Historical Perspective

The Texas Alcoholic Beverage Commission (formerly the Texas Liquor Control Board) was created in 1935.

Under the Alcoholic Beverage Code, the TABC "shall inspect, supervise and regulate every phase of the business of manufacturing, importing, exporting, transporting, storing, selling, advertising, labeling and distributing alcoholic beverages, and the possession of alcoholic beverages for the purpose of sale or otherwise."

"This code is an exercise of the police power of the state for the protection of the welfare, health, peace, temperance and safety of the people of the state. It shall be liberally construed to accomplish this purpose."

In 2007, following a recommendation by the Sunset Commission, the following was added to the agency’s mission in the Alcoholic Beverage Code: “The commission shall:

1. protect the public safety by deterring and detecting violations of this code;
2. promote legal and responsible alcohol consumption;
3. ensure fair competition within the alcoholic beverage industry;
4. ensure consistent, predictable, and timely enforcement of this code;
5. ensure a consistent, predictable, and timely licensing and permitting process;
6. promote and foster voluntary compliance with this code; and
7. communicate the requirements of this code clearly and consistently.”

Prohibition

In 1918, the Texas Legislature ratified the 18th Amendment to the United States Constitution and immediately passed new state laws, thus beginning the "Grand Experiment" of prohibition.

U.S. Constitution - AMENDMENT XVIII

Section 1. After one year from the ratification of this article the manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all territory subject to the jurisdiction thereof for beverage purposes is hereby prohibited.

Section 2. The Congress and the several States shall have concurrent power to enforce this article by appropriate legislation.

Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by the legislatures of the several States, as provided in the Constitution, within seven years from the date of the submission hereof to the States by the Congress.

At the time of adoption of the statewide prohibition laws, 199 out of 254 counties in Texas had been voted dry under local option laws; 43 were practically dry; and only 10 counties were without prohibition areas.

The prohibition law lacked public sentiment necessary for proper enforcement, and ultimately, the opponents of prohibition won out.

In 1933, Congress amended the Volstead Act (known as the National Prohibition Act) to permit the sale of beer up to 4% alcohol by volume; and in August 1933, the voters in Texas adopted an amendment to the State Constitution legalizing the sale of beer.

The 21st Amendment to the United States Constitution, which repealed the 18th Amendment, became effective December 15, 1933. The 44th Legislature then submitted an amendment to the voters repealing state prohibition, and the voters ratified it in August 1935.

Texas communities reverted back to the wet/dry status maintained prior to Prohibition.

U.S. Constitution - AMENDMENT XXI

Section 1. The eighteenth article of amendment to the Constitution of the United States is hereby repealed.

Section 2. The transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws there­of, is hereby prohibited.

Creation of the Agency

When the 21^st Amendment to the U.S. Constitution repealed national prohibition, it delegated responsibility for regulation of the alcoholic beverage industry to the individual states. This is probably the only remaining right guaranteed more or less exclusively to the states.

Shortly after the adoption of the 21^st Amendment, the Texas Legislature, meeting in special session, enacted the Texas Liquor Control Act that created the Texas Liquor Control Board. The LCB, as it came to be commonly known, began its existence on November 16, 1935, charged with the adminis­tration of the new act. The name of the agency was changed January 1, 1970, to the Texas Alcoholic Beverage Commission and, on September 1, 1977, the recodified Texas Liquor Control Act took effect as the Texas Alcoholic Beverage Code.

The Alcoholic Beverage Code authorizes the Texas Alcoholic Beverage Commission to:

• Grant, refuse, suspend, or cancel permits and licenses in all phases of the alco­holic beverage industry;
• Supervise, inspect, and regulate the manufacturing, importation, exportation, transporta­tion, sale, storage, distribu­tion, and possession of alcoholic beverages;
• Assess and collect fees and taxes;
• Investigate for violations of the Alcoholic Beverage Code and assist in the prosecution of violators;
• Seize illicit beverages;
• Adopt standards of quality and approve labels and size of containers for all alcoholic beverages sold in Texas;
• Pass rules to assist the agency in all of the above.

Liquor by the Drink

After several attempts, the Texas Legislature responded in 1971 to a public referendum by creating a mixed beverage permit that allowed sales of liquor by the drink in those areas specifically authorized by local option election. With the new permit came the mixed beverage gross receipts tax:

a tax at the rate of 10 percent… imposed on the gross receipts of a permittee from the sale, preparation, or service of mixed beverages or from the sale, preparation, or service of ice or nonalcoholic beverages that are sold, prepared, or served for the purpose of being mixed with alcoholic beverages and consumed on the premises of the permit­tee.

The new permit met with immediate acceptance, and the new tax quickly became a major revenue generator for the state. In 1985, the tax rate was increased to 12 percent and increased again in 1989 to 14 percent. For fiscal year 1993, gross receipts tax and penalty collections amounted to $244.7 million, more than half of the total revenue collected by the agency.

Sunset Review

House Bill 1445 of the 73rd Legislature, 1993, enacted recommendations from the Sunset Review of the commission. The legislature's action demonstrated its belief in the need for a separate alcoholic beverage regulato­ry agency. Emerging from the process, the Texas Alcoholic Beverage Commission was continued for 12 years with two significant functional changes:

• Effective January 1, 1994, responsibility for the collection and verification of the mixed beverage gross receipts tax was transferred to the Office of the Comptroller of Public Accounts.
• Effective April 1, 1994, responsibility for the enforcement of the Bingo Enabling Act was trans­ferred to the Texas Lottery Commission. The Texas Alcoholic Beverage Commission had assumed short-term responsibility for the regulation of bingo from the Office of the Comptroller of Public Accounts in January 1990.

The Sunset Commission again reviewed the agency in 2004; however, the bill containing their recommendations did not pass during the 79^th Legislative Session. Instead, TABC was continued for another two years.

Although the Sunset bill did not pass, the Sunset Report recommended that the agency focus on public safety issues. As a result, in 2005, the agency requested, and was granted, over 100 additional FTE’s to increase enforcement efforts focused on reducing DWI arrests, accidents, and fatalities in Texas. Of that amount, 59 enforcement agents were hired, and a new education and prevention division was created. An additional 27 compliance auditors were hired, which allowed the compliance division to assume administrative tasks previously conducted by enforcement agents. Additionally, enforcement efforts became more focused on at-risk locations, increasing the efficiency and effectiveness of operations.

Following another Sunset Review in 2006, Senate Bill 904 passed during the 80^th Legislative Session, continuing the agency for another 12 years. Following is a summary of the major aspects of the Sunset bill:

1. Update TABC’s mission to better reflect the agency’s role in protecting public safety and regulating the modern alcoholic beverage industry.
2. Ensure TABC’s enforcement efforts are fair, consistent, and focused on public safety.
3. Reduce TABC’s regulation of certain business practices that duplicate federal requirements, impose unnecessary costs and delays on the industry, and create excessive burdens for the agency.
4. Require TABC to develop a formal process for making and communicating policy decisions regarding marketing practices regulations.
5. Require the agency to create a more formal and consistent approach to investigating and resolving complaints against its employees.
6. Ensure licensees have access to online license application, renewal, and fee payment.
7. Require establishments that serve alcohol to post signs warning the public of the risks of drinking alcohol during pregnancy.
8. Expand TABC’s authority to take enforcement action against establishments that sell or serve alcohol during prohibited hours.

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