Under a new industry notice dated Aug. 7, existing food and beverage license holders that make more than 51% of their sales through alcoholic beverages may change their business models and use projected future food sales to qualify as a restaurant.
That would allow more establishments to open doors to dine-in customers under Gov. Greg Abbott’s executive order GA-28 outlining which businesses can offer in-person services during the coronavirus pandemic.
In an email with Community Impact Newspaper, Ryan Hughes, an attorney with Griffith & Hughes P.L.L.C. in Dallas, said businesses will need a food and beverage license to use projected food sales in 51% calculations.
“Before Aug. 7, only retailers that obtained [a food and beverage license] during the COVID-19 pandemic could use future projected sales to qualify as a restaurant; existing [food and beverage] holders didn't have that option. This change allows existing [food and beverage] holders with over 51% sales since April 1 the opportunity to open for dine-in services by changing their business model, such as requiring food be purchased with each drink order,” Hughes said. “This is a huge change that should help many businesses open.”
Starting Aug. 10, both permitted food and beverage license holders and applicants may submit an affidavit stating they are changing their business model to ensure the majority of their gross receipts come from food and merchandise sales.
The new industry notice outlines two ways in which an establishment may qualify as a restaurant under Abbott’s Open Texas plan.
Establishments qualified as retailers or brewpubs may now qualify for a food and beverage certificate, under the new guidance from the TABC.
To qualify, an establishment must include a business model that outlines changes or plans to incorporate permanent food facilities to the business premises, such as a permanent food truck on-site.
Hughes said that revenue generated from food trucks on the premises of a business will count toward the establishment’s 51% calculation, though the establishment must have permanent food facilities on-site for the food truck sales to count.
“As long as the food truck is located on the licensed premise, then the revenues count, even if the business is completely separate. However, the business also needs to have permanent food service facilities on the licensed premise to operate for dine-in services under GA-28, and also to qualify for a food and beverage certificate,” Hughes said.
For a food truck to be considered a permanent food service facility, Hughes said some renovations have to be done on the trucks, such as removing its wheels or erecting a barrier to surround the truck.
According to language in the TABC’s Aug. 7 order, any establishments applying for food and beverage licenses or applying to operate as a restaurant must maintain records showing the change in alcohol and food sales.
“Any permittee that qualifies as a restaurant using future projected sales should expect to be audited in 90 days to determine whether they've maintained under 51% on-premise alcohol sales,” Hughes said.
In its new guidance, the TABC mandates that food service at all establishments be operational for the entire time that alcoholic beverages are served. Further, businesses must still comply with social distancing, capacity, and other health and safety protocols outlined under Abbott’s executive orders.
Further information on which businesses may apply for restaurant qualification and necessary forms can be found on the TABC's website.
The newest industry order from the TABC follows weeks of similar issued guidances that have essentially expanded which businesses can qualify as restaurants and how they can do so.
In late July, the state agency put out guidelines stating breweries no longer had to include sales to-go sales to customers, sales to distributors and sales to retailers in their 51% calculations.
The July 24 ruling came at the end of a week in which several breweries across the state interpreted a loophole in an earlier TABC license modification guideline and began opening patios for customers. The TABC clarified those guidelines and closed the loophole.
In an encouraging sign for bar owners, breweries and tasting rooms across the state, state sales tax collection data shows alcohol sales appear to be on the rebound.
The state of Texas in July collected $110.14 million in sales taxes from alcoholic beverages, according to to data from the Texas comptroller of public accounts. That number represents a 6.23% year-over-year drop.
However, that is the highest reported collection of alcoholic beverage sales taxes since February. July’s collected sales taxes on alcohol sales jumped 69.49% from the month prior.
