| Organization: | Office of the State Auditor Division of Local Mandates |
|---|---|
| Date published: | October 13, 2026 |
Executive Summary
Alcohol service in restaurants, bars, hotels, clubs, and other establishments supports a substantial part of the Commonwealth’s economy. Massachusetts had 6,476 full-service restaurants in 2022, employing 125,838 people and generating $10.6 billion in sales.1 This study examines the Commonwealth’s liquor licensing system governed by Massachusetts General Laws (MGL) Chapter 138. In particular, the impact of the state-imposed quota formula in MGL c. 138, § 17, which determines and limits the number of allocated liquor licenses based on population for most municipalities, is evaluated. Analysis reveals that this quota formula creates a shortage of on-premises liquor licenses by capping the number of licenses a municipality may issue based solely on a single factor, population, rather than reflecting local demand. This artificial scarcity results in the commodification of liquor licenses and acts as an institutional mechanism for economic exclusion by pricing out many prospective licensees, especially smaller, first-time, or less-capitalized business owners, from equitable market access.
Data collected and analyzed shows that the quota formula does not align license allocation with demand because population alone does not account for local economic development goals, unique neighborhood characteristics, tourism and seasonal population fluctuations, and other relevant factors. Although prospective licensees and municipalities can try to overcome the artificial scarcity by pursuing home rule petitions and special legislation for licenses above quota, barriers to accessing liquor licenses persist due to the opaque, inconsistent, and unpredictable nature of this process.
Exacerbating inequity in Massachusetts liquor licensing is the existence of a two-tier system in which 26 municipalities can issue licenses “in addition to, and irrespective of any [quota] limitation”2 while 302 municipalities are limited by the quota formula. Limited information fragmented across state and municipal platforms makes the system difficult to navigate, further compounding inequity, as success may be dependent on whom one knows and leveraging those relationships.
To counter these inequities, this study recommends eliminating the state-imposed population-based quota for on-premises liquor licensing and establishing local control (Recommendation 1); improving information access, equity, and transparency in on-premises liquor licensing (Recommendation 4), and addressing the treatment of on-premises liquor licenses as transferable private assets (Recommendation 5). These reforms are designed to address equity concerns in license access, including wealth and process disparities; empower municipalities to make licensing decisions in the best interest of their communities and residents; and strengthen public confidence in the system.
In the absence of legislative action on Recommendation 1, this study makes alternative proposals to increase equitable access to licenses (Recommendation 2) and to establish a criteria-based, non-legislative pathway to additional licenses (Recommendation 3).
Below is a table of our findings and recommendations, with hyperlinks to each page listed.
| Finding 1 | The state-imposed population-based quota formula creates supply and demand mismatches in on-premises liquor licensing. |
| Finding 2 | The 1978–1984 exemption window created an inequitable two-tier system: 26 municipalities with local control and 302 municipalities restricted by the state-imposed quota formula. |
| Finding 3 | License access rises with municipal wealth. |
| Finding 4 | The two current relief pathways for constrained quota municipalities are marked by access barriers, unpredictability, and inconsistent outcomes. |
| Finding 5 | Prospective licensees and the public lack consistent, complete procedural information and data needed to navigate the licensing system at both the municipal and state levels. |
| Recommendation 1 | The Commonwealth should eliminate the state-imposed population-based quota for on-premises liquor licensing and establish local control. |
| Recommendation 2 | Increase equitable access to licenses by opening recurring windows of opportunity for municipalities to opt out of the state-imposed quota formula. |
| Recommendation 3 | Establish a criteria-based, non-legislative pathway to obtain additional licenses in conjunction with ABCC. |
| Recommendation 4 | Improve information access, equity, and transparency in on-premises liquor licensing. |
| Recommendation 5 | Address the equity and wealth-access barriers created by the secondary market for on-premises liquor licenses. |
1. US Census Bureau, “All Sectors: County Business Patterns, including ZIP Code Business Patterns, by Legal Form of Organization and Employment Size Class for the US, States, and Selected Geographies: 2022,” Table CB2200CBP, NAICS 722511 (full-service restaurants), Massachusetts, accessed August 10, 2026, https://data.census.gov/table/CBP2022.CB2200CBP: 6,476 establishments; 125,838 employees (average 19.4 per establishment). Sales: US Census Bureau, “2022 Economic Census,” sector 72 (accommodation and food services), NAICS 722511, Massachusetts, accessed July 27, 2026, https://www.census.gov/programs-surveys/economic-census.html: average receipts of $1,651,443 per establishment across 6,427 establishments, or $10.6 billion (6,427 × $1,651,443 = $10,613,824,161). The two Census programs count establishments on slightly different bases (6,476 and 6,427); the establishment and employment figures in the text use the County Business Patterns count, and the sales figure uses the Economic Census count on which the receipts average is reported.
2. St. 1978, c. 377, and St. 1984, c. 491 (MGL c. 138, §§ 17A–17C); see Finding 2.
Table of Contents
- List of Abbreviations
- List of Defined Terms
- About the Division of Local Mandates
- Introduction
- Background
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- 1 - The state-imposed population-based quota formula creates supply and demand mismatches in on-premises liquor licensing.
- 2 - The 1978–1984 exemption window created an inequitable two-tier system: 26 municipalities with local control and 302 municipalities restricted by the state-imposed quota formula.
- 3 - License access rises with municipal wealth.
- 4 - The two current relief pathways for constrained quota municipalities are marked by access barriers, unpredictability, and inconsistent outcomes.
- 4.1 - The home rule petition process, with respect to liquor licensing is opaque, slow, and relationship-dependent, and special legislation licenses are concentrated in wealthier municipalities.
- 4.2 - License scarcity in constrained quota municipalities creates a secondary market that commodifies licenses into private assets, artificially inflating prices and creating additional barriers for prospective licensees.
- 5 - Prospective licensees and the public lack consistent, complete procedural information and data needed to navigate the licensing system at both the municipal and state levels.
- 5.1 - A lack of uniform data collection, reporting, and website content standards prevents statewide market analysis and fosters relationship dependency in liquor licensing.
- 5.2 - At the state level, a lack of clear, consistent, and complete procedural information and live statewide data impairs transparency and accountability, creating barriers to equity in liquor licensing.
- Policy Recommendations
- Closing
Appendix
Downloads
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License to Pour - Access & Equity in Massachusetts Liquor Licensing, Open PDF file, 6.58 MB (English, PDF 6.58 MB)