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License Owners Aren't All Millionaires

Thomas Jannarone, "The Nightclub Lawyer's" first priority is to get the Insurance Company to pay, so you don't have to. If there is no insurance (i.e., lapse or exclusion), or if it is an uninsurable matter (i.e. A.B.C. or Municipal Disciplinary Hearing) his rates are reasonable. Since you don't have to explain the business to Thomas Jannarone, "The Nightclub Lawyer", he can save time and money by getting to the root of the matter immediately. His bottom line is protecting your bottom line.

An Ounce of Prevention is Worth  . . .  a Ton of Cash!

Let's face it. One huge lawsuit can wipe out just about anyone. Don't let it be you. Not knowing the myriad of complex, and often unfair, laws that govern the business is not an excuse when you (or your employees) break one and you have to pay. Thomas Jannarone, "The Nightclub Lawyer" is a vital source of information for all N.J. liquor license owners and operators. 

He is available for consultation BEFORE you get sued to help avoid unnecessary litigation, license suspensions and fines. ALL persons who own a liquor license should be familiar with the types of laws that govern their business; including Civil, Criminal, Municipal, and Administrative.

Always consult an experienced attorney when facing any type of Lawsuit, Violation or Charge. Call the Law Offices of Kalas and Jannarone at (732) 477-4466.

Can You Answer the Following Questions?

Do you really know what you are (and are not) allowed to do on a licensed premise? How well do you know your business? You might be surprised. Below is a very small sample of things you should know when operating a licensed premise. The answers are farther down the page.

  1.   What is the ABC?
  2.   How old must someone be to be employed by a licensee?
  3.   What are the laws regarding "backing up" a patron?
  4.   What documents must a licensee keep readily available for inspection?
  5.   What are the criteria for defending a sale to an underage person?
  6.   What are ABC Bulletins?
  7.   What are the laws regarding serving a drink "on the house"?
  8.   What can I do if my town suspends or revokes my liquor license?
  9.    If I don't have a liquor license, can I advertise B.Y.O.B.?
10.   What are the rules regarding a "pocket license"? How do I renew one?
11.   Can a lien be placed on a liquor license?
12.   Can police officers work on a licensed premises?
13.   How can "special conditions" be placed on my license?
14.   How many liquor licenses can a person own?
15.   What happens if I don't renew my license on time?

Below, are excerpts from the State of New Jersey's Alcoholic Beverage Control Book for retail licensees that address some commonly asked questions by Liquor License Owners and Operators. The complete handbook can be downloaded from the Division of Alcoholic Beverage Control's website at http://www.nj.gov/lps/abc/index.html.

1.     WHAT IS THE DIVISION OF ALCOHOLIC BEVERAGE CONTROL?

The Division of Alcoholic Beverage Control ("A.B.C.") is the unit of State Government that is charged with regulating the commerce of alcoholic beverages within the State of New Jersey. The 21st amendment to the United States Constitution gave each state the right to determine whether to allow alcoholic beverages, and, if so, how to regulate them. As soon as the amendment was adopted in 1933, New Jersey enacted its Alcoholic Beverage Control Law, which is commonly known as Title 33 (since the Alcoholic Beverage Control Law is contained in the Revised Statutes as the 33rd title listed alphabetically by major subject matter, and under the title of "Intoxicating Liquors"). In that law, a Department of Alcoholic Beverage Control was established under a Commissioner. In the late 1940's, after New Jersey's 1947 Constitution was adopted, some departments were consolidated and the Department of Alcoholic Beverage Control was absorbed into and became a division of the Department of Law and Public Safety under the New Jersey Attorney General. The Division of A.B.C. is headed by a Director, whose function is to supervise the manufacture, distribution and sale of alcoholic beverages in such a number as to fulfill the public policy and legislative purpose of the Alcoholic Beverage Control Law. (See N.J.S.A. 33:1-1.1 and 33:1-3; A.B.C. Bulletin 2443, Item 1).

2.     AGE LIMITS: 

How Old Must Someone be to Purchase or Drink Alcoholic Beverages on a Licensed Premises?

A person must be 21 years of age or older to legally purchase or consume any alcoholic beverage on a licensed premises. There is absolutely no exception to this. (N.J.S.A. 9:17B-1)

How Old Must Someone be to Own a Liquor License?

The lawful age to own a license and to purchase alcoholic beverage products for resale under a license privilege is 18 years of age. (N.J.S.A. 9:17B-1)

How Old Must Someone be to be Employed by a Licensee?

  *  Although a person must be 18 years of age to be employed as an entertainer (includes member of a band, etc.), N.J.S.A. 34:2-21.17, et seq., provides for the employment of younger persons in certain "theatrical productions". This is under the jurisdiction of the New Jersey Department of Labor.

  **  To qualify as a restaurant, the establishment must regularly and principally be used for the purpose of providing meals to the public, having an adequate kitchen and dining room equipped for the preparing, cooking and serving of food for its customers and in which no other business, except such as is incidental to such establishment, is conducted. As a rough rule of thumb, to qualify as a restaurant, the establishment should have table (i.e., "sit-down") service with a full service menu, proper and adequate equipment to be considered a bona fide restaurant (e.g., food freezers, dishwasher, oven, etc.) and the majority of its business revenues should be from the sale of prepared food for consumption on the premises, with revenue from the sale of alcoholic beverages merely being ancillary thereto.

  ***  Permits for the employment of minors under the age of 18 years of age must first be obtained from the Division of A.B.C. before (or within ten days) such persons are employed on a licensed premises. (N.J.A.C. 13:2-14.3, 4 & 10).

These rules, including the requirements for permits, apply to children of licensees as well, if they are employed on the licensed premises in any capacity.

3.     BACKING UP DRINKS:  IF A PATRON HAS A DRINK, CAN ANOTHER DRINK BE SERVED TO THAT PATRON?

If a patron has a drink, it is permissible to serve another drink, either at the patron's request, or one purchased by someone else, or to use a token or other indication of such purchase. However, care must be taken to prevent over consumption by such patron. If necessary, the licensee should refuse to serve any actually or apparently patron a drink, and if drinks have been previously purchased, must refund the patron his money. NOTE ALSO THAT THIS PRACTICE CANNOT BE USED TO AVOID A CLOSING HOUR RESTRICTION. (See also A.B.C. Bulletin 2381, Item 2).

4.     DOCUMENTS:  WHAT DOCUMENTS AND RECORDS MUST A LICENSEE KEEP ON THE LICENSED PREMISES AND MAKE AVAILABLE FOR INSPECTION BY PERSONS AUTHORIZED TO ENFORCE THE ALCOHOLIC BEVERAGE CONTROL LAWS?

The following documents and records must be maintained on the licensed premises in such manner as to be readily available upon demand to persons authorized to enforce the Alcoholic Beverage Control laws:

(1)   Current license certificate (which must also be conspicuously displayed in plain view of customers) (N.J.A.C. 13:2- 23.13(a)l);

(2)   Copy of the current license application with any amendments filed, if applicable, together with the copy of the last full retail license application filed by the licensee (N.J.A.C. 13:2- 23.13(a)2) (see "Twelve-Page Application);

(3)   A fully completed and up-to-date list of all persons currently working on the licensed premises (commonly known as the "E-141-A" form) (N.J.A.C. 13:2-23.13(a)3);

(4)   The current federal special tax stamp, or proof of filing for such annual tax stamp (N.J.S.A. 33:1-31.e a canceled check, checkbook entry and 5630.5 as filed) (see A.B.C. Bulletin 24, Federal Section, "Special Occupational' end of the Handbook);

(5)   Copies of delivery slips, invoices or similar documents which  must be retained for a period of one (1) 13:2-20.4(b));

(6)    True books of account and other records including all business receipts, disbursements and funds which, when used in connection with the licensed business must be retained for a period of five (5) years and, with respect to all moneys invested in the licensed business, all such records must be retained for an unlimited period of time. (see N.J.A.C. 13:2-23.32);

(7)   Records of transactions with or placements by a registered display service (N.J.A.C. 13:2-24.12) and

(8)   N.J. Sales Tax Certificate of Authority number (see A.B.C. Bulletin 2457, Item 4 and see "Inspections")

5.     AGE TO PURCHASE:  WHAT ARE THE CRITERIA FOR AVOIDING AN UNDERAGE SALE VIOLATION?

A licensee with retail license privileges cannot sell to a person under the legal age (21 years) often abbreviated as PULA. A bartender or sales clerk who violates this law will be subject to a disorderly persons charge under N.J.S.A. 33:1-77 and the license itself will be subject to administrative charges under that statute or N.J.A.C 13:2-23.1. The law does recognize a valid defense to a charge that a person or licensee sold to someone under the legal age. For this defense, all of the following must be established:

(1) That the purchaser falsely represented his or her age by producing;

(a) a photo driver’s license of any state or,

(b) an official photo identification card issued by any state or the federal government; AND

(2) That the purchaser falsely represented in writing that he or she was of legal age to make the purchase;

(3) That the purchaser appeared to be 21 years of age or older, AND

(4) That the seller relied on the written representation or on the false photo identification presented and on the purchaser’s appearance, thereby believing that the individual was 21 years of age or older.

The three elements together are necessary to establish a valid defense to a charge of sale to a person under the legal age. Any forms of identification other than those above, which may be presented will not be recognized as a defense. Please note that County ID cards are no longer considered a primary form of identification. The best, and safest, identification you can rely on is either a photo New Jersey drivers license or a United States Passport.

You should also request alternate types of identification, in addition to the photographic identification, to verify the true age and identity of the purchaser. This should also be done if the written representation is used and such alternate types of identification, together with numbers, etc., should be noted on the written representation paper. (See A.B.C. Bulletin 2457, Item 5) and (A.B.C. Bulletin 2445, Item 3).

If there is any doubt that the purchaser is under 21 years of age, the sale should not be made. Licensees have the right to refuse a sale if they believe a purchaser is under the age of 21.

A license which has four (4) such violations within 2 years presumptively will be revoked.

6.     BULLETINS: WHAT ARE A.B.C. BULLETINS?

A.B.C. Bulletins contain information regarding changes in laws and regulations, notices from the Director, directives to licensees, opinions of the Director, and other pertinent information that are important to the licensee and reflect the policy of the Division of A.B.C.. Bulletins also contain appellate and disciplinary opinions of the Director which can be used as precedent in future cases. Failure to follow a directive published in a Bulletin can result in disciplinary action against a license.

Bulletins are promulgated and published by the Division of A.B.C.. They have been continually published since the Department of Alcoholic Beverage Control was established in 1933.

The A.B.C. Bulletins are accumulated and bound by the A.B.C. and the Bulletins may be viewed at the offices of the Division of A.B.C. Bound and current Bulletins have been furnished to the New Jersey State Library in Trenton, the Division of Law library within the Richard J. Hughes Justice Complex, and the law school libraries in the State. The Casino Control Concession also has the Bulletins.

Current Bulletins can be obtained by annual subscription from the Division of A.B.C. Details regarding ordering and cost are contained in the information at the beginning of the A.B.C. Handbook.

7.     COMPLIMENTARY DRINKS: CAN A CONSUMPTION LICENSEE OR EMPLOYEE BUY A DRINK OR GIVE THE CUSTOMER A DRINK "ON THE HOUSE"?

Yes with certain qualifications. The general rule is that a licensee cannot sell any alcoholic beverage, whether in the original package or by the drink, which would fall below the cost of that beverage. Generally, the offering of a free drink would cause it to be below cost and thus would be prohibited. There are, however, certain exceptions which permit a complimentary alcoholic beverage to be served to a patron. (See A.B.C. Bulletin 2440, Item 2). The three exceptions are:

(1) The Division of A.B.C. recognizes the long-standing practice of allowing a retail license to "buy a drink" for a patron as a gesture of good will. This activity is permitted so long as there is no advertising of the fact that the retail license will "buy" a patron a drink at any established interval or based on the purchase by the patron of a certain number of drinks or other products. Where a license engages in this practice of "buying a drink" for a patron, the licensee must be careful that it does not result in over consumption by the patron.

It should be noted that where someone identified other than the licensee, such as the band or the DJ offers a free drink for certain patrons or during certain times, these activities will only be permitted if the licensee can lawfully conduct such a promotion. The band or DJ is considered for alcoholic beverage control purposes as the licensee's employees since their services are in furtherance of the licensee's business. Accordingly, the licensee is responsible for their actions. Thus, a promotion that limits the offer to one free drink on the DJ would be lawful because the licensee itself could conduct such a promotion. In contrast, a promotion advertising "free drinks to all ladies for two hours on the DJ" is not permitted because it involves giving away more than one free drink and since that cannot be done by the licensee, it also cannot be done by the licensee's employee.

(2) The Division also permits retail licensees to utilize a "free drink coupon". The Division has permitted retail licensees to offer a patron one open container drink per day per patron by utilization of a coupon or other similar advertising device.

(3) The Division also permits a license beverage drink to be given complimentary with or to be  included in the price of a meal. In such situations the licensee may advertise that the beverage is included with the meal or is complimentary with the meal. The Division also requires that the patron have the opportunity to chose a non-alcoholic beverage in lieu of the included or complimentary drink. Promotions which offer to the general public unlimited alcoholic beverages such as "champagne brunches" are not allowed. Only one free or complimentary drink can be offered with the meal.

8.     APPEAL OF MUNICIPAL DISCIPLINARY ACTIONS

Within 30 days after a municipality adopts a resolution suspending or revoking a license, the licensee may appeal by filing with the Division a “Notice and Petition of Appeal.” The only administrative penalties available to a municipal issuing authority as a result of a license violation hearing are suspension or revocation of license privileges. When a suspension is imposed on a license by the municipal issuing authority, the licensee may file an appeal in the same manner described above to request that the Director accept a monetary penalty in lieu of the suspension. When the appeal is properly filed, the Director may stay the effective date of the suspension or revocation until the appeal has been considered. (N.J.S.A. 33:1-31; N.J.A.C. 13:2-17.8.) If a municipality objects to a stay, it must Notice the Director and request a hearing.

Division Appellate Review

Municipal actions appealed to the Division will usually be referred to the State’s Office of Administrative Law for a hearing held before an Administrative Law Judge. The Judge will issue an Initial Decision and forward the matter for final determination by the Director. The Director must issue a final decision within 45 days, either accepting, rejecting, or modifying the Initial Decision. If a final decision is not issued within 45 days, the Administrative Law Judge’s Initial Decision becomes final. The 45-day limit may be extended for good cause.

9.     BRING YOUR OWN BOTTLE (“B.Y.O.B.”)

Unless there is a municipal ordinance prohibiting it, customers of an unlicensed restaurant may be permitted by the restaurant to bring their own wine or beer (not liquor). The restaurant owners may supply glasses, ice, etc., but may not impose a cover, corkage, or service charge. The restaurant owner may not advertise the fact that wine or beer may be brought onto the premises. The owner may not permit consumption of those products during the hours in which the sale of these products by licensees is prohibited. Persons under the age of 21 years or persons who are visibly or apparently intoxicated must be prohibited from consuming alcohol. (N.J.S.A. 2C:33-27.) In many instances, a nonlicensed restaurant will attempt to forge a relationship with a distribution licensee for free delivery of wine and beer to its customers on the licensed premises. This particular action would violate the statute. Therefore, “B.Y.O.B.” relationships should be viewed very carefully to ensure compliance.

Finally, it should be noted that violation of the statute constitutes a disorderly persons offense which is tried in municipal court.

10.   INACTIVE or "POCKET LICENSES"

An inactive license is a license that is not currently open and operating in a licensed premises. Whenever a licensed business closes and the license continues to be held by the licensee of record, the licensee must place the license in “inactive status.” A licensee must submit pages 1, 2, and 11 of the license application within ten (10) days of the license becoming inactive. (N.J.A.C. 13:2-1.7.) Page 2, Question 2.6B, must reflect the last date on which the license was actively used (the “date of inactivity”). The licensee must surrender the license certificate to the issuing authority, and the issuing authority must maintain it as part of the municipal file until the license has been reactivated. Within ten days (10) of the date the license becomes active, the licensee is required to file an amendment to the application which indicates the date the license became active. This is accomplished by submitting pages 1, 2, and 11 of the license application to the local issuing authority. Page 2, Question 2.6A, must reflect that the license is active and the date the license became active. Upon receipt of the amendment which indicates that the license became active, the issuing authority should return the license certificate to the licensee for display on the licensed premises.

Any time that a licensee ceases business and the license privilege will no longer be sited at the business location, the licensee is required to submit an amended application containing a mailing address to which all correspondence concerning the license will be directed. (N.J.A.C. 13:2-7.2(d).) The mailing address is not required to be located within the issuing municipality’s boundaries. Once the amendment is filed, the license certificate on file should also be amended to reflect the new address. A license which becomes inactive and is no longer sited at a business premises becomes a “pocket” license. At the time a pocket license is reactivated, the licensee must file an application for a place-to-place transfer of the license so that it may be sited at the new active business address.

The municipality may renew an inactive or pocket license for two license terms following the date it became inactive (not operating at a place of business). If the license has been inactive for more than two license terms, the licensee must file a petition in affidavit form with the Director (with a copy to the municipality) setting forth what efforts have been made to site the license at an operating place of business and what specific plans are in place for activating the license in the future. The municipality must accept the timely filed application and the fees, however, the license may not be renewed by resolution until a Special Ruling is issued by the Director which authorizes the municipality to renew the license. (N.J.S.A. 33:1-12.39; N.J.A.C. 13:2-43.) 

11.    LIEN ON LIQUOR LICENSE

Under no circumstances may a license, or rights thereunder, be deemed property subject to inheritance, sale, pledge, lien, levy, attachment, execution, seizure for debts, or any other transfer or disposition whatsoever, except as expressly provided by the Alcoholic Beverage Control Act (Title 33). Any change in ownership of a license must be approved by the issuing authority through the prescribed procedures. A license transfer is independent of the sale of a business or property. If a license transfer is approved by resolution and the sale of property or business did not occur, the license may only revert back to the original licensee through another person-to-person transfer. If a licensee’s assets are sold as part of a bankruptcy proceeding, the license must be transferred to an entity by a person-to-person transfer. (N.J.S.A. 33:1-25; 1-26.)

The right to sell a license can be attached when the Internal Revenue Service serves a Notice of Lien and Levy for non-payment of federal taxes or the New Jersey Division of Taxation serves a Notice of Seizure for non-payment of State taxes. When these taxing authorities serve such notices upon a licensee, copies are served upon the issuing authority and the Division of Alcoholic Beverage Control. The Notice prohibits the licensee from transferring its interest in the license to another party. This prohibition on the transfer remains in effect until the Notice is released by the Internal Revenue Service or the New Jersey Division of Taxation. The licensee may continue to operate the licensed business after service of the lien or levy or the New Jersey Notice of Seizure. If the actual license certificate was seized, a copy identified as a duplicate should be made available to the licensee by the municipality for public display on the licensed premises.

The law then permits the Internal Revenue Service or the Division of Taxation agencies to offer the license for sale at public auction. The successful bidder will receive the consent to apply for a transfer of the license. Thereafter, the municipal issuing authority may consider the transfer of the license.

A licensee may not employ a regular police officer who is a member of the local police department who has regular duties and responsibilities in the municipality where the license is located. A licensee may, however, employ a regular police officer who does not have duties in that community, but not for more than 24 hours in any week. The officer may not possess his firearm or wear his uniform if he is involved in the actual sale of alcoholic beverages. The officer also shall not wear any badge or insignia indicating he or she is a police officer. This prohibition does not apply when the police officer is providing security and is not involved in the sale, service, or delivery of alcoholic beverages. The officer must also obtain the consent of his/her police chief and must also give notice of such off-duty employment to the chief of police in the municipality where the licensed premises is located. The licensee must also obtain permission by the Director to employ an officer by sending copies of consent and notice to the chiefs of police and identifying the period and type of employment. A letter of permission for such employment will be furnished to the licensee by the Director of the Division of Alcoholic Beverage Control. Peace officers employed by the Department of Corrections may not be employed by an entity licensed to sell, serve, or manufacture alcoholic beverages.

In situations when a licensee has need for police officers for crowd control, traffic control, and/or security for large sums of money, the municipality may assign regular police officers for those purposes. The municipality must establish a written policy which requires the licensee to pay the municipality for the police services provided. Under no circumstances may a licensee directly hire regular police officers. (N.J.S.A. 33:1-26.1; N.J.A.C. 13:2-23.31.)

13.    SPECIAL CONDITIONS

A municipal issuing authority may, by resolution, impose any condition at the time of issuance, renewal, or transfer of any license deemed necessary and proper to accomplish the objectives of N.J.S.A. Title 33. Conditions may not be imposed for matters not directly related to alcoholic beverage control, such as zoning matters, or to compel payment of property taxes. The implementing resolution is subject to the approval of the Director, which may be given, nunc pro tunc, at the time that an appeal from a violation of the conditions is heard. Special conditions should be attached to the implementing Resolution and forwarded to the Licensing Bureau for review. Licenses may be subject to disciplinary action for violation of special conditions. (N.J.S.A. 33:1-32.) To remain effective, special conditions must be re-imposed at time of transfer or renewal.

14.    TWO LICENSE LIMITATION

A “person” or entity may not hold an interest in more than two (2) retail licenses. Exceptions are permitted to those who held such interest prior to August 3, 1962, and licenses that are used in conjunction with a restaurant, a hotel with at least 100 sleeping rooms, a bowling alley with 20 or more lanes, or a business located at an international airport. Where the exception applies to a restaurant or bowling alley, the sale of package goods is prohibited. (N.J.S.A. 33:1-12.31 to 12.37.)

15.    LATE FILING OF RENEWAL APPLICATION

All retail licenses are renewed for one year beginning July 1st and expiring on June 30th. The municipality may accept and renew a retail license if the licensee files a renewal application and the required fees by July 30th, which is 30 days after the commencement of the new license term. (N.J.S.A. 33:1-12.13.) No one may operate a license after July 1st if their license has not been renewed unless the applicant applies for and receives an “Ad Interim” permit.¹

If a retail licensee files a renewal application and the required fees between July 31st and September 28th (sixty (60) days after the initial late renewal date), a municipality may not act to renew the license unless a Special Ruling is issued by the Director which allows a “new” license to be issued to replace the expired license. (N.J.S.A. 33:1-12.18.) The licensee must file a petition in affidavit form with the Director (with a copy to the municipality) setting forth the circumstances beyond the licensee’s control which caused the failure to timely file the renewal application. The last date for late filing a renewal application, the petition, and the required fees for all retail licenses is September 28th.

If a retail licensee files its renewal application or the petition and the required fees after September 28th, it may be determined that the license has lapsed and ceased to exist for failure to timely renew, unless otherwise ruled by the Director. (N.J.S.A. 33:1-12.18; N.J.A.C. 13:2-42.)

The filing deadline for Summer Seasonal Licenses is May 30th. The last date for late filing for a Summer Seasonal License is July 29th. Therefore, if a renewal application and the required fees on the petition have not been filed with the municipality by the statutory deadline, there is generally no statutory relief provided for a late filing and the license is considered to be lapsed and no longer in existence.

When an application and fee for renewal is offered to the municipal issuing authority, it should be accepted even though not timely filed. It is possible that a petition is pending or some other action will occur that will permit the municipality to subsequently renew the license. The municipality and the licensee should contact the Counsel to the Director’s Office in order to receive instructions regarding filing a request for a Special Ruling pursuant to N.J.S.A. 33:1-12.18.

No municipal resolution approving renewal may be passed in these situations without a Special Ruling from the Director. If a licensee fails to file a renewal application on or before September 28th, the licensee has abandoned its license, and the municipality should pass a Resolution stating that the license has lapsed for failure to renew. A copy of the Resolution must be forwarded to the Licensing Bureau.

1.  Prior to receiving an “Ad Interim Permit,” the licensee must file the renewal application and all fees with the issuing authority.

Always consult an experienced attorney when facing any type of Lawsuit, Violation or Charge. Call the Law Offices of Kalas and Jannarone at (732) 477-4466.

The ABC handbook can be downloaded for FREE from the Division of Alcoholic Beverage Control's website at http://www.nj.gov/lps/abc/index.html.

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