Before a prospective applicant can submit their application to the Texas Alcoholic Beverage Commission (TABC) for any type of TABC permit, the applicant must get the comptroller to sign the TABC’s L-Cert form. By signing a TABC application, the comptroller certifies that the applicant has complied with the following provisions of the Texas Alcoholic Beverage Code:
- The applicant (entity or person) holds a TX sales tax permit and the proposed address; or
- The applicant has applied for a sales tax permit with the TX Comptroller at the proposed address and meets the requirements for holding a sales tax permit.
See Tex. Alco. Bev. Code § 11.46(b).
Over the past year, we’ve noticed that the Texas Comptroller has started refusing to certify TABC applications it suspects the applicant entity, or any of people listed on the application as part of the applicant entity, are delinquent in paying taxes owed to the state – even if the alleged taxes the Comptroller flags as delinquent have nothing to do with the business applying for the TABC permit. The comptroller has refused to certify applications based on alleged tax delinquencies that are decades old, and even in situations where the Texas Attorney General has refused to file suit to collect the taxes allegedly owed.
Essentially, if anyone at the comptroller’s office decides to put a person on their tax delinquent list – for whatever reason – they will refuse to certify a TABC application with that person’s name listed. The comptroller’s website (link can be found here) even indicates that no individual listed on the application can be delinquent in taxes owed to the State.
Although the TX Comptroller is likely incorrect about legally being able to refuse certifying a TABC application based on whether a person is up to date on paying all their taxes, there is currently no appeal mechanism to hold them accountable. The comptroller-certification requirement stems from § 11.46(b) of the TABC Code. 11.46(b) requires that a TABC applicant submit a TX Comptroller certification that confirms the applicant meets the requirements to hold a sales tax permit at the location where the permit is sought, not that the individuals listed on the TABC permit are up to date on paying all their taxes.
Unfortunately, TABC applicants currently do not have a right to a hearing to dispute the Comptroller’s refusal to certify an application like they can when a city or county refuses to certify, raising serious due process concerns.
Texas courts have already held that TABC applicants have a right to a hearing to dispute the facts leading to its application being denied. In 2017, after the TABC denied a business’s renewal application because the comptroller refused to certify the business maintained less than 50% alcohol sales (based on old FB rules that have since changed), a District Court determined the TABC and Texas Comptroller acted unconstitutionally in denying the applicant’s food and beverage certificate because the business was not given an opportunity for a hearing to dispute whether its alcohol sales were actually less than 50% of total sales. (See New Millennium Restaurant Group Inc. v. Texas Alcoholic Beverage Commission).
Just like the situation in the New Millennium Case, applicants currently do not have the option to dispute whether the comptroller’s refusal to certify its TABC application is justified, and until applicants are given those hearing rights, employees of comptroller’s office will have the unbridled power to cancel a proposed business without any accountability or justification.
