New Liquor Rules for Nonprofit Events and Fundraisers in Tennessee

New Liquor Rules for Nonprofit Events and Fundraisers in Tennessee

The Tennessee Alcoholic Beverage Commission has issued new rules for nonprofit liquor licenses, known as Special Occasion Licenses.  We see the new TABC rules as game changers, particularly for bigger events.

Previously, nonprofits could pull a Special Occasion License from the ABC for an event and just receive a check.  The nonprofit was merely the beneficiary of the event.

No more.

The Tennessee ABC now requires that the nonprofit actively provide liquor service: from picking up or receiving liquor inventory to paying for servers or providing volunteers to serve alcohol.

George Thorogood's classic tune seems relevant:

One bourbon, one scotch, one beer
Well I ain't seen my baby since I don't know when,
I've been drinking bourbon, whiskey, scotch and gin
Gonna get high man, I'm gonna get loose,
Need me a triple shot of that juice
Gonna get drunk, don't you have no fear
I want one bourbon, one scotch and one beer
One bourbon, one scotch, one beer

Special occasion licenses are critical for many popular events.  A nonprofit with a special occasion license can receive donated alcohol.  Under another recent Tennessee ABC rule, regular permit holders cannot receive free alcohol.  Caterers, for example, cannot serve donated liquor at a nonprofit event.

The ABC has compiled a helpful pdf of relevant laws special occasion license laws and regs (01144156).

Special occasion license holders also do not have to pay sales or LBD taxes, which typically add up to 24.25%.

Special occasion licenses are regularly used to permit alcohol sales at outdoor events that do not normally qualify for liquor sales.

Keep in mind that these rules only apply to wine and spirits.  Beer is poured under completely different laws.

As we see things, perhaps the biggest impact of the new Tennessee ABC rule is that the nonprofit must pay for servers or provide volunteers to serve alcohol.  For large events, staffing bars is a huge responsibility.

So far, the Tennessee ABC seems to allow the event promoter to pay the nonprofit in advance for staffing costs.

We advise nonprofits to require promoters to name the nonprofit as an additional insured and provide proof of insurance before the event.  This is a small expense for the promoter that is priceless for the nonprofit.  If a guest served by the nonprofit at the event causes a drunk driving accident or other liquor liability, the insurance will cover the cost of legal fees for the nonprofit, which can easily cost tens of thousands of dollars, as well as any court judgment.

If the Tennessee ABC cracks down further, the rules could become unworkable for many special events.  For example, so far, the Tennessee ABC seems to allow a promoter to sell tickets and pay for event expenses like entertainment, staging, security, trash and portapotties.

Under the current rules, a promoter bears the risk that an event makes or loses money.  The nonprofit gets a check regardless of whether the event makes money.

The Tennessee ABC could require a nonprofit to be responsible for all aspects of an event, including being responsible for losses.  This would be a huge game changer.

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