A private club is an association of persons for some common purpose. The law allows a private club to serve and offer to serve alcohol to its members, even in a dry area, as long as it holds a valid private club permit from the Texas Alcoholic Beverage Commission (“TABC”). Any club that does not hold a TABC permit is prohibited by law from serving or offering to serve alcohol to its members.
Private Club Act
The Private Club Act was enacted in 1961, which exempted associations from the general prohibition against the “sale” of alcoholic beverages containing distilled spirits for on-premise consumption, provided they obtained a private club permit from the Liquor Control Board (which later became the Texas Alcoholic Beverage Commission or “TABC” for short). Prior to the enactment of the private club legislation, bars, lounges, and taverns which were known as “open saloons”, were prohibited from operating under the Texas State Constitution and Liquor Control Act.
Associations benefiting from a private club permit included country clubs, fraternities and lodges such as Eagles, Elks, Freemasons, Moose, and Knights of Columbus, golf clubs, social clubs, and veteran’s organizations, such as American Legion and Veterans of Foreign Wars. Of course, this wasn’t limited to well-known and established organizations either. Bars, lounges and taverns could also be eligible as a social drinking club.
Under the Private Club Act, no “sale” of alcoholic beverages occurs under the Texas Alcoholic Beverage Code or the State Constitution, if a member of a private club holding a TABC private club permit is served alcohol for service charge or fee. Alcohol is common property owned by members of the private club. Members contribute money to a pool system through a service charge and or other fees, which in turn is used to purchase alcohol for the use and enjoyment of all private club members. While this may sound very simple in principle, there are complex laws and regulations governing membership and pool system which have to be complied with.
Following the 1970 repeal of constitutional prohibition against open saloons, the legislature passed local option elections laws. Justice precincts, counties and cities were given local control over the sale, service, and distribution of alcoholic beverages at the retail level. This introduced a new category of permits such as a Mixed Beverage Permit (MB), among others, which made it simpler and easier for businesses to offer alcohol service located in wet areas.
Private Club Permits
Notwithstanding the above, over a thousand private club permits are still active today as of this blog posting. Some of those permits have been active since September 1961 when private club permits first became legal. While reasons for obtaining a private club permit may vary, the most common two are being able to serve mixed beverages at a restaurant located in a dry area, and operating an exclusive club which limits membership through invitations, strict eligibility criteria, and membership fees.
Whether you choose to apply for a private club on your own or through a licensing agency, it is important to speak with a liquor attorney having experience with TABC to advise you about the feasibility of applying for a private club permit, reviewing and drafting legal documents, maintaining compliance, and availability of other alternatives.