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Residency Requirements for Applicants of Liquor Permit

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Reviewed Date: June 20, 2017

Original Author: 
Nevad, Warren
Date of Material: 
Aug 3, 2006

Alcoholic beverages--Laws and regulations
Licenses and permits--Laws and regulations

Residency Requirements for Applicants of Liquor Permit

MTAS was asked whether applicants for a liquor permit should be required to have resided within the city limits at least two consecutive years preceding the date when the application is filed.

Knowledgebase-Residency Requirements for Applicants of Liquor PermitAugust 3, 2006

Mayor Billy Simpson
Town of Jasper
4460 Main Street
Jasper, Tennessee 37347

Re: Residency requirement for applicants of liquor permits

Dear Mayor Simpson:

Pursuant to your request, The University of Tennessee Municipal Technical Advisory Service (MTAS) has reviewed Title 8, Chapter 2, Section 8-205 of the Jasper Code of Ordinances : Certificate of good moral character a prerequisite for a retail permit. Said section requires a liquor permit applicant to have resided within the city limits of Jasper at least two (2) consecutive years immediately preceding the date when the application is filed with the board of mayor and aldermen. As a result of our review, research and discussions with MTAS Senior Legal Consultant Sid Hemsley, we recommend that you prepare an amending ordinance to delete the residency requirement because your existing ordinance could potentially not withstand a legal challenge due to the Federal Interstate Commerce Clause.

There appears to be no Tennessee cases on the question of what residency requirements are “reasonable” under Tennessee Code Annotated 57-3-208. However, generally, the courts in other jurisdictions have treated residency requirements as unconstitutional because the courts have stated that residency requirements have resulted in economic protectionism and thus, restricting free competition. Arguments have been made that residency requirements are justified by temperance, the evils of unregulated traffic in liquor, the need to intensely investigate and screen applicant’s reputations and backgrounds, which is not easy to do on out-of-state applicants. That argument generally does not work because courts have said that in today’s age of computer networks, fax machines, and other technologies interstate investigations should be not much more difficult that intrastate ones, and that other less discriminatory means are available to promote the state’s interests than the burden of living in the state a certain period of time, such as:

- Requiring license applicants to furnish whatever information the state deems necessary, together with a release to permit rigorous verification check.;

- Application of penalties for duplicity that apply equally to in-state and out-of- state applicants;

- Furnishing of bonds;

- Filing of consent to suit in the state by out-of-state applicants; and

- Already existing penalties for violations of the liquor laws of the state.

In the case of Cooper v. McBeath, 11 F.3d 547 (5th Cir. 1994) Texas’ liquor laws required a three year residency requirement for a mixed beverage permit. During the pendency of this case, Texas changed the residence requirement to one year. The court held that the case was not moot and proceeded to hold the three year requirement violated the Commerce Clause. The one year requirement is probably also on shaky ground.); Glazer’s Wholesale Drug Co., Inc. v. Kansas, 145 F.Supp.2d 1234 (D. Kan. 2001); Indiana Wholesale Wine & Liquor Co. Inc. v. State ex rel. Indiana Alcoholic Beverage Commission, 662 N.E.2d 905 (Ind. Ct. App. 1966); Dickerson v. Bailey , 87 F.Supp.2d 691 (S.D. Tex. Houston Div. 2000).] MTAS has previously transmitted other federal case citations to the Jasper Town Attorney for his confirmation of our recommendation.

State statutes that directly discriminate against interstate commerce or whose effects favor in-state economic interests at the expense of out-of-state economic interests will probably be struck down unless the discrimination is demonstrably justified by a valid factor unrelated to economic protectionism. In the case state statutes and ordinances that are discriminatory in those manners with respect to alcoholic beverages, the courts weigh the federal government’s interest in commerce under the Commerce Clause against states’ very broad rights to regulate the sale of alcoholic beverages under the 21st Amendment. But the Commerce Clause wins most of the time unless the state has compelling arguments in favor of its right to enact a particular alcoholic beverage regulation that discriminates against out-of-state residents.

We appreciate you taking the initiative to contact MTAS on this important issue. Please contact me should you desire additional information.


Warren P. Nevad
The University of Tennessee MTAS
Municipal Management Consultant

cc: Sid Hemsley, Senior Legal Consultant


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Information written by MTAS staff was based on the law at the time and/or a specific sets of facts. The laws referenced may have changed and/or the technical advice provided may not be applicable to your city or circumstances. Always consult with your city attorney or an MTAS consultant before taking any action based on information posted to this website.