TABC Draws a New Line on Hemp: What Texas License Holders Need to Know About Section 35.7
By Hari Nathan Kalyan, Managing Attorney, Warren Kalyan.
Five Key Takeaways
A new rule took effect June 22, 2026. TABC's 16 TAC Section 35.7 bars hemp product consumption on any licensed premises where alcohol consumption is already prohibited.
Off premises retailers cannot allow on site use. Package stores, convenience stores, and other off premises sellers of hemp products cannot let customers consume them anywhere on the property.
Your license is on the line. Violations of TABC's hemp rules can lead to suspension or cancellation, the same enforcement tools TABC already uses for alcohol violations.
Part of a fast moving framework. Section 35.7 follows emergency hemp rules from September 2025, permanent rules adopted in January 2026, and a formal enforcement partnership between TABC and the Department of State Health Services.
A federal ban looms in November 2026. Congress approved a ban on nearly all consumable hemp products, and the outcome remains genuinely uncertain, so operators should plan for both scenarios.
If you hold a TABC license or permit in Texas, hemp is officially your problem now. Not in the abstract, not someday. The Texas Alcoholic Beverage Commission has spent the past year building a full regulatory framework around consumable hemp products, and its newest rule quietly closed one of the last open questions: where customers can actually use these products on licensed premises.
At its June 2, 2026 meeting, TABC adopted a new administrative rule, 16 TAC Section 35.7. The rule was published in the June 19 edition of the Texas Register and took effect June 22, 2026. The substance is short but consequential. A license or permit holder may not authorize or allow anyone to consume a consumable hemp product on any premises where the consumption of alcoholic beverages is generally prohibited.
In plain English, the rule matches hemp consumption to alcohol consumption. If your license does not allow customers to drink on site, it does not allow them to use hemp products on site either. A package store, a convenience store, or any other off premises retailer that sells THC seltzers or hemp gummies cannot let customers crack one open at the register or gather in the parking area to consume. The consumption rules that already govern your alcohol premises now govern hemp too.
Why This Matters
The stakes are not theoretical. Violations of TABC's hemp rules can lead to suspension or cancellation of your license or permit. For a restaurant, bar, hotel, or retailer, that license is the business. An employee who shrugs while a customer samples a hemp beverage in the wrong part of the premises is no longer a harmless moment; it is a regulatory event with your permit on the line.
And this rule does not arrive alone. It is the latest piece of a framework that came together fast.
How We Got Here
The backstory matters because it explains why enforcement energy is high. In 2025, the Texas Legislature passed a near total ban on consumable hemp products. Governor Abbott vetoed it, then put THC regulation on the agenda for two special sessions. Lawmakers could not reach a deal. Rather than call a third session, the Governor issued an executive order directing state agencies to regulate the industry directly.
TABC responded with emergency rules in September 2025, then adopted permanent rules in January 2026. Those rules apply to roughly 60,000 TABC license holders, including convenience stores, restaurants, and liquor stores. They prohibit the sale of consumable hemp products to anyone under 21 and require an ID check on every sale, service, or delivery. The permanent rules did soften one feature of the emergency version; TABC removed the one strike provision that allowed license cancellation for a single sale to a minor, opting instead for a graduated approach that includes temporary suspensions for less serious violations.
TABC also entered into a memorandum of understanding with the Department of State Health Services making TABC the primary enforcement agency for consumable hemp regulations at licensed locations. So the agency that inspects your bar, audits your compliance, and processes your renewals is the same agency watching your hemp shelf.
Section 35.7, adopted in June, completes the picture. Sales rules came first. Now consumption rules are in place too.
What You Should Do Now
Here are the practical takeaways we are giving hospitality and retail clients.
Know your premises status. Your TABC authorization already defines where alcohol may be consumed on your property. Map your hemp policy to that same footprint. On premises permit holders have room to allow consumption where drinking is allowed; off premises retailers should treat hemp consumption as prohibited everywhere on site.
Train your staff and write it down. Your team already checks IDs for alcohol. Extend that muscle memory to hemp: ID check on every hemp sale regardless of the customer's apparent age, no sales to anyone under 21, and no on site consumption in prohibited areas. Put it in your written policies and your onboarding materials. If TABC ever questions an incident, documented training is your best evidence of diligence.
Audit your product mix and signage. If you sell hemp beverages next to beer coolers, make sure nothing about your merchandising invites on site use. Simple signage stating that hemp products may not be consumed on premises costs almost nothing and shows good faith.
Watch the federal calendar. Congress approved a ban on nearly all consumable hemp products that is scheduled to take effect in November 2026. Industry groups are lobbying hard for repeal, and the outcome is genuinely uncertain. If you are building revenue projections around hemp sales, build them with that contingency in mind. If the federal ban takes effect, the Texas framework becomes largely moot; if it is repealed or delayed, the TABC rules are your operating reality.
A note for operators with New York locations. New York regulates hemp derived cannabinoid products through a separate state licensing regime, not through its liquor authority. If you run venues in both states, do not assume your Texas playbook travels; the rules differ in structure and substance.
Our Take
The bigger lesson is one we keep repeating to clients: your liquor license is no longer just about liquor. TABC has become the front line regulator for an adjacent product category, and the agency's enforcement tools all point at the same permit. Compliance planning has to treat alcohol and hemp as one integrated premises issue.
We represent restaurants, bars, hotels, and retailers across Texas hospitality and liquor licensing, guiding operators through original applications, transfers, protests, and the full regulatory life cycle, including compliance questions that new rules like Section 35.7 create. We help operators update premises policies, respond to TABC inquiries, and protect the licenses their businesses depend on. If you operate in New York as well, our New York hospitality and liquor licensing team can walk through how the two states differ.
Need help updating your premises policy for hemp compliance?
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General information only, not legal advice for your specific situation.