Overview

Inspectors from the Texas Liquor Control Board seize a stash of illicit liquor hidden in a tanker truck during an operation near Brownfield, Texas, in 1959.

In 1933 the 21st Amendment to the U.S. Constitution ended Prohibition and devolved responsibility for the regulation of alcoholic beverages to the states. Shortly thereafter, the Texas Legislature passed the Texas Liquor Control Act to govern alcohol in Texas, and on Nov. 18, 1935 the Texas Liquor Control Board was established to administer the Act. The agency's name was changed to the Alcoholic Beverage Commission on 1 January 1970, and the Liquor Control Act was superseded by the Texas Alcoholic Beverage Code on Sept. 1, 1977.^[6]

Texas Liquor Control Board Agent Red Zwernemann stands with an illegal still he seized during operations in the 1940s.

The scope of the agency's mission increased further in 1971 with the passage of "liquor by the drink" legislation in the Texas Legislature.^[7] The new law came in response to a public referendum and created a new type of state-issued permit allowing the sales of distilled spirits and mixed drinks in areas specifically authorized by local elections. The law also provided for the creation of a Mixed Beverage Gross Receipts tax, which quickly became a major revenue generator for the state. During fiscal year 1993, the tax and associated fees generated more than $244.7 million, accounting for more than half the total revenue collected by the agency.^[8]

Today, TABC regulates more than 54,000 licensed businesses in Texas as well as more than 100,000 out-of-state producers and distributors of alcoholic beverages. The agency collects more than $220 million per year in state excise and import taxes, as well as a further $76 million in licensing fees, surcharges, and administrative fines.^[9]

Rainbow Lounge incident

On June 28, 2009, officers from the Fort Worth Police Department and TABC conducted a raid on the Rainbow Lounge, a gay bar in Fort Worth.^[10] The incident occurred on the anniversary of the Stonewall Riots, a 1969 New York riot seen as the start of the LGBT rights movement. Many Rainbow Lounge patrons were present to mark the anniversary. Several customers were arrested for intoxication inside of the bar. One patron was hospitalized due to alcohol poisoning as well as injuries he sustained while in TABC custody.^[11] Following the incident, an internal investigation found that three TABC agents who took part in the raid had violated multiple agency policies, leading to their termination.^[12] A later Use of Force report found that allegations of improper use of force against two of the agents were unfounded, though the agents' terminations were upheld. According to then-TABC Administrator Alan Steen, "...this is not how we treat people, and we have been looking at this from every angle to find ways to make sure it does not happen again."^[13]

Travel Spending & New Leadership

The TABC honor guard participates in a peace officers memorial service near the Texas Capitol in Austin.

On April 17, 2017, TABC Executive Director Sherry Cook announced she was retiring from her position.^[14] The decision came a month after the Texas Tribune reported that agency leadership had spent $85,000 dollars during a six-year period from 2011-2017 on out-of-state travel, including on trips to meetings hosted by the National Conference of State Liquor Administrators, a group representing state liquor regulators and alcoholic beverage industry members from across the United States.^[15]

Prior to her retirement, Cook had been questioned about the spending during a Texas House General Investigating and Ethics Committee hearing chaired by Texas Rep. Sarah Davis, R-West University Place. The hearing also covered fraudulent allegations by a former TABC employee claiming the agency held several missing vehicles in its inventory; these claims were later debunked during a review by the Texas State Auditor's Office.^[16] Cook's activities and travel payments as chair of the National Conference of State Liquor Administrators were also investigated by the Texas Ethics Commission, which ultimately found no wrongdoing.^[17]

Immediately following Cook's retirement announcement, Texas Gov. Greg Abbott announced his selection of Houston businessman Kevin J. Lilly as the Commission's new presiding officer.^[18] Lilly's first priorities included hiring a new executive director to succeed Cook, naming former United States Army brigadier general Bentley Nettles on July 12, 2017.^[19]

Under new leadership, the agency worked to rehabilitate its image, reaching out to law enforcement agencies and industry members to collaborate on new programs designed to enhance public safety while enabling business owners to more easily comply with the state's complex alcohol laws. These efforts drew praise from the alcoholic beverage industry, noting that "the transformation that has taken place already under General Nettles' leadership is hard to overstate."^[20] The initiatives also resulted in a reduction in major litigation against the agency; one suit filed by the McLane Company, which claimed that Texas laws prohibiting vertical integration of the liquor industry was unconstitutional, was dropped.^[21]

2018 Sunset Review

Texas Gov. Greg Abbott signs the TABC Sunset bill during a ceremony on June 15, 2019 as state Sen. Brian Birdwell looks on.

In 2018, TABC was reviewed by the Texas Sunset Advisory Commission, a legislative board which determines whether a state agency's function is still required and seeks ways to improve efficiencies and performance. Following the eight-month review process, the commission made numerous recommendations:

• Continuing the agency for 12 years;
• Increasing the size of the Commission board from three members to five;
• Eliminating or combining unnecessary or redundant license/permits, reducing the number of license/permit types from 75 to 36;
• Combining the beer and ale beverage designations into a single "malt beverage" designation and setting the same tax rates and regulations for those beverages; and
• Eliminating the state review of malt beverage labels while allowing TABC to accept federal Certificate of Label Approval (COLA).

Two major amendments were added to the TABC Sunset bill during debate in the Texas House of Representatives and Texas Senate. One amendment allows brewery permit holders to sell malt beverages to-go to consumers at their on-site taprooms or tasting rooms; the other removes the five-permit limit for Package Store permits and the consanguinity provision which allowed family members to combine their permits in order to legally exceed the five-permit limit.

The final version of the bill was passed unanimously by the Texas Senate and the Texas House;^[22] Governor Greg Abbott signed the bill into law during a June 15, 2019^[23] ceremony at the Austin Beerworks brewery.

Following the recommendations of the 2018 sunset review, TABC implemented the Alcohol Industry Management Solution (AIMS)^[24] in September 2021. AIMS was an implementation of a SaaS system—Gov2biz.^[25] It allowed TABC to modernize operations, cut costs and improve customer service.