What Conduct Surety Bonds and Performance Bonds Does TABC Require, and Who Is Exempt?

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“Do I need a bond?” is a question with no single answer in Texas. The Texas Alcoholic Beverage Commission (TABC) may require different bonds depending on the permit type, the location, and the kind of operation, and several meaningful exemptions exist. Treating “the bond” as one thing, or assuming every permit needs one, misses how the requirement actually works.

This page describes the main bond types and who must or need not post them. It is general information, not legal advice.

What a bond does and why TABC requires it

A surety bond in this setting is a three-party arrangement among the business (the principal), TABC (the obligee), and a surety company that backs the bond. It guarantees that the licensee will follow the Alcoholic Beverage Code and TABC rules. If the licensee violates the law and a claim is made, the surety pays the state up to the bond amount, and the business is ultimately responsible for repaying that amount. The bond is, in effect, financial security for compliance.

TABC recognizes several distinct bonds, and the easiest way to keep them straight is by what triggers each.

Conduct surety bond

The conduct surety bond is the one most retail applicants encounter. Under Alcoholic Beverage Code Section 11.11, an applicant for or holder of certain permits must file a conduct surety bond conditioned on conformance with alcoholic beverage law. The amount turns on proximity to a public school:

  • $5,000 if the business is more than 1,000 feet from the property line of a public school.
  • $10,000 if it is within 1,000 feet of a public school, measured property line to property line.

The bond can be satisfied with a surety bond, a letter of credit, or an assignment of a certificate of deposit. It generally must remain in effect for as long as the business operates at the location.

Performance bond

The performance bond is narrower and geographic. It applies only in counties with a population of 1.4 million or more, which in practice means Bexar, Dallas, Harris, and Tarrant counties. It is required of holders of certain on-premise retail permits and licenses (such as a wine and malt beverage retailer’s permit or a retail dealer’s on-premise license) who do not hold a food and beverage certificate with a primary food-service business.

The initial performance bond amount is $2,000, and that amount increases if the business violates the Alcoholic Beverage Code or TABC rules. Like the conduct bond, it can be posted as a bond, a letter of credit, or an assignment of a CD.

Fee interest bond

The fee interest bond is specific to certain manufacturing arrangements. TABC describes a $30,000 fee interest bond for a business participating in an alternating brewery proprietorship or contract brewing arrangement that holds a brewer’s or nonresident brewer’s license and does not own a fee interest in any brewing facility. It is a different animal from the retail bonds and is tied to the structure of the brewing operation. (TABC also administers excise tax bonds in connection with tax obligations, which are separate again.)

Who is exempt

The exemptions are where many businesses find relief, and they are worth knowing precisely.

  • Food and beverage certificate holders. A retailer that holds a food and beverage certificate, with food service as the primary business, is generally not required to post the conduct surety bond, and the performance bond requirement likewise does not apply to such an establishment. A business that obtains a food and beverage certificate may be eligible to have an existing bond discharged or released, and TABC provides a form for the return of a bond. This is one of the more practical benefits of the certificate.
  • Long-term holders with a clean record. Section 11.11 also exempts a permit holder who has held a permit for three years or more before applying for renewal, if the holder has not had a license or permit revoked in the prior five years, is not the subject of a pending revocation proceeding, and has continuously operated on the permitted premises for three years or more. If a holder is exempt at one location under this provision, the exemption extends to other locations where the holder applies for or holds a permit.

What this means in practice

An applicant determines which bonds apply by looking at three things together: the permit type, the location (both proximity to a public school and whether it sits in one of the large counties where the performance bond applies), and whether the business will hold a food and beverage certificate. Those factors, not a single rule, determine the bond picture.

Because a food and beverage certificate can remove the conduct and performance bond requirements for a primarily food-service business, and because long-term holders with a clean record can qualify for exemption, the bond analysis is worth doing alongside the broader licensing plan rather than assuming a bond is simply a fixed cost. The simplest path to confirming the specific requirement is to work it through the application process and confirm the applicable bond, amount, and any exemption against current TABC requirements for the exact permit and location.

This article is for general educational purposes only and is not legal advice. It does not create an attorney-client relationship and does not guarantee any particular bond requirement or exemption. Texas alcoholic beverage law and TABC rules change, and bond requirements depend on the specific permit type, location, and facts. The bond types, amounts, and exemptions described here should be confirmed against current primary sources. For advice about a specific situation, consult a licensed Texas attorney.

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