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

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TABC requires three kinds of bonds. A conduct surety bond of $5,000, or $10,000 near a public school, applies to most on-premise retailers and to some off-premise retailers near schools. A performance bond of $2,000 applies to holders of a BE license or BG permit without a Food and Beverage Certificate in Bexar, Dallas, Harris, and Tarrant counties. A fee interest bond of $30,000 applies to certain contract brewers. A Food and Beverage Certificate removes the first two, and a holder with three years of continuous operation and no recent revocation can be released from the conduct bond.

The conduct surety bond

Section 11.11 of the Alcoholic Beverage Code sets the conduct surety bond for permits, and Section 61.13 sets the same bond for the Retail Dealer’s On-Premise License (BE).

Who must file Amount
Holders of or applicants for a Wine and Malt Beverage Retailer's Permit (BG, Chapter 25), Mixed Beverage Permit (MB, Chapter 28), Private Club Registration Permit (N, Chapter 32), or BE (Chapter 69) $5,000
The same permits and license, and holders of a package store (Chapter 22), wine-only package store (Chapter 24), or wine and malt beverage retailer's off-premise permit (Chapter 26), when the place of business is within 1,000 feet of the property line of a public school $10,000

The bond is conditioned on the holder not violating the state’s alcoholic beverage laws or TABC rules. By its own terms, the bond amount is paid to the state if the permit or license is revoked, or on a final finding that the holder violated the Code, even where an employee’s conduct would not otherwise be attributed to the holder under Section 106.14.

Instead of all or part of the bond, the holder may furnish certificates of deposit assigned to the state or letters of credit, issued by a federally insured bank or savings institution authorized to do business in Texas (Section 11.11(d)).

The performance bond

TABC’s bonds page describes the performance bond as required only when all of the following apply:

  • the business is in Bexar, Harris, Dallas, or Tarrant County;
  • it holds or is applying for a Retail Dealer’s On-Premise License (BE) or a Wine and Malt Beverage Retailer’s Permit (BG); and
  • it does not hold a Food and Beverage Certificate (FB).

The amount is $2,000, and TABC states that it increases if the business violates the Alcoholic Beverage Code or TABC rules. It can be posted as a bond, a letter of credit, or an assignment of a certificate of deposit.

The statutory basis is Section 11.61(b-1). It applies in counties with a population of 1.4 million or more to on-premise licenses and permits for beer only, or beer and wine only, other than establishments holding a Food and Beverage Certificate whose primary business is food service, and fraternal and veterans organizations are excluded. The statute builds in escalation: the bond is forfeited to TABC the first time the license or permit is suspended, and reinstatement requires a second, larger bond; a second suspension forfeits that bond and requires a third, larger one; a third suspension forfeits the bond again and the license or permit is cancelled.

The fee interest bond

A brewery taking part in an alternating brewery proprietorship or a contract brewing arrangement, under a Brewer’s License (BW) or Nonresident Brewer’s License (BN), must post a bond of at least $30,000 if it does not own a fee interest in a brewing facility (Section 62.01(e)). TABC’s bonds page lists the amount as $30,000.

Exemption 1: the Food and Beverage Certificate

The FB exemption is written directly into the certificate sections of the Code. For an MB, BG, or N, Sections 28.18(f), 25.13(e), and 32.23(f) each state that “Section 11.11 does not apply to the holder of a food and beverage certificate.” For a BE, Section 69.16(e) says the same of Section 61.13. The certificate does not reduce the conduct bond; it takes the holder outside the section that requires one.

TABC’s performance bond criteria also exclude businesses holding an FB. The exemption lasts only as long as the certificate: if the FB expires or is canceled, the bond sections apply again. No FB exemption is written for the fee interest bond.

Exemption 2: three years without a revocation

Section 11.11(e), and Section 61.13(e) for BE licensees, releases a holder from the conduct bond at renewal if the holder:

  1. has held a permit for three years or more before applying for renewal;
  2. has not had any license or permit under the Code revoked in the five years before the renewal application;
  3. is not the subject of a pending revocation proceeding; and
  4. has operated continuously on the permitted premises for three years or more.

A holder exempt under this subsection is also exempt at any other location where it applies for or holds a permit (Section 11.11(f)).

Working out the bond for one location

Three facts decide the answer: the permit or license type, the location (distance to the nearest public school’s property line and, for the performance bond, the county), and whether the business will hold an FB. Four invented locations show how they combine:

Hypothetical location Conduct surety bond Performance bond
New restaurant with an MB and an FB in Dallas County none; the FB takes it outside Section 11.11 none; the performance bond applies only to a BE or BG, and an FB excludes it
New bar with a BG and no FB in Harris County, far from any school $5,000 $2,000
New package store 800 feet from a public school's property line $10,000 none
Bar with a BG and no FB in Travis County, operating continuously for four years with no revocation may be released at renewal under Section 11.11(e) none; Travis is not one of the four counties

A new business with no permit history cannot use the three-year exemption, so its first bond decision is between posting the bond and qualifying for an FB.

This article is general information about Texas alcoholic beverage law, not legal advice, and reading it does not create an attorney-client relationship. Statutes and TABC rules change; confirm current requirements with the Texas Alcoholic Beverage Commission, the relevant city or county, or a licensed Texas attorney before acting.

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