Financial Standing Counts


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What can prevent an otherwise qualified applicant from obtaining a license to sell liquor, wine or beer? Simply put, lack of “good moral character.”

That term includes one that is neither a citizen, resident or a business incorporated in Iowa, a felon (convicted within the last five years and without restored rights of citizenship) nor lacking good financial standing. The good financial standing requirement often raises many questions and, as such, will be the focus of this article.

By law, that criteria includes verified sources of financial support, adequate operating capital and a record of prompt payment of taxes and debts. The financial standing requirement applies to anyone that has a controlling interest of ten percent or more in the business.

The most common missteps the Iowa Alcoholic Beverages Division sees are failure to pay taxes, dram insurance cancellation and non-payment of debts.

I. Delinquent Taxes

Failure to pay income or sales taxes, accrued personally or as a business, is a clear example of lack of good financial standing. When a licensee fails to file or pay taxes, the Iowa Department of Revenue and Finance issues a tax notice requesting payment in full. If the tax remains unpaid, the Iowa Alcoholic Beverages Division is notified of the delinquency for the purposes of suspending the license.

One of the traps licensees sometimes fall for is treating sales taxes as operating capital. Then, when time comes to pay the taxes, the necessary cash is not available. The Division recommends that the monies be set aside in a separate account to ensure timely payment to the Revenue Department, as required by law. 

II. Dram Shop Cancellations

Dram shop insurance must remain in effect during the entire period of the license. A thirty-day cancellation notice is required to ensure the Division has adequate time to begin the process of suspending the license.

Routine cancellation of dram shop protection indicates a lack of good financial standing. As such, the Division will deny or revoke a license upon receipt of three or more notices of cancellation during the twelve-month license period. Licensees, therefore, should take the necessary steps to assure that dram premiums are paid in a timely fashion.

III. Outstanding Debts

Non-payment of other debts can equally jeopardize an applicant’s chances of obtaining or maintaining a license. The two biggest red flags the Division sees are unpaid utilities and license fees. Another example is the failure to pay your Class E licensee, beer wholesaler or wine wholesaler for the products they supply.

A record of late or unpaid fees to the local municipalities, as well as suppliers, proves poor financial standing. In addition, all fees associated with obtaining a license and any administrative penalties imposed must be paid in full and on time. Neglecting financial responsibilities of any kind can drastically diminish the chances of a license application being approved.

IV. Conclusion

The issuance of an Iowa liquor license is contingent on the applicant’s good moral character, including their financial standing. Adversely stated, the Division or any local licensing authority may deny a license based on the grounds of an applicant’s lack of good financial standing. Delinquent taxes, dram insurance cancellations and failure to satisfy other outstanding debts are all factors in decided whether to issue a license.

While it is not always easy to meet financial obligations in today’s economy, licensees are encouraged to be punctual and methodical in their business dealings. Whether a liquor license will be granted or not is never certain, but as Benjamin Franklin said, “In this world nothing is certain but death and taxes.”