HB2223 - 561R

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

Section 1. Section 4-101, Arizona Revised Statutes, is amended to read:

START_STATUTE4-101. Definitions

In this title, unless the context otherwise requires:

1. "Act of violence":

(a) Means an incident that consists of a riot, a fight, an altercation or tumultuous conduct and that meets at least one of the following criteria:

(i) In which Bodily injuries are sustained by any person and the injuries would be obvious to a reasonable person.

(ii) is of sufficient intensity as to require the intervention of a peace officer to restore normal order.

(iii) In which A weapon is brandished, displayed or used.

(iv) In which A licensee or an employee or contractor of the licensee fails to follow a clear and direct lawful order from a law enforcement officer or a fire marshal.

(b) Does not include the use of nonlethal devices by a peace officer.

2. "Aggrieved party" means a person who resides at, owns or leases property within a one-mile radius of premises proposed to be licensed and who filed a written request with the department to speak in favor of or opposition to the issuance of the license not later than sixty days after filing the application or fifteen days after action by the local governing body, whichever is sooner.

3. "Beer":

(a) Means any beverage obtained by the alcoholic fermentation, infusion or decoction of barley malt, hops, rice, bran or other grain, glucose, sugar or molasses, or any combination of them, and may include, as adjuncts in fermentation, honey, fruit, fruit juice, fruit concentrate, herbs, spices and other food materials.

(b) Includes beer aged in an empty wooden barrel previously used to contain wine or distilled spirits and as such is not considered a dilution or mixture of any other spirituous liquor.

4. "Biometric identity verification device" means a device authorized by the department that instantly verifies the identity and age of a person by an electronic scan of a biometric of the person, through a fingerprint, iris image, facial image or other biometric characteristic, or any combination of these characteristics, that references the person's identity and age against any record described in section 4-241, subsection K, and that meets all of the following conditions:

(a) The authenticity of the record was previously verified by an electronic authentication process.

(b) The identity of and information about the record holder was previously verified through either:

(i) A secondary, electronic authentication process or set of processes using commercially available data, such as a public records query or a knowledge-based authentication quiz.

(ii) Using a state or federal government system of records for digital authentication.

(c) The authenticated record was securely linked to biometrics contemporaneously collected from the verified record holder and is stored in a centralized, highly secured, encrypted biometric database.

5. "Board" means the state liquor board.

6. "Bona fide guest" means:

(a) An individual who is personally familiar to the member, who is personally sponsored by the member and whose presence as a guest is in response to a specific and personal invitation.

(b) In the case of a club that meets the criteria prescribed in paragraph 8, subdivision (a) of this section, a current member of the armed services of the United States who presents proper military identification and any member of a recognized veterans' organization of the United States and of any country allied with the United States during current or past wars or through treaty arrangements.

7. "Broken package" means any container of spirituous liquor on which the United States tax seal has been broken or removed or from which the cap, cork or seal placed on the container by the manufacturer has been removed.

8. "Club" includes any of the following organizations where the sale of spirituous liquor for consumption on the premises is made only to members, spouses of members, families of members, bona fide guests of members and guests at other events authorized in this title:

(a) A post, chapter, camp or other local unit composed solely of veterans and its duly recognized auxiliary that has been chartered by the Congress of the United States for patriotic, fraternal or benevolent purposes and that has, as the owner, lessee or occupant, operated an establishment for that purpose in this state.

(b) A chapter, aerie, parlor, lodge or other local unit of an American national fraternal organization that has, as the owner, lessee or occupant, operated an establishment for fraternal purposes in this state. An American national fraternal organization as used in this subdivision shall actively operate in at least thirty-six states or have been in active continuous existence for at least twenty years.

(c) A hall or building association of a local unit mentioned in subdivisions (a) and (b) of this paragraph of which all of the capital stock is owned by the local unit or the members and that operates the clubroom facilities of the local unit.

(d) A golf club that has more than fifty bona fide members and that owns, maintains or operates a bona fide golf links together with a clubhouse.

(e) A social club that has more than one hundred bona fide members who are actual residents of the county in which it is located, that owns, maintains or operates club quarters, that is authorized and incorporated to operate as a nonprofit club under the laws of this state, and that has been continuously incorporated and operating for a period of at least one year. The club shall have had, during this one-year period, a bona fide membership with regular meetings conducted at least once each month, and the membership shall be and shall have been actively engaged in carrying out the objects of the club. The club's membership shall consist of bona fide dues-paying members paying dues of at least $6 per year, payable monthly, quarterly or annually, which have been recorded by the secretary of the club, and the members at the time of application for a club license shall be in good standing having for at least one full year paid dues. At least fifty-one percent of the members shall have signified their intention to secure a social club license by personally signing a petition, on a form prescribed by the board, which shall also include the correct mailing address of each signer. The petition shall not have been signed by a member at a date earlier than one hundred eighty days before the filing of the application. The club shall qualify for exemption from the payment of state income taxes under title 43. It is the intent of this subdivision that a license shall not be granted to a club that is, or has been, primarily formed or activated to obtain a license to sell liquor, but solely to a bona fide club, where the sale of liquor is incidental to the main purposes of the club.

(f) An airline club operated by or for airlines that are certificated by the United States government and that maintain or operate club quarters located at airports with international status.

9. "Company" or "association", when used in reference to a corporation, includes successors or assigns.

10. "Control" means the power to direct or cause the direction of the management and policies of an applicant or licensee, whether through the ownership of voting securities or a partnership interest, by agreement or otherwise. Control is presumed to exist if a person has the direct or indirect ownership of or power to vote ten percent or more of the outstanding voting securities of the applicant or licensee or to control in any manner the election of one or more of the directors of the applicant or licensee. In the case of a partnership, control is presumed to mean the general partner or a limited partner who holds ten percent or more of the voting rights of the partnership. For the purposes of determining the percentage of voting securities owned, controlled or held by a person, there shall be aggregated with the voting securities attributed to the person the voting securities of an officer, partner, employee or agent of the person or a spouse, parent or child of the person. Control is also presumed to exist if a creditor of the applicant or licensee holds a beneficial interest in ten percent or more of the liabilities of the licensee. The presumptions in this paragraph regarding control are rebuttable.

11. "Controlling person" means a person directly or indirectly possessing control of an applicant or licensee.

12. "Craft distiller" means a distiller in the United States or in a territory or possession of the United States that holds a license pursuant to section 4-205.10.

13. "craft producer" means a licensed farm winery, a licensed microbrewery or a licensed craft distiller.

13. 14. "Department" means the department of liquor licenses and control.

14. 15. "Director" means the director of the department of liquor licenses and control.

15. 16. "Distilled spirits" includes alcohol, brandy, whiskey, rum, tequila, mescal, gin, absinthe, a compound or mixture of any of them or of any of them with any vegetable or other substance, alcohol bitters, bitters containing alcohol, fruits preserved in ardent spirits, and any alcoholic mixture or preparation, whether patented or otherwise, that may in sufficient quantities produce intoxication.

16. 17. "Employee" means any person who performs any service on licensed premises on a full-time, part-time or contract basis with consent of the licensee, whether or not the person is denominated an employee or independent contractor or otherwise. Employee does not include a person who is exclusively on the premises for musical or vocal performances, for repair or maintenance of the premises or for the delivery of goods to the licensee.

17. 18. "Farm winery" means a winery in the United States or in a territory or possession of the United States that holds a license pursuant to section 4-205.04.

18. 19. "Government license" means a license to serve and sell spirituous liquor on specified premises available only to a state agency, state board, state commission, county, city, town, community college or state university or the national guard or Arizona coliseum and exposition center on application by the governing body of the state agency, state board, state commission, county, city, town, community college or state university or the national guard or Arizona exposition and state fair board.

19. 20. "Legal drinking age" means twenty-one years of age or older.

20. 21. "License" means a license or an interim retail permit issued pursuant to this title.

21. 22. "Licensee" means a person who has been issued a license or an interim retail permit pursuant to this title or a special event licensee.

22. 23. "License fees" means fees collected for license issuance, license application, license renewal, interim permit issuance and license transfer between persons or locations.

23. 24. "Manager" means a natural person who meets the standards required of licensees and who has authority to organize, direct, carry on, control or otherwise operate a licensed business on a temporary or full-time basis.

24. 25. "Menu food item" means a food item from a regular menu, special menu or happy hour menu that is prepared by the licensee or the licensee's employee.

25. 26. "Microbrewery" means a brewery in the United States or in a territory or possession of the United States that meets the requirements of section 4-205.08.

26. 27. "Mixed cocktail":

(a) Means any drink combined at the premises of an authorized licensee that contains a spirituous liquor and that is combined with at least one other ingredient, which may include additional spirituous liquors, fruit juice, vegetable juice, mixers, cream, flavored syrup or other ingredients except water, and that when combined contains more than one-half of one percent of alcohol by volume.

(b) Does not include a drink sold in an original manufacturer's packaging or any drink poured from an original manufacturer's package without the addition of all of the cocktail's other ingredients at the premises of the licensed bar, liquor store or restaurant.

27. 28. "Off-sale retailer" means any person that operates a bona fide regularly established retail liquor store selling that sells spirituous liquors, wines and beer and any established retail store that sells commodities other than spirituous liquors and that is engaged in the sale of spirituous liquors only in the original unbroken package, to be taken away from the premises of the retailer and to be consumed off the premises.

28. 29. "On-sale retailer" means any person operating an establishment where spirituous liquors are sold in the original container for consumption on or off the premises or in individual portions for consumption on the premises.

29. 30. "Permanent occupancy" means the maximum occupancy of the building or facility as set by the office of the state fire marshal for the jurisdiction in which the building or facility is located.

30. 31. "Person" includes a partnership, limited liability company, association, company or corporation, as well as a natural person.

31. 32. "Premises" or "licensed premises":

(a) Means the area from which the licensee is authorized to sell, dispense or serve spirituous liquors under the provision of the license. Premises or licensed premises

(b) Includes a patio that is not contiguous to the remainder of the premises or licensed premises if the patio is separated from the remainder of the premises or licensed premises by a public or private walkway or driveway not to exceed thirty feet, subject to rules the director may adopt to establish criteria for noncontiguous premises.

32. 33. "Registered alcohol delivery contractor":

(a) Means a person who delivers spirituous liquor to a consumer on behalf of a bar, beer and wine bar, liquor store, beer and wine store or restaurant.

(b) Does not include:

(i) A motor carrier as defined in section 28-5201.

(ii) An independent contractor, a subcontractor of an independent contractor, an employee of an independent contractor or an employee of a subcontractor as provided in section 4-203, subsection J.

33. 34. "Registered mail" includes certified mail.

34. 35. "Registered retail agent" means any person who is authorized pursuant to section 4-222 to purchase spirituous liquors for and on behalf of the person and other retail licensees.

35. 36. "Repeated acts of violence" means:

(a) For licensed premises with a permanent occupancy of two hundred or fewer persons, two or more acts of violence occurring within seven days or three or more acts of violence occurring within thirty days.

(b) For licensed premises with a permanent occupancy of more than two hundred but not more than four hundred persons, four or more acts of violence within thirty days.

(c) For licensed premises with a permanent occupancy of more than four hundred but not more than six hundred fifty persons, five or more acts of violence within thirty days.

(d) For licensed premises with a permanent occupancy of more than six hundred fifty but not more than one thousand fifty persons, six or more acts of violence within thirty days.

(e) For licensed premises with a permanent occupancy of more than one thousand fifty persons, seven or more acts of violence within thirty days.

36. 37. "Sell" includes soliciting or receiving an order for, keeping or exposing for sale, directly or indirectly delivering for value, peddling, keeping with intent to sell and trafficking in.

37. 38. "Spirituous liquor" includes alcohol, brandy, whiskey, rum, tequila, mescal, gin, wine, porter, ale, beer, any malt liquor or malt beverage, absinthe, a compound or mixture of any of them or of any of them with any vegetable or other substance, alcohol bitters, bitters containing alcohol, any liquid mixture or preparation, whether patented or otherwise, that produces intoxication, fruits preserved in ardent spirits, and beverages containing more than one-half of one percent of alcohol by volume.

38. 39. "Tamperproof sealed" means designed to prevent consumption without the removal of a tamperproof cap, seal, cork or closure that has a device, mechanism or adhesive that clearly shows whether a container has been opened.

39. 40. "Vehicle" means any means of transportation by land, water or air, and includes everything made use of in any way for such transportation.

40. 41. "Vending machine" means a machine that dispenses merchandise through the means of coin, token, credit card or other nonpersonal means of accepting payment for merchandise received.

41. 42. "Veteran" means a person who has served in the United States air force, army, navy, marine corps or coast guard, as an active nurse in the services of the American red cross, in the army and navy nurse corps in time of war, or in any expedition of the armed forces of the United States, and who has received a discharge other than dishonorable.

42. 43. "Voting security" means any security presently entitling the owner or holder of the security to vote for the election of directors of an applicant or a licensee.

43. 44. "Wine" means the product obtained by the fermentation of grapes, other agricultural products containing natural or added sugar or cider or any such alcoholic beverage fortified with grape brandy and containing not more than twenty-four percent of alcohol by volume. END_STATUTE

Sec. 2. Section 4-201.01, Arizona Revised Statutes, is amended to read:

START_STATUTE4-201.01. Extending time limits

A. In the event any decision, hearing, or other action by the department, including the board, is alleged to be untimely, an aggrieved person may file a demand that the department take action within fifteen days. In the event the department does not then act, the aggrieved person may file an action in superior court seeking an order requiring the department to act.

B. Notwithstanding the provisions of subsection A of this section, if the director determines that it is in the public interest to extend the time limits for action by the department, including the board or a local governing body, in connection with a license issuance or transfer or acquisition of control, the director may extend the time limits by up to one hundred five days. When the request for an extension of the time limit is made by a local governing body, the extension may be granted when the applicant or the director agrees with the request. The director may further extend the time limits as the director deems necessary if special circumstances such as litigation affecting the ownership of the license, bankruptcy, probate or other circumstances deemed meritorious by the director prevent the department from completing its action or the director requires additional time to complete an investigation of an applicant's qualifications for licensure pursuant to section 4-202. In no event shall The director may NOT extend the time limits more than one year except as necessary in the event of litigation affecting the ownership of the license, bankruptcy or probate or except on a written request of the applicant or licensee that the director determines is supported by good cause. END_STATUTE

Sec. 3. Section 4-205.02, Arizona Revised Statutes, is amended to read:

START_STATUTE4-205.02. Restaurant license; issuance; regulatory provisions; expiration; off-sale leases and permits; fee; definitions

A. The director may issue a restaurant license to any restaurant in this state that is regularly open for serving food to guests for compensation and that has suitable kitchen facilities connected with the restaurant for keeping, cooking and preparing foods required for ordinary meals.

B. The director shall issue the license in the name of the restaurant on application for the license by the owner or lessee of the restaurant, if the applicant is otherwise qualified to hold a spirituous liquor license. The holder of such a license is subject to the penalties prescribed for any violation of the law relating to alcoholic beverages.

C. The holder of a restaurant license may sell and serve spirituous liquors solely for consumption on the licensed premises. For the purpose of this subsection, "licensed premises" may include rooms, areas or locations in which the restaurant normally sells or serves spirituous liquors pursuant to regular operating procedures and practices and that are contiguous to the restaurant or a noncontiguous patio pursuant to section 4-101, paragraph 31 32. For the purposes of this subsection, a restaurant licensee must submit proof of tenancy or permission from the landowner or lessor for all property to be included in the licensed premises.

D. In addition to other grounds prescribed in this title on which a license may be revoked, the director may require the holder of a restaurant license issued pursuant to this section to surrender the license in any case in which the licensee ceases to operate as a restaurant, as prescribed in subsection A of this section. The surrender of a license pursuant to this subsection does not prevent the director from revoking the license for other grounds prescribed in this title or for making deliberate material misrepresentations to the department regarding the licensee's equipment, service or entertainment items or seating capacity in applying for the restaurant license.

E. Neither the director nor the board may initially issue a restaurant license if either finds that there is sufficient evidence that the operation will not satisfy the criteria adopted by the director for issuing a restaurant license described in section 4-209, subsection B, paragraph 12. The director shall issue a restaurant license only if the applicant has submitted a plan for the operation of the restaurant. The plan shall be completed on forms provided by the department and shall include listings of all restaurant equipment and service items, the restaurant seating capacity and other information requested by the department to substantiate that the restaurant will operate in compliance with this section.

F. The holder of the license described in section 4-209, subsection B, paragraph 12 who intends to alter the seating capacity or dimensions of a restaurant facility shall notify the department in advance on forms provided by the department.

G. The director may charge a fee for site inspections conducted before the issuance of a restaurant license.

H. A restaurant applicant or licensee may apply for a permit allowing for the sale of beer for consumption off the licensed premises pursuant to section 4-244, paragraph 32, subdivision (c) on a form prescribed and furnished by the director. The department shall not issue a permit to a restaurant applicant or licensee that does not meet the requirements in section 4-207, subsection A. Section 4-207, subsection B does not apply to this subsection. The permit shall be issued only after the director has determined that the public convenience requires and that the best interest of the community will be substantially served by the issuance of the permit, considering the same criteria adopted by the director for issuing a restaurant license described in section 4-209, subsection B, paragraph 12. The amount of beer sold under the permit shall not exceed ten percent of gross revenue of spirituous liquor sold by the establishment. After the permit has been issued, the permit shall be noted on the license itself and in the records of the department. The director may charge a fee for processing the application for the permit and a renewal fee.

I. Notwithstanding any rule adopted by the department, business establishments that relied on a form issued by the department that provides for a small restaurant exemption for fifty or fewer seats before January 31, 2019 are allowed to continue to maintain the capacity of fifty or fewer seats for the duration of the business. The rights of a business establishment subject to this section are not transferable.

J. Notwithstanding section 4-203, subsection E, section 4-207 and section 4-210, subsection A, paragraph 6, through December 31, 2025, a restaurant applicant or licensee may apply to the department for a lease for the privilege of selling mixed cocktails for consumption off the licensed premises pursuant to section 4-203.06 and section 4-244, paragraph 32, subdivision (d).

K. Notwithstanding section 4-207, beginning January 1, 2026, a restaurant applicant or licensee may apply for a permit to allow the sale of mixed cocktails for consumption off the licensed premises pursuant to section 4-203.07 and section 4-244, paragraph 32, subdivision (d), on a form prescribed and furnished by the director. The sale of mixed cocktails for consumption off the licensed premises must be accompanied by the sale of menu food items for consumption on or off the licensed premises. The department shall issue the permit only after the director has determined that the public convenience requires and that the best interest of the community will be substantially served by issuing the permit. All permit holders and their employees, managers and agents must complete alcohol training pursuant to section 4-112, subsection G, paragraph 2. After the department issues the permit, the permit shall be noted on the license itself and in the records of the department. The director may establish and charge a fee for processing the permit application and a renewal fee.

L. A restaurant licensee shall cease selling spirituous liquor, including mixed cocktails, for off-premises consumption when the licensee ceases regular kitchen service for food.

M. For the purposes of this section:

1. "Gross revenue":

(a) Means the revenue derived from all sales of food and spirituous liquor on the licensed premises, regardless of whether the sales of spirituous liquor are made under a restaurant license issued pursuant to this section or under any other license that has been issued for the premises pursuant to this article.

(b) Includes revenue derived from spirituous liquor sold for off-sale consumption.

2. "Restaurant" means an establishment that derives at least forty percent of its gross revenue from the sale of food, including sales of food for consumption off the licensed premises if the amount of these sales included in the calculation of gross revenue from the sale of food does not exceed fifteen percent of all gross revenue of the restaurant. END_STATUTE

Sec. 4. Title 4, chapter 2, article 1, Arizona Revised Statutes, is amended by adding section 4-205.14, to read:

START_STATUTE4-205.14. Microbrewery festival license; microbrewery fair license; fee

A. The director may issue on a temporary basis a microbrewery festival license that authorizes:

1. The sampling of the microbrewery products on the microbrewery festival premises.

2. The sale of products for consumption on the microbrewery festival premises.

3. The sale of products in the original container for consumption off the microbrewery festival premises.

b. Before the director may issue a microbrewery festival license, a microbrewery festival that is to occur at an otherwise unlicensed location or at a location that is not fully within the licensee's existing licensed premises must be approved by the board of supervisors of the county, or the board's designee, if the event is to be held in an unincorporated area or by the governing body of the city or town, or the governing body's designee, if the event is to be held in a city or town. A denial by the county, city or town must be forwarded to the director within sixty days after the submission of an application to the county, city or town unless the applicant has requested more time for consideration of the application.

c. The approval process prescribed in subsection b of this section does not apply to physical locations that are fully located within a licensed premises.

d. The director may issue one or more microbrewery festival licenses for each licensed microbrewery, for a total of up to one hundred fifty calendar days for each microbrewery. The director may establish a fee for each day of each event for a microbrewery festival license.

e. Any microbrewery may APPLY for a microbrewery festival license pursuant to this section.

f. A representative of the licensed microbrewery may consume small amounts of the products of the licensed microbrewery on the festival premises for the purpose of quality control.

g. The director may issue a microbrewery fair license with the permission of state fair organizers or county fair organizers. Any microbrewery may allow the sampling of microbrewery products on the fair premises, the sale of the products for consumption on the fair premises and the sale of the products in original containers for consumption off of the fair premises at any sanctioned state fair or county fair. The director may establish a fee for each day for each event for a microbrewery fair license.

h. Section 4-201 does not apply to the licenses provided under this section. END_STATUTE

Sec. 5. Section 4-207, Arizona Revised Statutes, is amended to read:

START_STATUTE4-207. Restrictions on licensing premises near school buildings; definition

A. A retailer's license shall not be issued for any premises that are, at the time the license application is received by the director, within three hundred horizontal feet of a public or private school building with kindergarten programs or any of grades one through twelve or within three hundred horizontal feet of a fenced recreational area adjacent to such school building. This section does not prohibit the renewal of a valid license issued pursuant to this title if, on the date that the original application for the license is filed, the premises were not within three hundred horizontal feet of a public or private school building with kindergarten programs or any of grades one through twelve or within three hundred horizontal feet of a fenced recreational area adjacent to such school building.

B. Subsection A of this section does not apply to a:

1. Restaurant issued a license pursuant to section 4-205.02, subject to the limitations in section 4-205.02, subsection H for a permit allowing for the sale of beer for consumption off of the licensed premises pursuant to section 4-244, paragraph 32, subdivision (c).

2. Special event license issued pursuant to section 4-203.02.

3. Hotel-motel issued a license pursuant to section 4-205.01.

4. Government license issued pursuant to section 4-205.03.

5. Playing area of a golf course issued a license pursuant to this article.

6. Beer and wine license at a nonprofit performing arts theatre with a permanent seating capacity of at least two hundred fifty persons.

7. Craft distillery festival license issued pursuant to section 4-205.11.

8. Farm winery festival license issued pursuant to section 4-203.03.

9. Microbrewery festival license or microbrewery fair license issued pursuant to section 4-205.14.

C. Notwithstanding subsection A of this section:

1. A transferable spirituous liquor license that is validly issued and that is, on the date an application for a transfer is filed, within three hundred horizontal feet of a public or private school building with kindergarten programs or any of grades one through twelve or within three hundred horizontal feet of a fenced recreational area adjacent to such school building may be transferred person to person pursuant to sections 4-201, 4-202 and 4-203 and remains in full force until the license is terminated in any manner, unless renewed pursuant to section 4-209, subsection A.

2. A person may be issued a spirituous liquor license pursuant to sections 4-201, 4-202 and 4-203 of the same class for premises that, on the date the application is filed, have a valid transferable or nontransferable license of the same series if the premises are, on the date an application for the license is filed, within three hundred horizontal feet of a public or private school building with kindergarten programs or any of grades one through twelve or within three hundred horizontal feet of a fenced recreational area adjacent to such school building and the license remains in full force until the license is terminated in any manner, unless renewed pursuant to section 4-209, subsection A.

3. A person may be issued a liquor store license pursuant to sections 4-201, 4-202, 4-203 and 4-206.01 for premises that have a beer and wine store license validly issued if the premises, on the date an application for such license is filed, are within three hundred horizontal feet of a public or private school building with kindergarten programs or any of grades one through twelve or within three hundred horizontal feet of a fenced recreational area adjacent to such school building and the license remains in full force until the license is terminated in any manner, unless renewed pursuant to section 4-209, subsection A.

4. The governing body of a city or town, on a case-by-case basis, may approve an exemption from the distance restrictions prescribed in this section for a public or private school that is located in an area that is designated an entertainment district by the governing body of that city or town. A city or town with a population of at least five hundred thousand persons may designate not more than three entertainment districts within the boundaries of the city or town pursuant to this paragraph. A city or town with a population of at least two hundred thousand persons but less than five hundred thousand persons may designate not more than two entertainment districts within the boundaries of the city or town pursuant to this paragraph. A city or town with a population of less than two hundred thousand persons may designate not more than one entertainment district within the boundaries of the city or town pursuant to this paragraph.

5. A person may be issued a beer and wine store license pursuant to sections 4-201, 4-202, 4-203 and 4-206.01 for premises that have a liquor store license validly issued if the premises, on the date of an application for which the license is filed, are within three hundred horizontal feet of a public or private school building with kindergarten programs or any of grades one through twelve or within three hundred horizontal feet of a fenced recreation area adjacent to such school building and the license remains in full force until the license is terminated in any manner, unless renewed pursuant to section 4-209, subsection A.

D. For the purposes of this section, "entertainment district" means a specific contiguous area that is designated an entertainment district by a resolution adopted by the governing body of a city or town, that consists of not more than one square mile, that is not less than one-eighth of a mile in width and that contains a significant number of entertainment, artistic and cultural venues, including music halls, concert facilities, theaters, arenas, stadiums, museums, studios, galleries, restaurants, bars and other related facilities. END_STATUTE

Sec. 6. Section 4-207.03, Arizona Revised Statutes, is amended to read:

START_STATUTE4-207.03. Extended premises; application; requirements; fee

A. An on-sale spirituous liquor licensee may apply to the director to extend the licensed premises on an individual day or hour basis or on a regular recurring basis. The application for an extended premises shall be on a form prescribed by the director. The application shall contain plans and diagrams that completely disclose and designate the physical arrangement of the proposed extended premises. The applicant licensee shall submit a copy of the application to the local governing body at least sixty days before submitting the application to the director. The local governing body or the local governing body's designee may review the application and provide an advisory recommendation to the director. If the local governing body or the local governing body's designee completes the review and provides an advisory recommendation to the director before the conclusion of the sixty-day period, the director may act on the application before the expiration of the sixty-day period.

B. The applicant licensee shall submit with the application a security plan. The applicant licensee shall identify the security measures that will be implemented by the applicant licensee for the extended premises. The security plan shall:

1. Provide for the safety of patrons.

2. Ensure that an individual who is under the legal drinking age does not purchase, possess or consume spirituous liquor on the extended premises.

3. Prevent the unauthorized removal of spirituous liquor from the extended premises.

4. Prevent the unauthorized carrying of spirituous liquor onto the extended premises.

C. The applicant licensee shall file with the application and may modify from time to time a schedule showing the date and time periods when the extended premises will be in use. The applicant licensee shall provide at least ten days' written notice of the modification to the department.

D. The right of a licensee to use an extended premises may be limited or revoked by the director for a violation of this title or any rule adopted pursuant to this title.

E. The department may charge a fee in an amount prescribed by the director for the review and processing of applications.

F. A licensee with extended premises may not allow an individual who is under the legal drinking age and who is not accompanied by a spouse, parent, grandparent or legal guardian of legal drinking age to remain in an area on the extended premises during hours in which the primary use of the premises is the sale, dispensing or consumption of spirituous liquor after the licensee or licensee's employees know or should have known that the individual is under the legal drinking age. END_STATUTE

Sec. 7. Section 4-241, Arizona Revised Statutes, is amended to read:

START_STATUTE4-241. Selling or giving liquor to underage person; illegally obtaining liquor by underage person; violation; classification; definition

A. If a licensee, an employee of the licensee or any other person questions or has reason to question that the person ordering, purchasing, attempting to purchase or otherwise procuring or attempting to procure the serving or delivery of spirituous liquor or entering a portion of a licensed premises when the primary use is the sale or service of spirituous liquor is under the legal drinking age, the licensee, employee of the licensee or other person shall do all of the following:

1. Demand identification from the person.

2. Examine the identification to determine that the identification reasonably appears to be a valid, unaltered identification that has not been defaced.

3. Examine the photograph in the identification and determine that the person reasonably appears to be the same person in the identification.

4. Determine that the date of birth in the identification indicates the person is not under the legal drinking age.

B. A licensee or an employee of the licensee who follows the procedures prescribed in subsection A of this section and who records and retains a record of the person's identification on this particular visit, or a licensee or an employee of the licensee who uses a biometric identity verification device to verify a person is not under the legal drinking age as provided in subsection W of this section, is not in violation of subsection J of this section or section 4-244, paragraph 9 or 22. This defense applies to actions of the licensee and all employees of the licensee after the procedure prescribed in subsection A or W of this section has been employed during the particular visit to the licensed premises by the person. A licensee or an employee of the licensee is not required to demand and examine identification of a person pursuant to subsection A or W of this section if, during this visit to the licensed premises by the person, the licensee or any employee of the licensee has previously followed the procedure prescribed in subsection A or W of this section.

C. Proof that the licensee or employee followed the entire procedure prescribed in subsection A of this section but did not record and retain a record as prescribed in subsection B of this section is an affirmative defense to a criminal charge under subsection J of this section or under section 4-244, paragraph 9 or 22 or a disciplinary action under section 4-210 for a violation of subsection J of this section or section 4-244, paragraph 9 or 22. This defense applies to actions of the licensee and all employees of the licensee after the procedure has been employed during the particular visit to the licensed premises by the person.

D. A licensee or an employee who has not recorded and retained a record of the identification as prescribed by subsection B of this section is presumed not to have followed any of the elements prescribed in subsection A of this section.

E. For the purposes of section 4-244, paragraph 22, a licensee or an employee who has not recorded and retained a record of the identification as prescribed by subsection B of this section is presumed to know that the person entering or attempting to enter a portion of a licensed premises when the primary use is the sale or service of spirituous liquor is under the legal drinking age.

F. It is a defense to a violation of subsection A of this section if the person ordering, purchasing, attempting to purchase or otherwise procuring or attempting to procure the serving or delivery of spirituous liquor or to enter a portion of a licensed premises when the primary use is the sale or service of spirituous liquor is not under the legal drinking age.

G. A person penalized for a violation of subsection J of this section or section 4-244, paragraph 22 shall not be additionally penalized for a violation of subsection A or W of this section relating to the same event.

H. The defenses provided in this section do not apply to a licensee or an employee who has actual knowledge that the person exhibiting the identification is under the legal drinking age.

I. Any of the following types of records are acceptable forms for recording the person's identification:

1. A writing containing the type of identification, the date of issuance of the identification, the name on the identification, the date of birth on the identification and the signature of the person.

2. An electronic file or printed document produced by a device that reads the person's age from the identification.

3. A dated and signed photocopy of the identification.

4. A photograph of the identification.

5. A digital copy of the identification.

J. An off-sale retail licensee or employee of an off-sale retail licensee shall require an instrument of identification from any customer who appears to be under twenty-seven years of age and who is using a drive-through or other physical feature of the licensed premises that allows a customer to purchase spirituous liquor without leaving the customer's vehicle.

K. The following written instruments are the only types of identification that are acceptable under subsection A of this section:

1. An unexpired driver license issued by this state. A driver license issued to a person who is under twenty-one years of age is no longer an acceptable type of identification under this paragraph thirty days after the person turns twenty-one years of age.

2. An unexpired driver license issued by any other state, the District of Columbia, any territory of the United States or Canada if the license includes a picture of the person and the person's date of birth.

3. An unexpired nonoperating identification license issued pursuant to section 28-3165. An unexpired nonoperating license issued to a person who is under twenty-one years of age is no longer an acceptable type of identification under this paragraph thirty days after the person turns twenty-one years of age.

4. A form of identification license issued by any other state, the District of Columbia, any territory of the United States or Canada if the license is substantially equivalent to a nonoperating identification license issued pursuant to section 28-3165 and includes a picture of the person and the person's date of birth.

5. An unexpired armed forces identification card that includes the person's picture and date of birth.

6. A valid unexpired passport or a valid unexpired resident alien card that contains a photograph of the person and the person's date of birth.

7. A valid unexpired consular identification card that is issued by a FOREIGN government if the FOREIGN government uses biometric identity verification techniques in issuing the consular identification card. for the purposes of this paragraph, "biometric identity verification techniques" has the same meaning prescribed in section 41-5001.

L. A person who is under the legal drinking age and who misrepresents the person's age to any person by means of a written instrument of identification with the intent to induce a person to sell, serve, give or furnish spirituous liquor contrary to law is guilty of a class 1 misdemeanor.

M. A person who is under the legal drinking age and who solicits another person to purchase, sell, give, serve or furnish spirituous liquor contrary to law is guilty of a class 3 misdemeanor.

N. A person who is under the legal drinking age and who uses a fraudulent or false written instrument of identification or identification of another person or uses a valid license or identification of another person to gain access to a licensed establishment is guilty of a class 1 misdemeanor.

O. A person who uses a driver or nonoperating identification license in violation of subsection L or N of this section is subject to suspension of the driver or nonoperating identification license as provided in section 28-3309. A person who does not have a valid driver or nonoperating identification license and who uses a driver or nonoperating identification license of another in violation of subsection N of this section has the person's right to apply for a driver or nonoperating identification license suspended as provided by section 28-3309.

P. A person who knowingly influences the sale, giving or serving of spirituous liquor to a person under the legal drinking age by misrepresenting the age of such person or who orders, requests, receives or procures spirituous liquor from any licensee, employee or other person with the intent of selling, giving or serving it to a person under the legal drinking age is guilty of a class 1 misdemeanor. A licensee or employee of a licensee who has actual knowledge that a person is under the legal drinking age and who admits the person into any portion of the licensed premises in violation of section 4-244, paragraph 22 is in violation of this subsection. In addition to other penalties provided by law, a judge may suspend a driver license issued to or the driving privilege of a person for not more than thirty days for a first conviction and not more than six months for a second or subsequent conviction under this subsection.

Q. A person who is at least eighteen years of age and who is an occupant of an unlicensed premises is guilty of a class 1 misdemeanor if the person knowingly hosts on the unlicensed premises a gathering of two or more persons who are under the legal drinking age and if the person knows that one or more of the persons under the legal drinking age are in possession of or consuming spirituous liquor on the unlicensed premises.

R. For the purposes of subsection Q of this section:

1. "Hosts" means allowing or promoting a party, gathering or event at a person's place of residence or other premises under the person's ownership or control where spirituous liquor is served to, in the possession of or consumed by an underage person.

2. "Occupant" means a person who has legal possession or the legal right to exclude others from the unlicensed premises.

S. A peace officer shall forward or electronically transfer to the director of the department of transportation the affidavit required by section 28-3310 if the peace officer has arrested a person for the commission of an offense for which, on conviction, suspension of the license or privilege to operate a motor vehicle is required by section 28-3309, subsection A, B, C or D, or if the peace officer has confiscated a false identification document used by the person to gain access to licensed premises.

T. A person who acts under a program of testing compliance with this title that is approved by the director is not in violation of section 4-244.

U. Law enforcement agencies may use persons who are under the legal drinking age to test compliance with this section and section 4-244, paragraph 9 by a licensee if the law enforcement agency has reasonable suspicion that the licensee is violating this section or section 4-244, paragraph 9. A person who is under the legal drinking age and who purchases or attempts to purchase spirituous liquor under the direction of a law enforcement agency pursuant to this subsection is immune from prosecution for that purchase or attempted purchase. Law enforcement agencies may use a person under the legal drinking age pursuant to this subsection only if:

1. The person is at least fifteen but not more than nineteen years of age.

2. The person is not employed on an incentive or quota basis.

3. The person's appearance is that of a person who is under the legal drinking age.

4. A photograph of the person is taken no not more than twelve hours before the purchase or attempted purchase. The photograph shall accurately depict the person's appearance and attire. A licensee or an employee of a licensee who is cited for selling spirituous liquor to a person under the legal drinking age pursuant to this subsection is allowed to inspect the photograph immediately after the citation is issued. The person's appearance at any trial or administrative hearing that results from a citation shall not be substantially different from the person's appearance at the time the citation was issued.

5. The person places, receives and pays for the person's order of spirituous liquor. An adult shall not accompany the person onto the premises of the licensee.

6. The person does not consume any spirituous liquor.

V. The department may adopt rules to carry out the purposes of this section.

W. In lieu of or in addition to the procedures prescribed in subsection A of this section, a licensee, an employee of the licensee or any other person who questions or has reason to question that whether the person ordering, purchasing, attempting to purchase or otherwise procuring or attempting to procure the serving or delivery of spirituous liquor or entering a portion of a licensed premises when the primary use is the sale or service of spirituous liquor is under the legal drinking age, the licensee, employee of the licensee or other person may use a biometric identity verification device to determine the person's age. In any instance where the device indicates the person is under the legal drinking age, the attempted purchase, procurement or entry shall be denied.END_STATUTE

Sec. 8. Section 4-243, Arizona Revised Statutes, is amended to read:

START_STATUTE4-243. Commercial coercion or bribery unlawful; exceptions

A. It is unlawful for a person engaged in the business of distiller, vintner, brewer, rectifier or blender or any other producer or wholesaler of any spirituous liquor, directly or indirectly, or through an affiliate:

1. To require that a retailer purchase spirituous liquor from the producer or wholesaler to the exclusion, in whole or in part, of spirituous liquor sold or offered for sale by other persons.

2. To induce a retailer by any form of commercial bribery to purchase spirituous liquor from the producer or wholesaler to the exclusion, in whole or in part, of spirituous liquor sold or offered for sale by other persons.

3. To acquire an interest in property owned, occupied or used by the retailer in the retailer's business, or in a license with respect to the premises of the retailer.

4. To furnish, give, rent, lend or sell to the retailer equipment, fixtures, signs, supplies, money, services or other things of value, subject to the exception as the rules adopted pursuant to this title may prescribe, having regard for established trade customs and the purposes of this subsection.

5. To pay or credit the retailer for advertising, display or distribution service, except that the director may adopt rules regarding advertising in conjunction with seasonal sporting events.

6. To guarantee a loan or repayment of a financial obligation of the retailer.

7. To extend credit to the retailer on a sale of spirituous liquor.

8. To require the retailer to take and dispose of a certain quota of spirituous liquor.

9. To offer or give a bonus, a premium or compensation to the retailer or any of the retailer's officers, employees or representatives.

B. This section does not prohibit any distiller, vintner, brewer, rectifier, blender or other producer or wholesaler of any spirituous liquor from:

1. Giving financial and other forms of event sponsorship assistance to nonprofit or charitable organizations for purposes of charitable fundraising that are issued special event licenses by the department. This section does not prohibit suppliers from advertising their sponsorship at such special events.

2. Providing samples to retail consumers at on-sale premises establishments according to the following procedures:

(a) Sampling operations shall be conducted under the supervision of an employee of the sponsoring producer or wholesaler.

(b) Sampling shall be limited to sixteen ounces of beer or cooler products, six ounces of wine or two ounces of distilled spirits per person per brand.

(c) If requesting the on-sale retailer to prepare a drink for the consumer, the producer's or wholesaler's representative shall pay the retailer for the sample drink.

(d) The producer or wholesaler may not buy the on-sale retailer or the retailer's employees a drink during their working hours or while they are engaged in waiting on or serving customers.

(e) The producer or wholesaler may not give a keg of beer or any spirituous liquor or any other gifts or benefits to the on-sale retailer.

(f) All sampling procedures shall comply with federal sampling laws and regulations.

3. Providing samples to retail consumers on an off-sale retailer's premises according to the following procedures:

(a) Sampling shall be conducted by an employee of the sponsoring producer or wholesaler.

(b) The producer or wholesaler shall notify the department in writing or by electronic means at least five days before the sampling of the date, time and location of the sampling and of the name of the wholesaler or producer distributing the product.

(c) Sampling is limited to three ounces of beer, one and one-half ounces of wine or one ounce of distilled spirits per person per day for consumption on the premises and up to seventy-two ounces of beer and two ounces of distilled spirits per person per day for consumption off the premises.

(d) An off-sale retailer shall not allow sampling to be conducted on a licensed premises on more than twelve days in any calendar year per wholesaler or producer.

(e) Sampling shall be limited to two wholesalers or producers at any one off-sale retailer's premises on any day and shall not exceed three hours on any day per approved sampling.

(f) A producer conducting sampling shall buy the sampled product from a wholesaler or from the retailer where the sampling is being conducted. If the product for the sampling is purchased from the retailer, the amount paid for the product must be the same amount that the retailer charges for sale to the general public.

(g) The producer or wholesaler shall not provide samples to any person who is under the legal drinking age.

(h) The producer or wholesaler shall designate an area in which sampling is conducted that is in the portion of the licensed premises where spirituous liquor is primarily displayed and separated from the remainder of the off-sale retailer's premises by a wall, rope, door, cable, cord, chain, fence or other barrier. The producer or wholesaler shall not allow persons under the legal drinking age from entering the area in which sampling is conducted. If the retail location has been issued a permanent sampling privilege from the department, the requirement for separation from the remainder of the premises by wall, rope, door, cable, cord, chain, fence or other barrier is not required.

(i) The producer or wholesaler may not provide samples to the retailer or the retailer's employees.

(j) Sampling shall not be conducted in retail premises with a total of under five thousand square feet of retail space unless at least seventy-five percent of the retailer's shelf space is dedicated to the sale of spirituous liquor.

(k) The producer or wholesaler may not give spirituous liquor or any other gifts or benefits to the off-sale retailer.

(l) All sampling procedures shall comply with federal sampling laws and regulations.

C. Notwithstanding subsection A, paragraph 4 of this section, any wholesaler of any spirituous liquor may sell tobacco products or foodstuffs to a retailer at a price not less than the cost to the wholesaler.

D. Notwithstanding subsection A, paragraph 4, and subsection B, paragraph 2, subdivision (e) of this section, any wholesaler may furnish without cost promotional items to an on-sale retailer, except that the total market value of the promotional items furnished by that wholesaler to that retailer in any calendar year shall not exceed $500 $700. For the purposes of this subsection, "promotional items" means items of equipment, supplies, novelties or other advertising specialties that conspicuously display the brand name of a spirituous liquor product. Promotional items do not include signs, or dispensing or tapping machines or equipment or refrigerators.

E. Notwithstanding subsection A, paragraphs 4 and 7 of this section, a wholesaler may in the wholesaler's sole discretion accept the return of malt beverage products from a retailer under any of the following conditions:

1. The retailer's licensed premises will be closed for business for thirty or more consecutive days, and the products are likely to spoil or expire during the business closing period.

2. The retailer's licensed premises is used primarily as a music or live sporting venue with a permanent occupancy of more than one thousand people, and the products are likely to spoil or expire during the time period between venue events.

3. The retailer holds a governmental entity license and conducts less than six events per year at which products are sold, and the products are likely to spoil or expire during the time period between events.

F. It is unlawful for a retailer to request or knowingly receive anything of value that a distiller, vintner, brewer, rectifier or blender or any other producer or wholesaler is prohibited by subsection A, D or E of this section from furnishing to a retailer, except that this subsection does not prohibit special discounts provided to retailers and based on quantity purchases. END_STATUTE

Sec. 9. Section 4-244.04, Arizona Revised Statutes, is amended to read:

START_STATUTE4-244.04. Craft producer sampling

Notwithstanding section 4-244, paragraphs 13 and 19, a representative of a licensed farm winery craft producer may consume small amounts and may serve the products of the licensed farm winery craft producer on the premises of an off-sale retailer or a retailer with off-sale privileges for the purpose of sampling the products of the farm winery craft producer. The licensee of the farm winery craft producer is liable for any violations of this title committed in connection with such sampling. The director shall regulate the manner of conducting such samplings to prevent abusive practices. The licensed retailer shall make sales of farm winery craft producer products from the licensed retail premises. END_STATUTE

Sec. 10. Section 42-3355, Arizona Revised Statutes, is amended to read:

START_STATUTE42-3355. Return and payment by farm wineries, manufacturers, direct shipment licensees, microbreweries and craft distillers

A. Every a farm winery selling vinous liquor at retail or to a retail licensee pursuant to title 4, chapter 2 that is manufactured or produced on the premises, a producer of vinous liquor that sells at retail pursuant to section 4-243.02 or a direct shipment licensee that sells pursuant to section 4-203.04 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 a microbrewery selling malt liquor at retail or to a retail licensee pursuant to title 4, chapter 2 that is 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.

C. Every a craft distiller selling spirituous liquor at retail or to a retail licensee pursuant to title 4, chapter 2, that is 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, craft distiller or direct shipment licensee shall pay the tax to the department monthly annually on or before the twentieth day of the first month next of the year succeeding the month year in which the tax accrues.

E. On or before that date, the farm winery, manufacturer, microbrewery, craft distiller or direct shipment licensee shall prepare a sworn return for the month year 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 year 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, craft distiller or direct shipment licensee shall deliver the return, together with a remittance of the amount of the tax due, to the department.

G. Any taxpayer that fails to pay the tax within ten days after the date on 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.

H. For reporting periods beginning from and after December 31, 2019, or when the department has established an electronic filing program, whichever is later, each taxpayer shall file electronically any report or return required under this chapter. The report or return is considered to be filed and received by the department on the date of the electronic postmark pursuant to section 42-1105.02. END_STATUTE

Sec. 11. Applicability

Section 42-3355, Arizona Revised Statutes, as amended by this act, applies to taxable periods beginning from and after December 31, 2023.