Established as the Liquor Control Board after the repeal of Prohibition in 1935, the Texas Alcoholic Beverage Commission is composed of three members appointed by the governor for six-year terms with the advice and consent of the Senate. While the board originally selected the administrator of their department, the chairman is now designated by the governor. The board was to promote temperance, protect the public interest, encourage observance of the Liquor Control Act, collect alcoholic beverage taxes, and discourage socially undesirable activities such as bootlegging, underage drinking, and organized crime. In addition to supervising, inspecting, and regulating every phase of the liquor business within the state, the agency's duties and responsibilities have expanded considerably. In 1970 the legislature renamed the Liquor Control Board the Texas Alcoholic Beverage Commission and recodified the Liquor Control Act as the Alcoholic Beverage Code. The following year the legislature permitted voters in local elections to decide whether mixed beverages could be sold in restaurants and bars in their area. Consequently, the TABC monitors the distribution of alcoholic beverages to ensure there are no illegal business relationships between manufacturers, wholesalers, and retailers. It also regulates and controls the flow of alcoholic beverages from manufacturers to consumer. Additionally, because the legislature transferred the Bingo Enabling Act from the Comptroller of Public Accounts to the TABC in 1989, it is responsible for regulating the bingo industry and auditing both alcoholic beverage and bingo accounts to determine if the proper amount of taxes have been paid. In the spring of 1992 the Texas Sunset Advisory Commission reviewed the TABC; it concluded that the commission should continue for a twelve-year period subject to review again in 2005. Citing 45,000 criminal and 3,600 administrative enforcement actions the TABC took in fiscal year 1991, the report persuasively argued a need for the agency's continued oversight of the alcoholic beverage industry. The report also confirmed that TABC's responsibility to oversee the operation of bingo as a legal form of gambling continued to be necessary. However, the Sunset Commission urged changing the number of board members to six and establishing a citizens advisory committee as well as a bingo advisory committee. The report also urged the agency to increase its efforts to recruit, hire, and promote minority employees.
The Liquor Control Board has been criticised as a tool of the liquor and beer industry and a victim of high pressures and influence peddling. In June 1968 the attorney general's office reported such criticism, after which the administrator since 1949, Coke Stevenson, Jr., resigned. Most of the subsequent administrators did not last long before resigning from the commission, and in 1975 one official was fired because of allegations that he had accepted bribes from a Houston liquor store during his early years with the LCB. Church of Christ deacon Luke Robinson served as the commission's chief from October 1, 1975, until his resignation in June of 1976, after his get-tough policy placed numerous business establishments' alcohol permits in jeopardy. Robinson strictly enforced the Liquor Control Act as written, particularly for out-of-state owners of businesses seeking alcohol permits. Robinson's successor was former sheriff and ex-Marine Corps sergeant Sherman McBeath, who served as administrator from 1976 until 1991, when the agency faced allegations of selective enforcement against minorities and sexual harassment of female employees. His retirement came two months after Governor Ann Richards criticized the agency for hiring too few minorities and women. Other critics of the agency during the 1990s claimed the commission's executives were too close to the liquor industry that consequently left a "trail of favoritism and selectively enforced state laws." Such a relationship to the liquor industry drew attention from the public because of the comptroller's recommendation at that time to abolish the agency.