‘Dramatic’ change in state liquor license policies could affect thousands of SC bars

South Carolina bars, dance clubs and all other businesses that serve alcoholic drinks to customers will have to start proving they also serve a certain amount of food before their liquor licenses will be issued or renewed.

An attorney for the Department of Revenue announced the change Thursday during a hearing on whether the license for a Five Points bar — Cover 3 — would be renewed. Previously, the department had not used food sales as a factor in approving licenses, despite a state Constitution requirement that an establishment be “primarily and substantially” engaged in the sale of food to sell liquor by the drink for on-premise consumption.

The new policy could impact thousands of tiki bars, honky-tonks, dive bars, dance clubs and road houses across the state.

The change came after a Monday meeting between Gov. Henry McMaster, revenue department officials and state Sen. Dick Harpootlian, the Columbia attorney who is representing Five Points neighbors opposed to the issuance or renewal of liquor licenses to bars that primarily open late and cater to University of South Carolina students, many underaged.

McMaster spokesman Brian Symmes said the governor “is supportive of Sen. Harpootlian’s efforts in Five Points to establish some clarity in how this law will be enforced moving forward.”

The state Constitution does not specify what percentage of a bar’s business must come from food sales. The revenue department could not be reached late Thursday for comment on what threshold it would use.

But Harpootlian, who called the change “dramatic,” said the food percentage would likely be determined “on a case-by-case basis.”

“It’s like pornography,” he said. “You’ll know it if you see it. If you have a big open concrete floor with a bar down the side, it’s probably not a restaurant.”

In Thursday’s hearing, revenue department attorney Patrick McCade did not set a standard for food sales, but said that “one percent is not enough,” referring to the less than one percent of food sales Cover 3 has reported.

Five Points neighbors are going after the liquor license of two more bars, including the landmark Group Therapy.

The neighbors are protesting the liquor license renewals of Group Therapy, owned by former University of South Carolina football great Steve Tanneyhill, and Cover 3, a late-opening college bar on Harden Street.

They claim the bars cause a nuisance in nearby neighborhoods when thousands of drunken USC students and others disgorge from them after late night binge drinking.

“Five Points is a mess,” said Chris Kenney, an attorney with Harpootlian’s firm. “Is it suitable to have another college bar serving cheap liquor to mainly underage students?”

A hearing on the license renewal for Cover 3 began Thursday in S.C. Administrative Law Court. The hearing for Group Therapy begins next week.

In opening statements Thursday, Ken Allen, a former chief of the former Alcohol Beverage Commission who represents Cover 3 owner Max Mannillo, said the opponents are trying to change the long-standing enforcement practices of Department of Revenue regulators and SLED inspectors and punish Mannillo retroactively. Mannillo also owns Five Points Saloon and The Barn.

“You can’t make up different rules for him,” Allen said of his client.

A study last year by the S.C. Restaurant and Lodging Association found 1,022 establishments that identified themselves on the 2012 U.S. Census as “bars” or “nightclubs.” The researchers assumed that the establishments self-identified themselves as bars because they sell less food than alcohol.

In testimony Thursday, Cover 3 manager Connor Hobbs said that the bar, which doesn’t open until 8 p.m. and usually stays open until 2 a.m., took in $1.4 million in gross sales in 34 months and had only $8,500 in food sales, mostly Chick-fil-A sandwiches purchased from a nearby Five Points store and resold for $5. That’s a percent of 0.07 in food to alcohol sales.

Allen noted that Cover 3 has since begun serving pressed sandwiches, and has had no license violations since it was last renewed two years ago.

“Yes, Five Points is a mess,” he said. “Bad things happen there. But it’s not my client’s fault.”