Alcohol beverage licenses are fickle things. Like any meaningful and lasting relationship, they need to be cared for. When the dynamic is altered, when change occurs, it cannot be simply swept under the rug. The change needs to be confronted and dealt with swiftly and if not, one risks losing or at least paying a heavy penalty for lack of action.
Admittedly, having a meaningful relationship with a liquor license may be an odd thing and require some form of psychological counseling but unreported changes in fact will lead to problems. Both federal and state regulatory agencies refer to this as “changes after initial qualification.”
Think about the initial qualification process. Officers and owners had to be disclosed; percentage of ownership needed to be revealed. Management agreements and leases needed to be provided. The premises had to be described accurately, sketches provided, and in some instances, equipment needed to be described and its location identified. These sorts of disclosures serve a purpose, providing regulatory agencies with the information necessary to determine eligibility and compliance prior to qualifying to hold an alcohol beverage license. Changes in these (and other) areas need to be reported, usually on prescribed forms and following detailed procedures to ensure compliance. Failure to do so will almost surely result in charges being brought against the licensee by the State in the form of an administrative action. Penalties for infraction(s) range from monetary fines to outright license revocation (repeated violations usually required).
As a rule of thumb changes in proprietorship and changes in control must be reported (most notably changes in owners and/or officers). Changes to management agreements and concession agreements and additions or reductions in operating premises must be reported as well.
On the federal side, failure to report changes in a timely way usually results in automatic termination of the license or permit. Many a federal alcohol beverage license holder, unaware of reporting requirements after changes in initial qualification, continue to operate only to find out that they have been conducting business on an invalid permit (see the reprint of a TTB press release below). Granted, many federal permit matters arise in conjunction with other investigations but the consequences remain the same. Fines for operating without a permit can be severe.
At the federal level and as a rule of thumb, changes in proprietorship and control for upper tier industry member need to be reported. Changes of location and related matters must be disclosed. Failure to report in a timely way, particularly for breweries, distilleries and wineries (including craft) and brewpubs will result in monetary fines and in some instances operations must cease until the matter is resolved. For manufacturers, in some scenarios, business closure may last for up to six months.
Reporting changes after initial qualification for licensure is a very important compliance requirement. Failure to do so may result in costly administrative actions that put business operations in jeopardy. Prior to considering any changes of any sort in your alcohol beverage operation it is always best to consult with experts in the filed so proper reporting requirements are complied with and in a timely way.
The Hospitality, Alcohol & Leisure Industry Group at Greenspoon Marder is well prepared to assist in these matters.