Timeline of Beer Legislation in Texas

Every so often questions come up regarding the current status of legal restrictions which hinder the growth of the craft beer industry in Texas. Most times these discussions center on the here and now, but occasionally you might hear words like the Sea World or Shiner exception, referring to laws put in place during prior years that at one time impacted the industry as well.

Hoping to provide a sort of synoptic view of how beer legislation has changed in Texas over time, I put together the following timeline of key events. For items occurring prior to 2007, I've only documented the end result of what, in many cases, was preceded by many years of lobbying efforts. For example, it took five years of discussion before the Carling Bill was passed in 1961, and as many as four sessions of work before the brewpub law was finally added to the books in 1993.

After 2007, though, I thought it best to approach things with more of a bill-by-bill/blow-by-blow summary showcasing the success and failure of attempts to resolve issues that have been of concern to craft brewers for nearly a decade.

Of particular note is an issue that has lingered since at least 2007, that being the restriction that prevents a brewery from selling its products directly to the end consumer. Ironically, those who most oppose this move once had a similar right themselves. Indeed, for a time, distributors were able to sell kegs of beer directly to the end consumer. "Dockside sales" were taken away from them in 1979, however, under the covenants of a revamped version of the three-tier system in Texas.


1961: The Carling Bill.

As part of the ongoing battle over local option, which found its origins in the temperance movement leading up to Prohibition, a law was passed allowing a brewery to continue to operate in a precinct regardless of its "wet or dry" status. The passage of this legislation essentially paved the way for the construction of a large, regional brewery in Fort Worth to be owned by Carling Brewing Co. of Canada (the plant would eventually be purchased by Miller Brewing). At the time, the area of Fort Worth in question was "wet," but there was concern that local conservative groups would campaign for a change in that status should a brewery be built.


1971: Tax breaks for small, in-state producers.

A tax break was established for any Texas brewery manufacturing less than 75,000 barrels of beer annually. The rate was 25% less per barrel, and at the time of passage Shiner was the only brewery in the state that qualified for the discount.

While it wouldn't matter until the first microbreweries were built, the bill was written in such a way that it only applied to producers of "beer" (a drink defined as one containing less than 4% alcohol by weight), meaning those creating "ale" or "malt liquor" were not affected. As for Shiner, the company outgrew the exemption in 1993.

The law was repealed in 2011 to comply with federal court rulings declaring in-state exemptions unconstitutional, in that they discriminated against out-of-state producers by giving preferential treatment to in-state interests. According to a fiscal note, passage would not have a significant financial impact to the state, but as a point of reference, were the law not in place during Fiscal 2010, six breweries operating at the time would have paid an additional $32,025 in tax combined (these were Franconia, Independence, Live Oak, Rahr & Sons, Real Ale and Saint Arnold).


1979: Three-tier system, self-distribution rights.

The three-tier system is fully instituted in the state. Prior to 1979, distributors had been allowed to sell kegs to the ultimate consumer (a.k.a. dockside sales), but under the new law this practice was prohibited. From this point on, brewers would only be allowed to sell to wholesalers, who in-turn would only be allowed to sell to retailers.

A stipulation was put in place allowing breweries with production not exceeding 75,000 barrels annually the right to self-distribute (a.k.a. the Shiner exception). This was changed in 2013 to increase the cap to 125,000 barrels annually, but the amount of beer a brewery may self-distribute was lowered to 40,000 barrels.


1983: Homebrewing.

The homebrewing of wine, ale, malt liquor or beer is legalized, allowing production of up to 200 gallons per year with no license or permit required.


1990: The Sea World exception.

A bill was passed allowing the sale of alcohol in a marine park, even in the case where the business was owned by the holder of a manufacturer's license or brewer's permit. Conditions of the rule stated that the marine park must have a restricted access area between 245 and 255 acres in a county with a population greater than 950,000.

This loophole was put in place after Anheuser Busch (AB) purchased Sea World in late 1989. It allowed AB to continue alcohol sales at the park in San Antonio, although its ownership violated the tenants of the three-tier system. The company sold its interest in Sea World in 2009 after being acquired by InBev, but the law was not repealed until 2013.


1993: Brewpubs.

Brewpubs were legalized, allowing holders of a brewpub license to manufacture and sell beer onsite and to package that beer for sale to customers for off-premise consumption. Food was also allowed (but not required) to be sold onsite. Licensees, however, were strictly prohibited from having an interest in businesses operating under a manufacturer's or distributor's license. This prevented individuals from having an interest in both a brewery (manufacturer) and brewpub (retailer), for example, since according to legal definitions, entities such as those operated on different levels of the three-tier system.


2007: First of many efforts to allow breweries to sell beer directly to consumers fails.

Bill proposed in the House to allow breweries producing less than 75,000 barrels per year to sell beer to consumers for on-premise consumption or in packaged form for off-premise consumption. The amount sold to consumers was not to exceed 5,000 barrels per year. This bill was referred to committee, but never scheduled for a hearing.


2009: Brewers Parity Bill, and an attempt at compromise.

Renewing the call for brewery sales, the so-called Brewers Parity Bill was introduced in the House. Like the 2007 proposal, this legislation would have allowed breweries to sell bottles and kegs from their place of business for off-premise consumption (capped at 35,000 gallons per year) and to sell beer for on-premise consumption. A similar bill was filed in the Senate, but neither made it out of committee.

Working with the Beer Alliance of Texas, a compromise was proposed to allow breweries producing no more than 250,000 barrels of ale per year to offer different types of tours. Consumers purchasing a basic package would receive no beer at the conclusion of a tour, but pay more for a "six-pack tour" and that amount of beer could be taken home for off-premise consumption. Options were also included for one and two-case tours, with the overall intent being to allow breweries to charge for tours, but essentially give beer away as a bonus. This bill did work its way through committee, but was released too late to be scheduled for a vote prior to the end of the legislative session.


2011: Another call for off-premise brewery sales falls short, as does an attempt to allow brewpub distribution.

Similar to the compromise proposed in 2009, a bill was introduced that would allow breweries to charge admission for a tour of the premises, after which visitors would be given up to 48 12-ounce bottles of beer or ale at no charge for off-premise consumption. During discussion the amount to be given away was reduced to a total of 144 ounces of beer, but while the modified legislation did get out of committee, a late objection by AB InBev stalled the bill such that it could not be called for a vote before the end of the legislative session.

A concurrent effort sought to allow brewpubs the right to package their products for retail distribution was left pending in committee.


2011: Jester King vs. TABC.

Jester King Brewery, along with Authentic Beverage Co. and Zax Restaurant and Bar brought suit against the Texas Alcoholic Beverage Commission for violations of 1st and 14th Amendment rights.

Regarding 1st Amendment rights pertaining to free speech, the plaintiffs cited nonsensical regulations preventing breweries from 1) providing truthful and accurate wording on product labels, specifically related to alcohol content and whether or not a product was a "beer" or an "ale," and 2) having the ability to tell customers where its products could be purchased.

As for the 14th Amendment, the plaintiffs claimed 1) that a brewery's inability to sell packaged products directly to the consumer was a violation of the Equal Protection Clause, since wineries and distilleries already enjoyed such freedoms, and 2) that the requirement of foreign breweries to obtain a separate license, while wineries and distilleries are able to avoid this by selling through a licensed distributor, was a violation of both the Equal Protection Clause and Commerce Clause.

A U.S. District Court decision ruled in favor of the plaintiffs with respect to all of the 1st Amendment challenges, declaring them each to be unconstitutional, but did not see fit to provide relief on the questions brought up in relation to the 14th Amendment.


2013: Taprooms, brewpub sales, distribution rights.

Breweries producing up to 225,000 barrels annually were allowed to sell up to 5000 barrels to consumers for on-premise consumption. Passage of this law was the catalyst for the establishment of taprooms in breweries all across Texas.

Brewpubs producing up to 10,000 barrels annually (up from a previous limit of 5000) were allowed to sell packaged products to consumers for off-premise consumption, to sell to distributors, and to sell up to 1000 barrels directly to retailers. As a result of these changes, many smaller breweries opted to switch from a brewer's permit to a brewpub license in order to take advantage of the ability to sell beer to-go.

Despite this progress, additional attempts to legalize off-premise brewery sales were unsuccessful. Not only that, an additional law was put in place to prohibit brewers from selling their territorial distribution rights. The latter was said to have been thrown-in at the last minute as a concession to opposition parties who would have otherwise worked to prevent passage of the above-mentioned measures.


2015: A full stop on progress.

Yet another attempt to institute off-premise brewery sales, this time in the form of a once-a-month consumer purchase not to exceed 576 ounces, failed to get out of committee, as did an initiative seeking to allow direct-to-consumer shipments of beer from outside the state (another example of something wineries are permitted to do, but breweries are not).

A third effort, seeking to clarify rules on homebrew competitions at breweries, reached the Calendars Committee, but was never scheduled for a vote.


Pending litigation:

December 2014: Live Oak, Peticolas and Revolver Brewing file suit against the State of Texas over property rights related to the inability of breweries to charge a fee for distribution rights. The Texas Legislature took away these rights during the 2013 session.

September 2015: Deep Ellum Brewing Co. files suit against the State of Texas challenging the constitutionality of laws preventing breweries from selling their products directly to consumers for off-premise consumption.