Obtaining authorization to sell alcohol in Ohio is no easy task. While the legal landscape has changed considerably from the blanket Prohibition of the 1920s, trade in alcoholic beverages remains heavily controlled by the state government. Any business seeking to sell alcohol to the public for beverage use must first obtain a liquor permit from the Ohio Division of Liquor Control (“DOLC”), a division of the Ohio Department of Commerce. This document will provide you with a basic understanding of the types of permits and their associated privileges, options available for businesses seeking to sell alcohol, and the permit application process.
Types of Liquor Permits
The first step in a business’s liquor permitting journey is to identify what type of permit is needed. This depends on the nature of your business, what types of alcohol you wish to sell, what days and hours you wish to operate, and where your business is located.
Ohio offers various types of liquor permits, which are divided into classes based on the types of activities the permit authorizes. For example, establishments wishing only to sell alcohol at carryout should obtain a C-class permit, while full-service restaurants and the like desiring on-premises consumption will need a D-class permit. There are also A-class permits available to manufacturers and certain brewpubs, and B-class permits for distributors and wholesalers. Many operators may also be familiar with F-class temporary event permits, which can be obtained by qualifying not-for-profit organizations for limited time events.
Within each permit class are several subtypes, each with differing privileges. The most common restaurant and bar permits are:
• D-1 (beer)
• D-2 (wine and mixed drinks)
• D-3 (spirits)
• D-3A (extended hours to 2:30am)
• D-5 (all beverage types)
• D-6 (Sunday sales)
An establishment seeking maximum privileges (sometimes called a “full-service” permit) will generally obtain either a D-1, D-2, D-3, D-3A, & D-6, or a D-5 & D-6. Either set of permits will allow sales of all types of alcoholic beverages for on-premises consumption, seven days per week, from 5:30am to 2:30am. A full service permit also allows for sale of carryout beer, wine, and mixed drinks. Spirits (defined as anything over 21% ABV) may only be sold at carryout by special state-licensed Agency stores, although a recent update to Ohio law allows D-3 and D-5 permit holders to make limited sales of spirits “to-go” with a meal, under certain conditions.
There are two types of liquor permit applications available: an application for a new permit, or an application to transfer ownership of an existing permit. Which application you need to use will depend on several factors.
One of the basic concepts in Ohio liquor permitting is the quota system. A limited number of D- and C-class liquor permits are allocated to each city and township based on the area’s population data from the latest U.S. Census. For each one thousand population, a city or township is allocated one C-1, C-2, D-1, and D-2 permit; for each two thousand population, one D-3, D-4, and D-5 permit.
Once you have identified the type of liquor permit needed for your business, the next step is always to check the quota for the city or township where your business is located. This can be done through Ohio DOLC’s website, although the information in the quota database is not always 100% up-to-date. If a quota opening is available, great – you may submit a new permit application directly with Ohio DOLC. This option is always preferred, as it will secure a liquor permit for the state-minimum pricing ($2,844 for a D-5 & D-6, or $3,128 for a D-1/2/3/3A/6).
Often a quota permit is not available, particularly in very large or very small cities/townships. In that case, any application submitted to DOLC will be placed onto the “waitlist,” where it will remain indefinitely until a permit becomes available. This process can sometimes take several years depending on how many other applicants are ahead of you on the waitlist.
Another option that should be considered are possible “quota-exempt” permits. These are special D-class permits that may be issued to certain qualifying businesses, and the number available is not limited by the city or township quota. For example, large restaurants with 4,000 square feet of floor space, 140 indoor seats, and full-course meals may qualify for a D-5I permit. Another type of exempt permit is a D-5J, which requires that the business be located within a Community Entertainment District formed by the city council or township trustees. If your business qualifies, quota-exempt permits are often a great option to fairly quickly and cheaply obtain a liquor permit in instances where the quota is full.
What if the quota is full, your business does not qualify for an exempt permit, and you need a liquor permit ASAP? The only remaining option is to purchase an existing permit from someone else and transfer it to your business. This can be done in two ways: (1) identify a business within your city or township who is willing to sell their permit, or (2) use the Economic Development Transfer (“TREX”) process to transfer a permit issued to a business outside your city or township. A key requirement of the TREX process is that it requires approval from your local city council or township trustees prior to you being able to file a transfer application with Ohio DOLC.
Unlike new permit applications, transfers can be extremely complex, and it is very strongly recommended that applicants retain qualified liquor counsel to represent them in permit transfers. Transfers introduce numerous risks that are not present with new permit applications, such as seller tax issues that can impede transfer of a permit or even shift pre-existing tax liabilities from the prior permit holder to the new owner. State processing times are also a big concern for transfers. While experienced liquor counsel can often complete a transfer in 60-90 days, unrepresented applicants typically see their transfer applications languish for months on end without any progress being made by the state.
Pricing for liquor permits on the open market varies. As of late 2023, typical pricing for a TREX transfer is around $15,000 – $20,000 for a full-service permit. Pricing for a non-TREX varies by city. In some jurisdictions, such as small college towns that will not approve TREX transfers, permits can be valued at over $40,000. Average pricing in other common markets is typically more reasonable, such as ~$25,000 in Cleveland and $20,000 – $25,000 in Columbus. Either way, a liquor permit transfer does not come cheap.
The Application Process
So you have identified the type of permit your business needs, and chosen either a quota, quota-exempt, or transfer permit. Now it is time to file an application with Ohio DOLC. Many applicants mistakenly believe that this process is as simple as just filing a few forms with the state. While that may be true in other places, the situation Ohio is a fair bit more complicated.
As part of your application, the state will request disclosure forms identifying all 5% or greater owners of your business, as well as any company officers. These individuals will need to provide a considerable amount of personal information to the state, and must also be fingerprinted for and Ohio Bureau of Criminal Investigation & Identification (“BCI”) criminal history background check. You will also need to provide a Summary of Tenancy Rights Form signed by your landlord, documentation for “financial verification” showing you have capital available to fund your startup costs and the purchase of your liquor permit, and more.
In addition to the items you need to provide, various state and local government entities also play a role in processing of your application.
• City council or township trustees: Ohio law allows local governments and opportunity to object to any liquor permit application. When an application is filed, DOLC will send a notice to the local government where your business is located, notifying them of the application and asking whether they object to your business receiving a permit.
• Surrounding institutions: Similarly, any school, church, library, public playground, or public park within 500 feet of your premises will receive notice of your application and opportunity to object.
• Local police: Copies of the personal history forms for your business’s owners and officers will be sent to the police department in your city/township, where the police will perform a background check on each person.
• Ohio BCI: Once your owners and officers have been fingerprinted, their prints will be sent to Ohio BCI for processing, and results then forwarded onto DOLC.
• County Board of Elections: As touched on above, your county’s Board of Elections is involved in assessing the wet/dry status of your business’s address. Board of Elections will review precinct records for your address going back to 1934, and furnish the relevant records to DOLC. DOLC will then perform its own analysis and determine your exact wet/dry status.
• Ohio Department of Taxation: If a permit is being transferred, Ohio law requires a tax proceed determination from Department of Taxation. Taxation will review the seller’s tax accounts and identify any outstanding tax issues, all of which must be fully resolved in order for the liquor permit transfer to proceed.
• Liquor inspections: All liquor permitted businesses must complete a pre-license inspection. Generally this is divided into two separate inspections: an initial (conducted while construction is on-going) and a final (may only be completed after all constructions/renovations are complete).
Each of the above steps presents copious opportunities for error or delay. Most DIY applicants fail to submit all required documents with their liquor application, which can cause rejection of the application or delays as DOLC sends requests for additional documents through USPS. It is typical for city objection replies to take the full allowable 30 days to complete, even in cases when the city has no objection to your permit. Occasionally objection notices or local police forms get sent to the wrong address, lost in the mail, or sit in a stack at the police department waiting to be processed. BCI backlogs also present issues from time to time, and can delay results processing for weeks. Not to mention tax problems in a transfer, which can cause months-long delays while the seller attempts to resolve the issues.
Obtaining a liquor permit for your Ohio business can be quite difficult, and the process often takes several months from start to finish. Selecting the right type of permit for your business and obtaining it in the quickest and most cost-effective way possible is always a challenge. As a result, it is generally recommended that businesses first consult with an Ohio liquor attorney to guide them through the process of selecting and securing an appropriate permit type. Diligent counsel can also help expedite most, if not all, of the application processing items through careful business structuring and proactive communication with relevant stakeholders and governmental entities. As your trusted advisor, a liquor lawyer can help your business avoid problems before they arise and successfully obtain issuance of your liquor permit with a minimal amount of delay.
Alicia E. Zambelli is a partner at Walter Haverfield and has extensive experience working with businesses in the hospitality industry. She can be reached at email@example.com or at 614-246-2280.