Can a Texas city use zoning to control where liquor and package stores open?

Plain-English summary

A state senator asked whether a City of Dallas ordinance regulating businesses that sell alcohol was preempted by state law. Dallas is a home-rule city, so it has broad self-government power, but it cannot enforce an ordinance that conflicts with state law. The Alcoholic Beverage Code says the state code exclusively governs the regulation of alcoholic beverages, and the Texas Supreme Court had already struck down an earlier Dallas ordinance dispersing alcohol-related businesses as preempted by that code (the Dallas Merchant's case). The code has a narrow exception (section 109.57(d)(2)) that lets a local government regulate the location of an establishment that earns 75 percent or more of its gross revenue from the "on-premise sale" of alcoholic beverages. Dallas rewrote its ordinance to track that exception, defining regulated "beverage store" and "liquor store" categories.

Everything turned on what "on-premise sale" meant. Dallas read it as sale of alcohol on the premises, regardless of where the buyer drinks it, which would cover package and liquor stores. The senator read it as sale for consumption on the premises, like a bar. The office sided with the consumption reading. Because the code elsewhere ties "on-premise" and "off-premise" to where alcohol is consumed (including a package-store tasting provision in section 52.03 that says a tasting sample is not "on-premise sale"), the office concluded "on-premise sale" in the exception means sale for on-premise consumption. So the exception did not shield Dallas's ordinance, which was aimed at off-premise package and liquor stores, except to the extent the ordinance reached establishments earning 75 percent or more of their revenue from alcohol sold for on-premise consumption.

Currency note

This opinion was issued in 1994. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The Alcoholic Beverage Code sections cited here have been amended in the decades since 1994, and the Texas Legislature has revisited alcohol preemption and the "on-premise" definitions more than once. Read this page for how the office construed "on-premise sale" in 1994, not for the current scope of a city's power to regulate where alcohol businesses may locate.

What the opinion meant for those who asked

For the City of Dallas and other home-rule cities: The opinion concluded that the section 109.57(d)(2) exception reached only establishments earning 75 percent or more of their revenue from alcohol sold for on-premise consumption. A city ordinance built around off-premise package and liquor stores did not fit the exception and stayed subject to the code's general preemption, except where it regulated the location of on-premise-consumption establishments.

For package store and liquor store owners: The opinion treated stores selling alcohol for off-site consumption as outside the location exception the city was relying on, which meant the code's general preemption of local "where alcohol is sold" rules continued to apply to them.

For the requesting senator: The office adopted the reading the request urged, that "on-premise sale" means sale for on-premise consumption, and rejected the city's premises-of-sale reading.

Common questions

What does "on-premise sale" mean under the Texas Alcoholic Beverage Code?
The office concluded it means the sale of alcoholic beverages for consumption on the premises, such as at a bar or restaurant, not simply alcohol sold at a location and carried away.

Could Dallas regulate where liquor and package stores located using this exception?
No. Because those stores sell alcohol for off-premise consumption, the office concluded they fell outside the section 109.57(d)(2) location exception, so the code's general preemption still applied to that part of the ordinance.

Why does the state code override a home-rule city ordinance here?
The Alcoholic Beverage Code states the legislature's intent that the code exclusively govern the regulation of alcoholic beverages, and the Texas Supreme Court had read section 109.57 to preempt home-rule ordinances regulating where alcoholic beverages are sold in most circumstances.

Did the opinion say the whole ordinance was invalid?
No. The office concluded only that the (d)(2) exception did not exempt the ordinance, except to the extent it regulated the location of on-premise-consumption establishments, and it expressed no opinion on whether some other code provision might permit the ordinance.

Background and statutory framework

Under article XI, section 5 of the Texas Constitution, home-rule cities have all the powers of self-government not denied them by the legislature, but they may not enforce ordinances inconsistent with state law. When a state law and a local ordinance address the same subject, Texas courts try to construe both so each stays in effect, and the legislature is presumed to preempt a field usually within a home-rule city's powers only when it does so "with unmistakable clarity" (City of Richardson v. Responsible Dog Owners, 794 S.W.2d 17, 19 (Tex. 1990); City of Sweetwater v. Geron, 380 S.W.2d 550, 552 (Tex. 1964)).

The Alcoholic Beverage Code supplies that clarity through section 109.57, which declares the legislature's intent that the code exclusively govern the regulation of alcoholic beverages and bars local entities from imposing stricter standards on licensed businesses than on similar unlicensed ones. In Dallas Merchant's & Concessionaire's Ass'n v. City of Dallas, 852 S.W.2d 489 (Tex. 1993), the Texas Supreme Court relied on section 109.57 to strike down an earlier Dallas ordinance that dispersed alcohol-related businesses, while expressly declining to decide the scope of the subsection (d) exceptions. Subsection (d)(2) lets a governmental entity regulate the location of an establishment that derives 75 percent or more of its gross revenue from the "on-premise sale" of alcoholic beverages.

Finding no contemporaneous legislative history for the 1987 amendment that added the language (Acts 1987, 70th Leg., ch. 303, § 8), the office construed "on-premise sale" by how the code uses "on-premise" and "off-premise" elsewhere, terms it ties to the site of consumption, and by the only other code use of "on-premise sale," in the package-store tasting-permit provision (section 52.03, enacted by Acts 1993, 73d Leg., ch. 934, § 49), which states that a tasting sample is not revenue from the "on-premise sale" of alcoholic beverages. Treating that later enactment as significant though not controlling (Stephens County v. Hefner, 16 S.W.2d 804 (Tex. 1929)), the office concluded "on-premise sale" means sale for on-premise consumption, so the (d)(2) exception did not reach the city's off-premise store categories.

Citations

Constitutional and statutory provisions discussed:

• Tex. Const. art. XI, § 5 (home-rule city powers; no ordinances inconsistent with state law)
• Alcoholic Beverage Code § 109.57 (preemption of local alcohol regulation; subsection (d)(2) location exception)
• Alcoholic Beverage Code § 52.03 (package store tasting permits; "on-premise sale")
• Acts 1987, 70th Leg., ch. 303, § 8 (adding the (d)(2) language)
• Acts 1993, 73d Leg., ch. 934, § 49 (enacting section 52.03)

Cases discussed:

• Dallas Merchant's & Concessionaire's Ass'n v. City of Dallas, 852 S.W.2d 489, 490-91 (Tex. 1993)
• City of Brookside Village v. Comeau, 633 S.W.2d 790, 796 (Tex. 1982), cert. denied, 459 U.S. 1087 (1982)
• City of Richardson v. Responsible Dog Owners, 794 S.W.2d 17, 19 (Tex. 1990)
• City of Sweetwater v. Geron, 380 S.W.2d 550, 552 (Tex. 1964)
• Stephens County v. Hefner, 16 S.W.2d 804 (Tex. 1929)
• City of Ingleside v. Johnson, 537 S.W.2d 145 (Tex. Civ. App. 1976, no writ)

Prior Attorney General opinion referenced: DM-229 (1993).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0289
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1994/dm0289.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
ATTORNEY GENERAL

April 14, 1994

Honorable O.H. "Ike" Harris
Chair
Committee on State Affairs
Texas State Senate
P.O. Box 12068
Austin, Texas 78711

Opinion No. DM-289

Re: Whether a City of Dallas ordinance regulating establishments that sell alcoholic beverages falls within section 109.57(d)(2) of the Alcoholic Beverage Code (RQ-630)

Dear Senator Harris:

You ask whether a City of Dallas ordinance regulating establishments that sell alcoholic beverages is preempted by state law. The City of Dallas ("Dallas" or the "city") is a home-rule city. The Texas Constitution grants such cities all the power of self-government not expressly denied them by the legislature. Tex. Const. art. XI, § 5; Dallas Merchant's & Concessionaire's Ass'n v. City of Dallas, 852 S.W.2d 489, 490-91 (Tex. 1993). The Texas Constitution prohibits a home-rule city, however, from enforcing any legislation inconsistent with state laws or the state constitution. Tex. Const. art. XI, § 5; Dallas Merchant's, 852 S.W.2d at 491 (citing City of Brookside Village v. Comeau, 633 S.W.2d 790, 796 (Tex. 1982), cert. denied, 459 U.S. 1087 (1982)). The Texas Supreme Court has instructed that, in determining whether an ordinance is fatally inconsistent with state law on the same subject matter, courts must seek to construe the two in a way that will leave both in effect, if possible. City of Richardson v. Responsible Dog Owners, 794 S.W.2d 17, 19 (Tex. 1990). "[T]he mere fact that the legislature has enacted a law addressing a subject does not mean the complete subject matter is completely preempted." Id. Moreover, it is well established that "if the Legislature chooses to preempt a subject matter usually encompassed by the broad powers of a home-rule city, it must do so with unmistakable clarity." Dallas Merchant's, 852 S.W.2d at 491 (citing City of Sweetwater v. Geron, 380 S.W.2d 550, 552 (Tex. 1964)).

The Alcoholic Beverage Code (the "code") contains a preemption provision, section 109.57,[1] which provides in pertinent part:

(a) Except as is expressly authorized by this code, a regulation, charter, or ordinance promulgated by a governmental entity of this state may not impose stricter standards on premises or businesses required to have a license or permit under this code than are imposed on similar premises or businesses that are not required to have such a license or permit.

(b) It is the intent of the legislature that this code shall exclusively govern the regulation of alcoholic beverages in this state, and that except as permitted by this code, a governmental entity of this state may not discriminate against a business holding a license or permit under this code.

Alco. Bev. Code § 109.57(a), (b). Subsection (d) of section 109.57 sets forth exceptions to the general preemptive effect of section 109.57, providing in pertinent part:

(d) This section does not affect the authority of a governmental entity to regulate, in a manner as otherwise permitted by law, the location of

. . .

(2) an establishment that derives 75 percent or more of the establishment's gross revenue from the on-premise sale of alcoholic beverages.

Id. § 109.57(d) (emphasis added). The specific question before us is whether the ordinance falls within the exception set forth in section 109.57(d)(2).

In Dallas Merchant's, the Texas Supreme Court struck down a Dallas ordinance that dispersed the location of alcohol-related businesses, on the grounds that it was preempted by section 109.57 of the code. In that opinion, the court stated, "The Legislature's intent is clearly expressed in section 109.57(b) of the [code]—the regulation of alcoholic beverages is exclusively governed by the provisions of the [code] unless otherwise provided. . . . Section 109.57 clearly preempts an ordinance of a home-rule city that regulates where alcoholic beverages are sold under most circumstances." 852 S.W.2d at 491-92 (citation and footnotes omitted). The court also noted that section 109.57(a) provides that an ordinance may not impose stricter standards on alcohol related businesses than on non-alcohol related businesses:

For example, under section 109.57(a), an ordinance requiring all businesses with the same kind of premises to have a fire extinguisher on their premises would not violate section 109.57(a). On the other hand, an ordinance requiring an alcohol related business to have two fire extinguishers and only requiring a non-alcohol related business with the same kind of premises to have one fire extinguisher would violate section 109.57(a).

Id. at 492 n.5; see also Attorney General Opinion DM-229 (1993). The court expressed no opinion regarding the scope or applicability of section 109.57(d). 852 S.W.2d at 492 n.4.

You explain that in the wake of the Texas Supreme Court's decision in Dallas Merchant's, the city has gone back to the drawing board and has adopted a new ordinance on this subject. See Dallas, Tex., Ordinance 21,735 (June 23, 1993). The new ordinance purports to regulate establishments that derive 75 percent or more of their gross revenue from the sale of alcoholic beverages on the premises. For example, the ordinance defines one regulated category of establishment, the "beverage store," as an establishment "for the retail sale of soft drinks, beer, wine, or liquor that is not to be consumed on the premises that derives 75 percent or more of its gross revenue on an annual basis from the on-premise sale of alcoholic beverages, as defined by the [code]." Id. § 5 (amending Dallas, Tex., Code § 51A-4.211(10)); see also id. § 26 (amending Dallas, Tex., Code § 51A-4.210(b)(17)) (similarly defining the term "liquor store"). Apparently, the city's position is that this ordinance is permitted by section 109.57(d)(2) as a regulation of the location of "establishment[s] that derive[] 75 percent or more of the[ir] gross revenue from the on-premise sale of alcoholic beverages." Alco. Bev. Code § 109.57(d)(2) (emphasis added).

The validity of the Dallas ordinance turns upon the meaning of the term "on-premise sale" in section 109.57(d)(2) of the code. You contend that this term is intended to allow governmental entities to regulate establishments that derive 75 percent or more of their gross revenue from the sale of alcoholic beverages for on-premise consumption. The city, on the other hand, appears to construe this term to allow governmental entities to regulate establishments that derive 75 percent or more of their gross revenue from the sale of alcoholic beverages on the premises regardless of the place of consumption.

The relevant language in section 109.57(d)(2) was added by the 70th Legislature in conference committee. Acts 1987, 70th Leg., ch. 303, § 8 (eff. June 11, 1987). We have not been able to locate any contemporaneous legislative history. Therefore, we construe the meaning of the term "on-premise sale" by examining the use of the same or similar language in the code. The terms "on-premise" and "off-premise" in the code are generally associated with the site of consumption rather than the site of sale. For example, the term "off-premise permit" generally refers to a permit to sell alcoholic beverages for off-premises consumption, and the term "on-premise permit" generally refers to a permit to sell alcoholic beverages for on-premises consumption. See, e.g., Alco. Bev. Code §§ 11.49(d), 22.01, 26.01, 71.01, 71.03. In addition, these words are often paired with the word "consumption." See, e.g., id. §§ 11.391(a), 11.49(e), 24.01, 26.01, 32.01.

We have found only one other use of the term "on-premise sale" in the code. It appears in newly enacted section 52.03 relating to package store tasting permits, which provides as follows:

The commission or the administrator may only issue a package store tasting permit to a holder of a package store permit. For the purposes of this code and any other law of the state or political subdivision of the state, a package store tasting permit may not be considered a permit authorizing the sale of alcoholic beverages for on-premise consumption. Since no charge may be made for a sample tasted on the premises of a package store, none of a package store's revenue may be deemed to be revenue from the on-premise sale of alcoholic beverages.

Acts 1993, 73d Leg., ch. 934, § 49 (enacting Alcoholic Beverage Code, section 52.03) (emphasis added). The term "on-premise sale" in this provision obviously refers to sale for on-premise consumption. Although a legislative interpretation contained in an act passed by a subsequent legislature is not controlling, it may be very significant and is entitled to substantial weight. Stephens County v. Hefner, 16 S.W.2d 804 (Tex. 1929).[2]

Based on our examination of the code, we conclude that the term "on-premise sale" means the sale of alcoholic beverages for on-premise consumption. Because the term "on-premise sale" in section 109.57(d)(2) means the sale of alcoholic beverages for on-premise consumption, rather than the sale of alcoholic beverages on the premises, section 109.57(d)(2) does not exempt the ordinance from the general preemptive effect of section 109.57, except to the extent the ordinance regulates the location of establishments that derive 75 percent or more of their gross revenue from the sale of alcoholic beverages for on-premise consumption. We express no opinion regarding whether the ordinance may be expressly permitted by some other provision of the code. See Alco. Bev. Code § 109.57(a), (b).

SUMMARY

The term "on-premise sale" in section 109.57(d)(2) of the Alcoholic Beverage Code means the sale of alcoholic beverages for on-premise consumption, rather than the sale of alcoholic beverages on the premises. Therefore, section 109.57(d)(2) does not exempt the City of Dallas ordinance from the general preemptive effect of section 109.57, except to the extent the ordinance regulates the location of establishments that derive 75 percent or more of their gross revenue from the sale of alcoholic beverages for on-premise consumption.

DAN MORALES
Attorney General of Texas

JORGE VEGA
First Assistant Attorney General

DREW T. DURHAM
Deputy Assistant Attorney General for Criminal Justice

WILL PRYOR
Special Counsel

RENEA HICKS
State Solicitor

SARAH J. SHIRLEY
Chair, Opinion Committee

Prepared by Mary R. Crouter
Assistant Attorney General

[1] Unless otherwise specifically provided by the terms of this code, the manufacture, sale, distribution, transportation, and possession of alcoholic beverages shall be governed exclusively by the provisions of this code. Alco. Bev. Code § 1.06. We do not address this provision.

[2] The city, in a brief submitted to this office, places great emphasis on the fact that legislation was introduced in the 72d Legislature to amend section 1.04 of the code to define the term "on-premise sale" as "a sale for on-premise consumption." See C.S.S.B. 3, Acts 1991, 72d Leg., 2d C.S. § 4, at 3. The proposed legislation stated that this amendment was "a change made only to clarify and reflect the intent of the legislature." Id. § 5. This language was withdrawn on the House floor. See Debate on S.B. 3 on the Floor of the Senate, 72d Leg. 1-2 (Aug. 22, 1991) (transcript available from Senate Staff Services). We do not believe that this legislative history is dispositive. See City of Ingleside v. Johnson, 537 S.W.2d 145 (Tex. Civ. App.—1976, no writ) (rejection of an amendment does not amount to a construction of the statute). We have reviewed the transcript of the legislative hearing, and it is not apparent to us that the failure to adopt this proposed amendment indicates that the legislature intended to take a position contrary to the proposed amendment, especially given that the proposed amendment was intended to be a clarification.