLP

A business cannot legally sell alcoholic beverages at retail to consumers without a valid liquor license. Since profits from sales of alcoholic beverages can “make or break” a typical restaurant, hotel, club or package store, getting – and keeping – that retail liquor license is vitally important. Here are some tips to keep in mind:

Availability.

Retail liquor licenses are issued by each city or town, with the approval of the state Alcoholic Beverages Control Commission (ABCC). Pursuant to the state’s “quota system,” only a limited number of each type of liquor license is available in each municipality. A town or city that is “below quota” can issue a “new” license directly to qualified applicants. Once a town or city is “at quota,” however, an unlicensed business either must wait for an existing license to be “turned in,” or pay an existing licensee to agree to transfer their license to them. A new license will typically cost two or three thousand dollars just for application and annual license fees. The cost to buy an existing license will involve the same fees, plus whatever price the existing licensee will want to charge, which can vary quite a bit depending on location and the type of license. It can easily run well into six figures.

Applying for a License.

Applications for issuance of either new licenses or transfers of existing licenses must be made on forms supplied by the ABCC. The basic forms are available on the ABCC’s website (www.mass.gov/abcc/forms ) as well as a helpful checklist of all of the documents that need to be submitted with each type of application (www.mass.gov/abcc/pdf/reatailchecklist). It also makes sense to check with the licensing authorities in the municipality where your business will be located, as some cities and towns require additional forms or documents.

More tips about the applications:

  1. Fill the forms out completely and accurately. Failure to disclose a relevant fact in an application can be grounds to deny the application or even to revoke a license that was already granted.
  2. Attach copies of your lease or other evidence of your right to occupy the property. Licenses must describe the premises on which they may be exercised. Although those premises can be under construction at the time of application, no license will issue until premises are in existence and have been inspected by the authorities. While many start-ups understandably would prefer to lock-up a license before they commit to a lease, the law does not allow for “pocket” or “roving” licenses. An applicant for a licensee must demonstrate their right to legally occupy the premises as part of the application.
  3. Each person with an interest in the license must be disclosed and approved. The individual owner(s) of a license must be disclosed on the application. The license may be held in the name of a corporation, LLC, partnership or an association, but the application must list the individuals who will have an interest in the license by means of their ownership or control of the licensed entity – such as officers, directors and shareholders of a corporate licensee. Perhaps less obviously, an applicant’s landlord will be deemed to have an interest in the license if the lease for the premises includes a percentage rent provision that is based in any part on the sale of alcoholic beverages.
  4. Corporate licensees must designate, authorize and disclose an individual manager. Corporate licensees in Massachusetts are required to appoint a manager or other individual representative who must be authorized to take any action with respect to the license as an individual licensee could. A copy of the corporate vote appointing the manager must be included with the application. The manager must be a US citizen and, for Boston licenses, a Massachusetts resident.
  5. The initial costs and financing for the license must be disclosed. The application must show the costs involved in obtaining the license and getting the business operating, as well as the source of all funding for the indicated costs. Records sufficient to demonstrate the sources of all cash and documenting loan agreements must be submitted as part of the application.
  6. CORIs and PIFs, oh my. All individuals who have an interest in the licensee will have to personally sign and submit personal information forms (PIFs) and criminal records requests (CORIs) as part of the application. This includes your landlord if your lease includes a percentage rent provision that is calculated even in part on sales of alcoholic beverages. It may also include owners and officers of entities that own stock in the licensee.
  7. Apply for a tax Certificate of Good Standing. The ABCC cannot approve a license issuance if either the new or the old licensee owes taxes to the Commonwealth. As of June 1, 2013, the ABCC requires that applicants obtain Certificates of Good Standing from the Department of Revenue and submit them with the application papers.

Wholesaler debt.

Your “purchase and sale” agreement with the former licensee should provide that the new licensee is not accepting any liabilities of the original business. However, check whether the license is on the “delinquency list” kept for liquor wholesalers. Make certain that any wholesalers on the list are paid before the transfer because even though the new licensee would not technically owe the wholesalers for the existing debt, the license itself will remain on the list until those bills are paid – and while still on the list, no wholesaler can sell to the current licensee on credit.

Congratulations, you’re a licensee – but you’re not done.

Once your application is approved and the license is issued, you may have to go through the process all over again for any number of reasons. Approval must be obtained, for example, to alter the licensed premises, change location, issue new stock, or make a pledge of the stock or the license. Manager quits? You’ll need a new one, and he or she needs to be approved.

Annual Renewal.

One last reminder. All retail licenses in Massachusetts expire at the end of December each year. The good news is you, as licensee, are entitled to “automatic renewal” of your valuable asset, so long as you submit a renewal application during the month of November. More good news: Provided you apply for the same type of license, covering the same premises, that annual renewal form is only a page or two. We still recommend you take care of this well before Thanksgiving, though. Most municipalities require that documentation of liquor liability insurance and inspection certificates accompany the renewal form and, of course, you’ll still have to certify you’re up to date on your taxes and pay the annual license fee!

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