Top 5 Legal Mistakes Alcohol Businesses Make and How to Avoid Them
Operating an alcohol-related business in Texas comes with a unique set of challenges. Whether you’re running a bar, restaurant, distillery, winery or craft brewery, navigating liquor laws and ensuring compliance is essential for your success. To help you avoid costly legal issues, here’s a look at the top five legal mistakes alcohol businesses commonly make—and how to prevent them.
#1 Failing to do the research
One of the most frequent missteps alcohol startups make is failing to understand what is required for their planned operations. Texas liquor laws require specific licenses depending on the type of business, whether you’re a wine bar, distillery, or craft beer brewery.
Why It’s Risky:
The alcohol permit your business will hold affects everything from who can invest in your business, to site selection, to building construction, and more. Misunderstanding what permits are required for your operation can result in wasted time and money.
How to Stay Compliant:
Determine the exact permits your business needs based on its operations, such as production, on-site sales, or distribution.
Partner with a liquor attorney who can guide you through the licensing process and ensure compliance with local, state, and federal requirements.
Keep track of renewal deadlines to avoid lapses in licensing, especially for high-volume businesses like bars and restaurants.
#2 Failing to Comply with Alcohol Sales Regulations
Strict liquor laws govern how and when alcohol can be sold in Texas. Businesses that don’t comply—such as serving underage customers or operating outside legal hours—risk serious consequences.
The Consequences:
Violations can lead to fines, license suspension, or a damaged reputation, particularly for bars, restaurants, and startup businesses trying to establish themselves.
How to Prevent Issues:
Train all staff on responsible alcohol service, including checking IDs and monitoring patron behavior.
Implement systems to verify compliance, such as point-of-sale checks and ID scanners.
Consult a liquor attorney to create policies that align with Texas liquor laws, ensuring your team understands their responsibilities.
#3 Neglecting Tax Compliance
Taxes on alcohol sales are complex and include excise taxes, sales taxes, and state-specific regulations. Mismanaging these obligations can lead to audits and penalties.
The Problem:
Falling behind on tax payments or reporting errors can create financial strain and harm your business’s credibility with regulatory agencies.
How to Stay on Track:
Keep detailed and accurate records of all liquor sales, whether you’re a bar, distillery, or restaurant.
Work with a liquor attorney or tax professional to ensure you meet all federal and state tax obligations, especially for spirits and craft beer producers.
Regularly review your tax filing procedures to align with current laws and regulations.
#4 Overlooking Labeling and Marketing Rules
For alcohol producers such as distilleries, craft breweries, and wineries, compliance with advertising and labeling regulations is critical. Misleading labels or non-compliant advertising can result in legal trouble.
Why It’s a Concern:
Improper labeling or advertising can lead to product recalls, fines, or loss of consumer trust.
How to Avoid Mistakes:
Submit product labels to the Alcohol and Tobacco Tax and Trade Bureau (TTB) for approval before using them, especially for wine and spirits.
Ensure all marketing materials comply with Texas liquor laws, avoiding messages that target minors or promote excessive consumption.
Have a liquor attorney review your advertising campaigns and labels to ensure compliance with state and federal guidelines.
#5 Signing Unfavorable Distribution Agreements
For businesses producing alcohol, distribution agreements are a key factor in reaching customers. Poorly negotiated contracts can restrict your ability to grow or result in disputes.
The Risks:
A restrictive or unclear agreement can prevent you from making changes if your distributor underperforms or fails to meet sales targets.
How to Negotiate Effectively:
Consult a liquor attorney to draft or review all distribution contracts to ensure fair terms.
Understand your rights and obligations under Texas’s three-tier system, which separates producers, distributors, and retailers.
Negotiate clauses that protect your business, such as performance benchmarks and the ability to exit the contract if necessary.
Conclusion
Running an alcohol business in Texas or throughout the United States—whether you’re a bar, restaurant, distillery, winery, or craft brewery—requires careful navigation of liquor laws and ongoing compliance. Avoiding these common legal mistakes is essential to safeguarding your business and ensuring its long-term success.
By working with a knowledgeable liquor attorney, you can ensure your licenses, taxes, contracts, and marketing practices align with state and federal laws. Taking a proactive approach to compliance not only protects your business but also allows you to focus on what you do best: crafting exceptional experiences for your customers, whether they’re enjoying wine, spirits, or craft beer.
Don’t let legal pitfalls derail your success. Consult a liquor attorney today to ensure your business is built on a solid foundation.