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Some North Texas Breweries Open, Taking Own Interpretation of TABC Code

The patio of Legal Draft Beer Co. Thursday eveningEXPAND
The patio of Legal Draft Beer Co. Thursday evening
Lauren Drewes Daniels
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Legal Draft Beer Co. in Arlington has opened its taproom and patio, despite executive order GA-28 from June 26, which required all bars and breweries to close. 

Earlier this week in a post to their Facebook page, and several times since, they've explained their plans, starting with “Let’s hope this sticks! TABC has another update allowing us to open our doors again.” 

Oak Cliff Brewing Co. also posted to their Facebook page late Thursday: “We’re Open,” with a picture of a recently installed beer garden. 

People on both posts asked what TABC update each were referring to. 

For a little history, in mid-March, Gov. Greg Abbott issued an executive order closing all restaurants and bars. Many breweries transitioned to curbside pick-up. Then, in late May, breweries were allowed to reopen at 25% indoor and 100% outdoor capacity limits. 

As cases of COVID-19 continued to climb, on June 26 Abbott issued GA-28, closing all bars and breweries again. Restaurants were allowed to operate at 25% indoor capacity and 100% outdoor. Breweries could continue with to-go sales, but bars were completely shuttered.

July 17, the Texas Alcoholic Beverage Commission issued new guidance allowing brewers to remove outdoor spaces from their licensed premises so customers could have their beers to-go, but just "nearby." Five days later, the TABC reversed that order and issued this statement via email (which was also forwarded to the Observer by a TABC spokesperson) :

Gov. Greg Abbott’s Executive Order GA-28 limits on-premises sale of alcohol to restaurants that have less than 51% of their gross receipts from the sale of alcoholic beverages. The Texas Alcoholic Beverage Commission has determined that the 51% calculation of gross receipts should only include the sale of alcohol for on-premise consumption. Therefore, the calculation should exclude to-go, retail and wholesale sales of alcoholic beverages.  

This does not allow businesses to circumvent any requirements in Executive Order GA-28.  

For the most up-to-date information, please continue to visit the TABC Coronavirus Information page. 

TABC public information officer Chris Porter, when asked to explain in clear terms how a brewery could open right now, said breweries would have to have a restaurant or kitchen on-site.   

Co-founder of Legal Draft Beer Co. Greg McCarthy interprets the statement differently. He says less than 51% of their gross receipts comes from on-site sales. A much larger percentage come from off-site sales, things such as retail outlets and taps at bars. McCarthy says on-premise sales are far less than 51% of gross receipts overall.   

This is essentially applying the 51% to on-site versus off-site sales, rather than food versus alcohol sales.

In a written response, when asked if he was working on exposing a “loophole,” McCarthy, an attorney by trade (hence the name Legal Draft) explained he doesn’t see it that way.   

“Rather, it is a clarification by TABC on how they interpret the 51% provision. We believe this is a correct interpretation. There is no mention of food in this TABC message or any provision of the Code concerning balance of sales," McCarthy says.

Legal Draft has a slate of new beer releases lined up for this weekend as well as live music (Wes Ball, Justin Myers and Devin Leigh).

McCarthy wrote that they will “absolutely” follow social distancing guidelines, including places marked on the floor for lines, masks will be required indoors and they will limit seating to 30 people, which is about 25% of capacity. 

If the TABC pays a visit and determines McCarthy’s interpretation is out of compliance, they could suspend his liquor license for 30 days. When asked if that was worth it, McCarthy said he supposes it's a possibility. 

“However, we are not trying to thumb our nose at anyone or defy the TABC or the governor. Since we’re following their interpretation, we would expect they won’t even mention shutting anyone down or suspending licenses. We always cooperate with TABC and will in the event they come to see us about this," McCarthy said. 

One flaw, or inequity, in McCarthy’s interpretation of the 51% calculation, is that small breweries that don’t distribute would not be allowed to open. Many North Texas brewers don't have distribution into retail outlets or bars. So, by his calculations, the small operations would stay dark. Why the TABC would issue guidance that would punish a portion of brewers would be even odder.

Oak Cliff Brewing Co. is opening its taproom at 50% capacity and will allow up to 100 people on the new patio. We reached out to them for insight into their opening and they too referred to the 51% calculation explaining "our on-site alcohol sales have been below 51% of their gross receipts since at least last November, so we are allowed to be open (...) per GA 28.

"Our gross receipts include beer consumed on-site, beer sold to-go, beer distributed to retailers, taproom rentals, snacks, merchandise and consulting services," the representative said.

Further, bars aren't allowed to be open at all, even for liquor to-go sales.

At 9 p.m. Thursday evening, the TABC sent out another round of tweaked guidelines of the 51% calculation. Below is the section that applies to breweries, which sounds the same:

If you are a Manufacturer, Distiller, Brewer, or Winery and operate a taproom or tasting room, the 51% threshold under GA-28 applies to those dine-in services in the same manner as it does above for retailers. The calculation does not include alcohol sold togo or to another permit or license holder. It does include all food and alcohol sales for on-premises consumption as well as to-go food sales and other merchandise (e.g., Tshirts, glassware). If alcohol sales are grouped with another non-alcohol charge as a 3 package (tour/tasting fees), businesses should segregate the non-alcohol fees and include those in their calculation.

We'll update this post as necessary.

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