Police say during the standoff, the suspect was wearing body armor and a ballistics helmet, and was armed with two rifles.
Melody Adams says she saw the suspect outside as he run past her before storming the liquor store shortly after 9:30 a.m.
"I was looking like what's going on, and he went to someone's door and was knocking on the door, and then he said 'Hey home girl, I need to call my mom.' So I could tell he was under the influence," said Adams.
Inside the store, employees say Paez told them he was looking for a place to hide. At that point, they called 911.
For a while, neighbors thought there might be hostages.
"We know them all -- the dad, brothers and all -- and we were seeing them coming out little by little, we weren't sure if there was hostages or what," said neighbor Catarano Zamora.
Police say there never were any hostages, but it took the entire SWAT team to bring the situation to an end.
"Police K-9 was deployed, and between the police dog and the SWAT officers on scene, the suspect was taken into custody with minor injuries," said San Bernardino Police Lt. Dan Kiel.
"We do know that he was wanted for parole violations. As far as what caused him to come to this particular business, we don't know," added Kiel.
Paez, a suspected gang member, has a lengthy criminal record, including weapons charges, making threats, robbery and assault with a deadly weapon.