SB1030 - 521R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 4-205.08, Arizona Revised Statutes, is amended to read:

START_STATUTE4-205.08. Microbrewery license; issuance; regulatory provisions; retail site

A. The director may issue a microbrewery license to any microbrewery. Each location that engages in producing, manufacturing and bottling these products must obtain a separate microbrewery license. The licensee may not transfer the microbrewery license from person to person or from location to location.

B. An applicant for a microbrewery license, at the time of filing the application for the license, shall accompany the application with the license fee. Persons holding a microbrewery license shall report annually at the end of each calendar year, at such time and in such manner as the director may prescribe, the amount of beer produced or manufactured by them during the calendar year and the amount delivered pursuant to subsection D, paragraph 5, subdivision (b) of this section. If the total amount of beer that is produced or manufactured during the calendar year exceeds the amount permitted annually by the license, the licensee shall apply for and receive a producer's license and surrender that microbrewery license. Notwithstanding any other law, the licensee may retain and is not required to surrender any other microbrewery licenses or retail licenses that are held by the licensee when the licensee receives a producer's license.

C. Notwithstanding any other statute law, a licensed microbrewery may:

1. Sell beer produced or manufactured on the premises for consumption on or off the premises.

2. Make sales and deliveries of beer that the microbrewery produces or manufactures to persons licensed to sell beer under this title through wholesalers licensed under this title or as provided in subsection D, paragraph 5, subdivision (a) or (b) of this section.

3. Make sales and deliveries of beer that the microbrewery produces or manufactures to persons licensed to sell beer in another state if lawful under the laws of that state.

4. Serve beer produced or manufactured on the premises for the purpose of sampling the beer.

5. Sell beer produced or manufactured by other microbreweries for consumption only on the premises of the licensee, except that the sales percentage of beer from other microbreweries may not exceed twenty percent of the licensee's annual sales of beer at the premises. If the other microbrewery has established a distribution relationship with one or more wholesalers who are licensed under this title, the beer shall be purchased through those wholesalers.

D. A licensed microbrewery is subject to all of the following requirements:

1. The microbrewery shall produce or manufacture not less than five thousand gallons of beer in each calendar year following the first year of operation.

2. The microbrewery shall not produce or manufacture more than one million two hundred forty thousand gallons of beer in a calendar year.

3. If retail operations are conducted in conjunction with the microbrewery, these retail operations shall be conducted from the same site as the location of the microbrewery.

4. Except as permitted under subsection C of this section, the microbrewery may sell other spirituous liquor products if:

(a) The microbrewery holds an on-sale retail license as a bar, beer and wine bar or restaurant.

(b) The retail sale of the other spirituous liquor products is on or adjacent to the premises of the microbrewery.

5. The microbrewery may make sales and deliveries of beer that it has produced or manufactured to both:

(a) Retail licensees that are under common ownership with the microbrewery that meet the requirements prescribed in paragraph 4, SUBDIVISIONS (a) and (b) of this subsection in any amount.

(b) Other licensed retailers If the microbrewery does not otherwise hold a producer's license, to any RETAIL licensee in a cumulative amount not to exceed ninety‑three thousand gallons in total for all licensed retailers in any calendar year.

E. A person who holds a any microbrewery license that meets the requirements of this section and who is not otherwise engaged in the business of a distiller, vintner, brewer, rectifier, blender or other producer of spirituous liquor in any jurisdiction may hold other on-sale retail licenses be issued up to a combined total of seven retail licenses in this state if those licenses are issued only as bar, beer and wine bar or restaurant licenses, whether located on or adjacent to the person's microbrewery or located remotely from the person's microbrewery. Except as provided in subsection D, paragraph 5, subdivision (a) of this section, the person shall purchase all spirituous liquor for sale at the other on-sale retail premises of the retail licenses held by that person from wholesalers that are licensed in this state.

F. A microbrewery that sells or delivers beer pursuant to this section shall:

1. Pay to the department of revenue all luxury taxes imposed pursuant to title 42, chapter 3 and all transaction privilege or use taxes imposed pursuant to title 42, chapter 5.

2. File all returns or reports required by law.

G. A delivery of beer by a microbrewery to a purchaser in this state is a transaction deemed to have occurred in this state.

H. The director shall adopt rules in order to administer this section. END_STATUTE

Sec. 2. Section 4-243.01, Arizona Revised Statutes, is amended to read:

START_STATUTE4-243.01. Purchasing from other than primary source of supply unlawful; definitions

A. It is unlawful:

1. For any supplier to solicit, accept or fill any order for any spirituous liquor from any wholesaler in this state unless the supplier is the primary source of supply for the brand of spirituous liquor sold or sought to be sold and is duly licensed by the board.

2. For any wholesaler or any other licensee in this state to order, purchase or receive any spirituous liquor from any supplier unless the supplier is the primary source of supply for the brand ordered, purchased or received.

3. Except as provided by section 4‑243.02 For a retailer to order, purchase or receive any spirituous liquor from any source other than any of the following:

(a) A wholesaler that has purchased the brand from the primary source of supply.

(b) A wholesaler that is the designated representative of the primary source of supply in this state and that has purchased such spirituous liquor from the designated representative of the primary source of supply within or without this state.

(d) A farm winery licensed under section 4‑205.04 and subject to the limitations prescribed in section 4‑205.04, subsection C, paragraph 7.

(e) A licensed microbrewery licensed under section 4‑205.08.

B. All spirituous liquor shipped into this state shall be invoiced to the wholesaler by the primary source of supply. All spirituous liquor shall be unloaded and remain at the wholesaler's premises for at least twenty‑four hours. A copy of each invoice shall be transmitted by the wholesaler and the primary source of supply to the department of revenue.

C. The director may suspend for a period of one year the license of any wholesaler or retailer who violates this section.

D. Upon On determination by the department of revenue that a primary source of supply has violated this section, no wholesaler may accept any shipment of spirituous liquor from such primary source of supply for a period of one year.

E. For the purposes of this section:

1. "Primary source of supply" means the distiller, producer, owner of the commodity at the time it becomes a marketable product, bottler or exclusive agent of any such distributor or owner. In the case of imported products, the primary source of supply means either the foreign producer, owner, bottler or agent or the prime importer from, or the exclusive agent in, the United States of the foreign distiller, producer, bottler or owner.

2. "Wholesaler" means any person, firm or corporation that is licensed in this state to sell to retailers and that is engaged in the business of warehousing and distributing brands of various suppliers to retailers generally in the marketing area in which the wholesaler is located. END_STATUTE

Sec. 3. Repeal

Section 4-243.02, Arizona Revised Statutes, is repealed.

Sec. 4. Section 42-3355, Arizona Revised Statutes, is amended to read:

START_STATUTE42-3355. Return and payment by farm wineries, microbreweries and craft distillers

A. Every farm winery selling vinous liquor at retail or to a retail licensee pursuant to title 4, chapter 2 manufactured or produced on the premises or producer of vinous liquor that sells at retail pursuant to section 4‑243.02 shall pay the tax under this chapter on all such liquor sold at retail or to a retail licensee within this state and add the amount of the tax to the sales price.

B. Every microbrewery selling malt liquor at retail or to a retail licensee pursuant to title 4, chapter 2 manufactured or produced on the premises or a manufacturer of beer that sells at retail pursuant to section 4‑243.02 shall pay the tax under this chapter on all malt liquor sold at retail or to a retail licensee within this state and add the amount of the tax to the sales price. Every producer that is issued a license pursuant to section 4‑205.08, subsection B and that sells malt liquor at a retail establishment as provided in section 4-205.08, subsection D, paragraph 4, subdivision (b), shall pay the tax under this chapter on such malt liquor sold within this state and shall add the amount of the tax to the sales price.

C. Every craft distiller selling a spirituous liquor at retail or to a retail licensee pursuant to title 4, chapter 2, manufactured or produced on the premises or a distiller of spirituous liquor that sells at retail pursuant to section 4‑243.02 shall pay the tax under this chapter on all spirituous liquor sold at retail or to a retail licensee within this state and add the amount of the tax to the sales price.

D. The farm winery, manufacturer, microbrewery or craft distiller shall pay the tax to the department monthly on or before the twentieth day of the month next succeeding the month in which the tax accrues.

E. On or before that date the farm winery, manufacturer, microbrewery or craft distiller shall prepare a sworn return for the month in which the tax accrues in the form prescribed by the department, showing:

1. The amount of liquors or beer sold in this state during the month in which the tax accrues.

2. The amount of tax for the period covered by the return.

3. Any other information that the department deems necessary for the proper administration of this chapter.

F. The farm winery, manufacturer, microbrewery or craft distiller shall deliver the return, together with a remittance of the amount of the tax due, to the department.

G. Any taxpayer who fails to pay the tax within ten days from the date upon which the payment becomes due is subject to and shall pay a penalty determined under section 42‑1125, plus interest at the rate determined pursuant to section 42‑1123 from the time the tax was due and payable until paid. END_STATUTE

Sec. 5. Microbrewery licenses; temporary provisions

A. Notwithstanding section 4-205.08, Arizona Revised Statutes, as amended by this act, persons who hold microbrewery licenses and who also hold retail licenses or who have applied for retail licenses before the effective date of this act, of retail license types other than allowed or in excess of the total number of licenses allowed under section 4-205.08, subsection E, Arizona Revised Statutes, as amended by this act, may continue to hold and are not required to surrender any retail license held unless that license is inactive at that location for more than six months.

B. Notwithstanding the repeal of section 4-243.02, Arizona Revised Statutes, persons who hold producers' licenses and who also hold retail licenses or who have applied for retail licenses before the effective date of this act may continue to hold and are not required to surrender any retail license held unless that license is inactive at that location for more than six months.