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Cheers! Kentucky Removes Quota Limits For “Liquor-By-The-Drink” Licenses

A recent, significant change to Kentucky law means there are no longer limits to the number of “quota” retail drink licenses that may be issued in each county. This change will significantly increase the number and types of businesses eligible for a liquor license.

Historically, the Kentucky Department of Alcoholic Beverage Control, through administrative regulations, limited the number of retail package licenses (the license applicable to liquor stores) and retail drink licenses (the license applicable to bars) that could be issued in each county based on population. These limited licenses came to be known as “quota” licenses. But in December 2017, the Alcoholic Beverage Control Board promulgated 804 KAR 9:051, repealing the longstanding quotas. In repealing the quotas, the Board explained that it “believes that market forces rather than arbitrary quota limits should determine the number of businesses competing in a community.” The regulation was also intended as a cost-saving measure, because quota limits based on annual population statistics were burdensome to enforce.

In response to this major change, the Kentucky General Assembly proposed Senate Bill 110, which would have written the existing quota system into state law. However, a late amendment to the bill removed all references to quota retail drink licenses (the license applicable to bars). Senate Bill 110 became law on April 14, 2018 (2018 Ky. Acts Chapter 154), but in its amended form, it only preserves quota limits for retail package licenses (the license applicable to liquor stores). The quota limitations for sales by the drink have been effectively removed.

This is an important change for existing business owners and entrepreneurs. Before the repeal of quotas, Kenton and Campbell Counties had each reached their respective quota limits for retail drink licenses. This meant that a business owner looking to obtain a quota license would often have to pay $20,000 or more to purchase one from an existing business. And non-quota liquor licenses were available only to certain types of business, such as caterers, golf courses, restaurants, and bed and breakfasts.

This is good news for businesses like wedding venues that were eligible only for a quota license. This change is also significant because Kentucky law treats wine like liquor for retail licensing purposes. As a result, while licenses to sell beer have been available on a non-quota basis for some time, licenses to sell wine were not. Existing breweries and taprooms will now have the option of obtaining a license to sell wine.

If you are interested in obtaining a liquor license, or if you have questions about the application process, ASWD attorney Bryce C. Rhoades is experienced in this niche area of the law. Contact him at 859.394.6200 or [email protected].

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