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Alcohol Beverage Licenses 101

Posted By Scott A. Breen, Willingham & Cote’, P.C., Friday, March 3, 2017

By Scott A. Breen

All businesses desiring to manufacture, import, distribute, or sell alcohol to consumers must obtain proper licenses and permits from the Michigan Liquor Control Commission (“Commission”). There are numerous types of liquor licenses and permits, and the names for these licenses make it difficult for applicants to determine what is needed. In addition, the jargon used by industry insiders and the acronyms used for the various licenses do not make it any clearer. This article only relates to some of the common licenses and permits that apply to retailers.

On or Off Premise?  

Restaurants, bars, grocery stores, gas stations, liquor stores, and other establishments that sell alcohol to the end consumer are known as retailers. The first question for retailers is whether alcohol will be served for “on-premises” or “off-premises” consumption (or both). For example, a restaurant will certainly serve alcohol for consumption on their licensed premises. However, that restaurant may also sell/fill growlers that are brought home by the consumer and consumed off the licensed premises. Separate licenses are needed for each of these types of business activities. A grocery store, on the other hand, generally does not serve alcohol for consumption on its licensed premises (although this is becoming more popular).

Although there are numerous types of retail licenses, the main three types are “Class C,” Specially Designated Merchant (known as “SDM” licenses), and Specially Designated Distributor (known as “SDD” licenses). Class C licenses allow for the sale of beer, wine, and spirits on the licensed premises. Therefore, Class C licenses are needed by restaurants and bars.

SDM licenses allow for the sale of beer and wine for consumption off the licensed premises. SDD licenses allow for the sale of spirits off the licensed premises. Therefore, many grocery/liquor stores will desire SDM and SDD licenses.

Quotas on Licenses

Class C, SDM, and SDD licenses are all subject to a quota system, which limits the number of licenses that may be issued within a particular local unit of government. To the extent that there are no longer any licenses available directly from the Commission, the applicant will need to purchase the license from a willing seller.

In addition to licenses, the retailer will need to obtain all necessary permits. For example, “Sunday Sales,” “Entertainment,” “Dance,” or “Catering” permits may be desired depending on when sales will occur and what types of activities will be conducted.

This article only covers a very small number of licenses and permits that can be obtained from the Commission by a retailer. Each situation is different and should be tailored to each applicant’s desired business goals.

Scott A. Breen is an attorney and shareholder at Willingham & Cote’, P.C. in East Lansing, Michigan. He specializes in the areas of hospitality and alcohol beverage law as well as business and real estate transactions. Mr. Breen may be reached at 517-324-1021 or sbreen@willinghamcote.com.

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