Recently there was a news story about a bar in Montrose who had their liquor license revoked for nonpayment of taxes owed to the State. The story was a little confusing because the reporter used the terms, suspended and revoked interchangeably.
These are two different things.
A liquor license suspension is a temporary halt in the privilege of selling alcohol. On the other hand, when the Alcoholic Beverage Control (the ABC) revokes a license, it is gone for good. (Except if the revocation is stayed on certain conditions–that’s more like a business being on probation. If the business owner violates the law again, while on a “stayed revocation,” then the license can be revoked outright for good.)
It’s true. The State can take action when a liquor licensee is delinquent in paying either Sales Taxes or Use Taxes owed to the Board of Equalization. (The ABC, by the way, can also refuse to transfer a license if the licensee is delinquent in other types of taxes. This is all spelled out in Section 24049 of the Business & Professions Code.)
Both the State Board of Equalization and the Franchise Tax Board may seize and sell an On-Sale General License or an Off-Sale General license (full liquor licenses) if the owner is delinquent in their taxes to either of these agencies. We’re talking about sales and use tax, personal income tax or bank and corporation taxes.
When these agencies begin this process, they give written notice to the ABC and to the business owner of their intent to sell the license. (This doesn’t allow these agencies to sell alcohol, though!).
This seizure is different from revocation by the ABC because the owner may redeem his liquor license at any time prior to the date of sale by getting current with the debts owed to the taxing agencies.
What is the ABC’s involvement in all this?
When the ABC receives the request for suspension from the Board of Equalization, it posts a Notice of Suspension at the licensed business and picks up the license certificate. The ABC then puts the liquor license on indefinite suspension status. If the owner disputes the accuracy of the taxes owed, the owner will have to take up his dispute with the taxing agency–not the ABC.
When the owner has satisfied any tax requirements or debts, the taxing agency notifies the ABC that they can lift the suspension.
Hello Chris,
Thanks for your question. First, I’ll discuss the costs and basic steps, then some pitfalls to watch out for.
ABC Fees/Costs. The ABC fees are $150 for a person-to-person transfer plus renewal fees of $350 each for seller and buyer. Fingerprinting is $63 per person for each person with an ownership interest. There can be no “silent partners” or “hidden owners” when it comes to an ABC-licensed business.
Your other costs may include cost to the seller for the license itself, furniture/fixtures, inventory, goodwill/non-compete covenant, leasehold and/or improvements, fees for other licenses, permits and deposits, working capital and realty or interest.
A Type 42, On-Sale Beer & Wine license does not have the same value as a Type 48 or 47, On-Sale General (full liquor) license, which can run in the tens of thousands. This is because the beer and wine licenses are readily available and not restricted in number like the general licenses. But when someone has an existing beer and wine license to transfer, the license does have some value because a person-to-person transfer is easier than getting a new one. A new one includes much more red tape such as extra public notice requirements, city zoning approvals, etc.
Other fees may include broker fees (vary), escrow and processing fees (est. $1,250), overnight fees (est. $40), record, certify and process fees (est. $350), notary fees (vary) and newspaper publication fees (est. $150).
Steps in the Process. The basic steps in the process are:
(1) Open escrow. Be sure to use an escrow company with experience in handling ABC license escrows. If you are a corporation, LLC, etc., you will need your entity formation document (certified by Secretary of State) to open escrow.
(2) Record a Notice of Intended Transfer, Form ABC-227, with the County Recorder and obtain a certified copy. Escrow often handles this for the buyer. Form ABC-227, as well as the other ABC forms you will need, are on ABC’s website.
(3) Seller must “sign off” on ABC Form-211-A. Escrow often handles this.
(4) Complete all required ABC forms as shown on ABC’s website for a “person-to-person transfer.”
(5) Make an appointment with the local ABC district office to file your application or file it by mail, along with proper fees. Your application package must include, among other ABC forms, the seller’s “sign-off” and the certified copy of recorded notice, mentioned above.
(6) The ABC district office provides you with a notice to post on the building, a notice to publish in the newspaper, a live scan form for your fingerprints, and other items and instructions.
(7) The ABC district office assigns your case to one of their licensing reps for investigation. Escrow cannot close until the rep completes his or her investigation and the ABC Director approves the license transfer.
Potential Obstacles. Here are a few things that can create delays or extra costs:
1. Do you have a direct or indirect interest in a non-retail liquor license (producer, wholesaler, etc)? Are you a peace officer or married to one? These are potential conflicts of interest.
2. Is the seller in bankruptcy? A trustee could sign off on the transfer, but this could slow things down.
3. Does the seller have any ABC disciplinary action pending against the license? You can check this online (for the most part). Any fine or suspension must be paid/served before the license can transfer. Does the seller have tax delinquencies? Escrow must pay these before a license transfers.
4. Has the seller changed the building, without ABC approval, since originally licensed? Ask to see his Diagram of Licensed Premises, and compare it to the current space.
5. Does the seller’s license have conditions (operating restrictions)? You can check this online also. Ask the seller for a copy. Can you live with them? The local jurisdiction may also request additional conditions on any license transfer, especially when the place has been a problem.
6. Has the seller made any ownership changes not reported to the ABC since originally licensed? Added or dropped a partner? Stock transfers, etc?
7. Has the business been closed more than 90 days? If so, and if the premises is located in a census tract that is over concentrated or in a high-crime area, then the local governing body (e.g., city) must make a determination of “public convenience or necessity.”
Someone once said, “Adventure is just bad planning.” Hopefully, your business idea is a venture and not an adventure. Being curious, as you are, is your best defense in avoiding any surprises. One final word, be sure to implement a written “safe alcohol policy” for your employees and make sure they all receive training in responsible beverage service. I can’t stress the importance of this enough. Good luck and I hope this helps. Lauren
Hello Lauren,
I am in the early stages of purchasing the real estate as well as the assets of a business- a bar with a type 42 license. It’s my first time making such a purchase. I have no convictions on my record and no DUIs. What are the qualifications needed by the ABC to transfer the license between the previous owner and myself? I understand the process can take several months, and would like to know any problems that might come up with the transfer before I commit.
best
Chris