Tennessee Department of Revenue reviews liquor-by-the-drink rules, bonds, reporting and inventory requirements

Tennessee Department of Revenue officials outlined requirements for the state’s liquor-by-the-drink tax during a Jan. 28, 2025 webinar for hospitality taxpayers.

Katie Julian, a presenter with the Department’s taxpayer services group, said the tax — commonly called liquor by the drink (LBD) — applies to retail sales of alcoholic spirits, wine and high-alcohol-content beer for consumption on the premises and that the tax rate is 15 percent.

The webinar focused on practical compliance steps for operators. Department staff emphasized registration and bond requirements, how to prepare and maintain a price schedule of drinks, monthly filing and how to report inventory and handle disposition or business closures.

The LBD tax covers sales of liquor (spirits), wine (fermented juice up to 21 percent ABV) and high-alcohol-content beer (more than 8 percent ABV). Julian told attendees that “with very few exceptions, if you sell, at retail, alcoholic beverages … for consumption on the premises, you must pay the liquor by the drink tax on the gross sales of those beverages.” She said the Department’s guidance is current as of Jan. 28, 2025 but noted the legislature remains active and laws can change.

Registration, bonds and annual reviews were a focal point. Kellen Wheeler, of the Department’s miscellaneous tax unit, advised taxpayers to register tax accounts with the Department before completing ABC license applications to avoid delays. Wheeler and other staff described an…