HB2185 - 562R

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

Section 1. Section 4-203.02, Arizona Revised Statutes, is amended to read:

START_STATUTE4-203.02. Special event license; rules

A. The director may issue on a temporary basis:

1. A daily on-sale special event license authorizing the sale of spirituous liquor for consumption on the premises where sold. The fee for the license is $25 per day. The director shall transfer the monies collected to the department of health services for the purposes prescribed in title 36, chapter 18, article 2.

2. A daily off-sale special event license authorizing a charitable auction for the sale of spirituous liquor for consumption off premises.

B. Before the director may issue a temporary special event license, a special event that is to occur at an otherwise unlicensed location or by a licensee at a location that is not fully within the licensee's existing licensed premises must be approved by the board of supervisors of a 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 or by the president of a university under the jurisdiction of the Arizona board of regents if the event is to be held on the university's property. 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 this section does not apply to physical locations that are fully within premises that are licensed pursuant to this title.

D. A physical location, other than a physical location that is owned, operated, leased, managed or controlled by the United States, this state or a city, town or county of this state, that is not licensed pursuant to this title may not be issued more than a total of thirty days of special event licenses during the same calendar year. All applications for a special event license issued pursuant to this section must be submitted to the department at least ten days before the scheduled event. The director may waive the ten-day requirement for good cause shown.

E. The director may issue the special event license only to a government entity or a political party or campaign committee supporting a candidate for public office or a ballot measure, or a nonprofit entity that is organized as a nonprofit entity in this state or pursuant to the laws of another state and that is a nonprofit entity under section 501(c) of the internal revenue code of the United States. The nonprofit entity shall demonstrate that it is in good standing in this state. An applicant for a special event license may contract with a special event contractor for assistance in selling and serving spirituous liquor at the special event. The special event contractor shall be listed on the application form. The director shall require a special event contractor to provide the controlling persons' identification and background information deemed necessary to identify the special event contractor and to demonstrate proof of the contractor's authority to conduct business in this state, including providing copies of any required state or local business licenses or permits. The department shall maintain a list of special event contractors that have been employed by special event licensees during the past year and that are not otherwise in penalty status pursuant to subsection I of this section. A licensee holding a currently active series 6, 7, 11 or 12 license may serve as the special event contractor for a special event license without any additional requirements. A new applicant for an initial special event license may be required by the department to demonstrate it is qualified, capable and reliable to conduct a special event. The department may require new special event contractors and new special event licensees to require persons who serve or sell spirituous liquor to patrons at the special event to complete an approved training course in accordance with section 4-112, subsection G, paragraph 2. A special event contractor is subject to examinations conducted pursuant to section 4-112, subsection G, paragraph 1.

F. The director may issue a temporary special event license under subsection E of this section to an affiliate of a national, statewide or international parent nonprofit organization for a special event if all of the following requirements are met:

1. The affiliate holding the event provides a letter from the internal revenue service that the parent organization is a nonprofit entity under section 501(c)(4) of the internal revenue code of the United States with a group ruling.

2. The proceeds of the event are for a charitable or nonprofit purpose.

3. The affiliate provides a copy of a charter or letter from the parent nonprofit entity or organization that is organized under section 501(c) of the internal revenue code of the United States that recognizes the affiliate as a subordinate to the parent organization.

4. The affiliate and its members have not previously violated this title, local requirements for special events or any fire code.

G. The director may issue a special event license concurrently with a wine festival license licenses, and a craft distillery festival license and may approve the location of the wine festival license within an excluded area of a special event license specifically described in each license licenses and microbrewery festival licenses. Notwithstanding section 4-244, paragraphs 13 and 19, both all licenses shall allow the presence of purchased spirituous liquor in the possession of the purchaser.

H. For the purposes of this section, a special event licensee or an employee of a special event licensee and a special event contractor or an employee of a special event contractor that has been retained for an approved special event may order or purchase spirituous liquor from the holder of a license authorized to sell off-sale or a licensed wholesaler. If a nonprofit entity has obtained a special event license for the purpose of charitable fundraising activities, the nonprofit entity or special event contractor may receive the spirituous liquor from a wholesaler, farm winery, microbrewery or producer as a donation, except that a licensee licensed pursuant to subsection A, paragraph 2 of this section may receive spirituous liquor from a donor when the donor receives no remuneration or payment of any kind, directly or indirectly, other than any tax benefits that might result. Spirituous liquor may be dispensed and served at the special event only by the following persons:

1. The special event licensee or an employee of the special event licensee, unless the special event is at the premises of a licensed retailer and the licensed retailer has agreed to dispense and serve the spirituous liquor.

2. The special event contractor or an employee of the special event contractor, unless the special event is at the premises of a licensed retailer and the licensed retailer has agreed to dispense and serve the spirituous liquor.

3. The producer or producers who furnished the spirituous liquor.

4. The wholesaler or wholesalers who furnished the spirituous liquor.

I. In addition to all other actions that may be taken by the director for a violation of this title or the rules adopted pursuant to this title by the special event licensee or special event contractor, the department may limit the right of the licensee to obtain a special event license for a period of up to one year or may limit the right of the special event contractor to support any licensed special event for a period of up to one year. Any penalty issued pursuant to this subsection may be appealed to the board pursuant to section 4-210.02 as if the order was a sanction against a licensee. An organization that is issued a license pursuant to subsection A, paragraph 2 of this section shall receive at least seventy-five percent of the gross receipts of the auction. Up to twenty-five percent of the gross receipts of a special event auction conducted pursuant to subsection A, paragraph 2 of this section may be used to pay reasonable and necessary expenses incurred in connection with the auction. All expenses shall be supported by written contracts, invoices or receipts, which shall be made available to the director on request. An organization that is issued a license pursuant to subsection A, paragraph 2 of this section shall not sell at auction more than twenty twelve-bottle cases of spirituous liquor annually under a special event license.

J. The director may adopt those rules the director determines are necessary to implement and administer this section, including a limitation limit on the number of times during a calendar year a qualified organization may apply for and be issued a license under this section. The qualified organization issued a license pursuant to subsection A, paragraph 1 of this section must receive at least twenty-five percent of the gross revenues of all spirituous liquor sold at the special events, which shall be supported by a contract between the parties to be supplied at the time of application.

K. At an event conducted under a license issued pursuant to subsection A of this section, the licensee may conduct a wine pull or distilled spirits pull of up to twenty twelve-bottle cases of wine and up to ten twelve-bottle cases of distilled spirits per day of a licensed special event not to exceed five days per year. The special event licensee shall be responsible for compliance with the case limits in this section. An organization that is issued a license pursuant to subsection A, paragraph 2 of this section shall not sell more than twenty cases of spirituous liquor annually under a special event license. For the purposes of this subsection, "wine pull" or "distilled spirits pull" means an activity where, for a set price, one or more attendees at a special event pay for the opportunity to select at the event one or more bottles of wine or distilled spirits where the variety and vintage are undisclosed.

L. Section 4-201 does not apply to the licenses provided for under this section.

M. A licensed producer or wholesaler may donate spirituous liquor directly to a nonprofit entity that is issued a license pursuant to subsection A of this section. The licensed producer or wholesaler, shall in such instances, shall issue a net zero net-zero cost billing invoice in the name of the special event licensee. All licensees making or receiving spirituous liquor donations remain subject to the applicable limitations limits and requirements stated in this title and in the rules adopted by the department. A licensed producer or wholesaler may also make a monetary donation to a nonprofit entity that is issued a license pursuant to subsection A of this section to help sponsor a special event and the licensed producer or wholesaler may issue a check payable to either the special event licensee or to the approved special event contractor that is contracted to conduct the special event if the special event contractor does not hold a currently active bar license, beer and wine bar license, hotel-motel license or restaurant license.

N. A licensed wholesaler may temporarily leave a delivery vehicle and other items of equipment necessary for the sale or service of spirituous liquor on the premises of a licensed special event for the duration of the event and up to one business day before and after the event.

O. The holder of a license authorized to sell off-sale or a licensed wholesaler may leave purchased spirituous liquor products at a special event if the products are properly described on a preliminary billing invoice that is issued in the name of the special event licensee. The holder of a license authorized to sell off-sale or the licensed wholesaler has up to five business days after the special event ends to make any necessary billing adjustments and issue a final billing invoice to the special event licensee. Within one business day after the conclusion of the special event, the special event licensee or a special event contractor shall return unbroken packages of spirituous liquor to the appropriate off-sale licensee or wholesaler subject to the applicable rules of the United States alcohol and tobacco tax and trade bureau and the policy of the applicable off-sale licensee or wholesaler.

P. The director may adopt rules deemed necessary to implement and administer this section for special event contractors. END_STATUTE

Sec. 2. Section 4-203.06, Arizona Revised Statutes, is amended to read:

START_STATUTE4-203.06. Mixed cocktails; off-sale privileges; leases; fees

A. Notwithstanding section 4-203, subsection E and section 4-210, subsection A, paragraph 6, through December 31, 2025, bar and liquor store licensees, through the department, shall lease to restaurant licensees the privilege of selling mixed cocktails for consumption off the licensed premises in accordance with section 4-244, paragraph 32, subdivision (d). The lease shall be for a period of one year and shall be renewable for successive terms of one year. The department shall establish a lease amount that fairly recognizes, and is derived from, the commercial value of the privilege to sell mixed cocktails for consumption off the licensed premises.

B. Leases made pursuant to subsection A of this section are subject to the following conditions:

1. A restaurant licensee may apply to the department on a form prescribed and provided by the department for a lease pursuant to this section. The department may establish and charge an application fee for administrative and enforcement costs associated with this section.

2. On the director approving the application of a restaurant licensee, the director shall randomly select a bar or liquor store license for the lease of the bar or liquor store licensee's mixed cocktail off-sale privileges to the restaurant licensee through the department.

3. The department shall establish a process to facilitate and approve the lease conveyance and to govern the leases, including the following:

(a) A standard form of lease.

(b) The term of the lease, which shall be one year except for the first year of the lease. During the first year of the lease, the director may set a lease term that is less than a one year in order to align the lease renewal date with the renewal date of the restaurant license. The lease payment amount for the first year may be prorated.

(d) The responsibilities of the lessor and lessee.

(e) The lease may be transferred to another restaurant licensee if a new restaurant licensee purchases the business of the original lessee during the term of the lease.

(f) The privileges conveyed to the lessee during the term of the lease will continue if the bar or liquor store lessor has its license suspended or revoked.

(g) If the bar or liquor store lessor sells its license during the term of the lease, the purchaser of the bar or liquor store license becomes the new lessor.

(h) This title and rules adopted pursuant to this title apply to both the lessor and lessee.

(i) During the term of the lease, all violations and liability for liquor service under the lease shall be attributed only to the restaurant licensee leasing the mixed cocktail off-sale privilege. The restaurant licensee leasing the off-sale privilege is not responsible for violations committed by the lessor.

4. The director may deny approval of a lease based on the proposed location or history of the proposed lessee.

5. The restaurant licensee shall pay to the department all lease payments in full in advance.

6. The department of liquor licenses and control may adopt a procedure to pay the lease amount to the lessor and may use the department of administration to facilitate the payments.

7. During the term of the lease, all violations and liability for the liquor service under the lease shall be attributed only to the restaurant licensee leasing the privilege. Pursuant to section 4-210, the director may immediately suspend a lease for any violation of this title or any rule adopted pursuant to this title by the restaurant licensee. The restaurant licensee leasing the off-sale privilege is not responsible for violations committed by the lessor.

8. During the term of the lease, a bar or liquor store lessor may continue to sell spirituous liquor as authorized by the bar or liquor store license and mixed cocktails for off-premises consumption pursuant to section 4-244, paragraph 32, subdivision (d).

9. except for a restaurant licensee that meets the qualifications of subsection e of this section, the restaurant licensee leasing the off-sale privilege is subject to the limit on off-sale use by the restaurant licensee's total spirituous liquor sales as prescribed in section 4-206.01, subsection G.

C. If a restaurant licensee does not renew a lease, the director shall return the bar or liquor store lessor to the random selection process pursuant to subsection B, paragraph 2 of this section.

D. If a bar or liquor store lessor has its license suspended or revoked, the director shall transfer the lease to another bar or liquor store licensee at the end of the lease term pursuant to subsection B, paragraph 2 of this section.

E. NOTWITHSTANDING SECTION 4-206.01, SUBSECTION G, THROUGH DECEMBER 31, 2025, THE DEPARTMENT SHALL PROVIDE FOR A LEASE ADDENDUM TO ANY LEASE MADE PURSUANT TO SUBSECTION A OF THIS SECTION BETWEEN A BAR OR LIQUOR STORE LICENSEE AND A RESTAURANT LICENSEE THAT DERIVES AT LEAST NINETY PERCENT OF ITS GROSS REVENUE FROM THE SALE OF FOOD, INCLUDING SALES OF FOOD FOR CONSUMPTION OFF THE LICENSED PREMISES, AND THAT HAS OFF-SALE SPIRITUOUS LIQUOR SALES THAT EXCEED THIRTY PERCENT OF TOTAL SPIRITuOUS LIQUOR SALES IN EITHER 2023 OR 2024.

F. LEASE ADDENDUMS MADE PURSUANT TO SUBSECTION E OF THIS SECTION ARE SUBJECT TO all of THE FOLLOWING CONDITIONS:

1. ON THE RESTAURANT LICENSEE'S RENEWAL DATE FOR A LEASE MADE PURSUANT TO SUBSECTION A OF THIS SECTION, THE RESTAURANT LICENSEE MAY APPLY TO THE DEPARTMENT ON A FORM PRESCRIBED AND PROVIDED BY THE DEPARTMENT FOR A LEASE ADDENDUM PURSUANT TO THIS SECTION.

2. THE DEPARTMENT SHALL ESTABLISH A PROCESS TO FACILITATE AND APPROVE THE LEASE ADDENDUM AND TO GOVERN THE LEASE ADDENDUM, INCLUDING all of THE FOLLOWING:

(a) A STANDARD LEASE ADDENDUM FORM.

(b) THE TERM OF THE LEASE ADDENDUM SHALL BE THE SAME AS THE TERM OF THE LEASE BEING RENEWED BY THE RESTAURANT LICENSEE.

(c) THE AMOUNT OF THE LEASE ADDENDUM, WHICH MAY BE EQUAL TO ANY DOLLAR AMOUNT DETERMINED BY THE DIRECTOR FOR A LEASE ISSUED PURSUANT TO SUBSECTION A OF THIS SECTION.

(d) DURING THE TERM OF THE LEASE ADDENDUM, THE RESTAURANT LICENSEE SHALL NOT BE SUBJECT TO THE LIMIT On OFF-SALE USE BY THE RESTAURANT LICENSEE'S TOTAL SPIRITUOUS LIQUOR SALES AS PRESCRIBED IN SECTION 4-206.01, SUBSECTION G.

(e) IF THE UNDERLYING LEASE MADE PURSUANT TO SUBSECTION A OF THIS SECTION IS TRANSFERRED TO ANOTHER RESTAURANT LICENSEE PURSUANT TO SUBSECTION B, PARAGRAPH 3, SUBdivision (e) OF THIS SECTION, THE LEASE ADDENDUM IS ALSO TRANSFERRED.

(f) THE PRIVILEGES CONVEYED TO THE LESSEE DURING THE TERM OF THE LEASE ADDENDUM WILL CONTINUE IF THE BAR OR LIQUOR STORE LESSOR HAS ITS LICENSE SUSPENDED OR REVOKED.

(g) THIS title AND RULES ADOPTED PURSUANT TO THIS title APPLY TO BOTH THE LESSOR AND LESSEE.

(h) DURING THE TERM OF THE LEASE ADDENDUM, ALL VIOLATIONS AND LIABILITY FOR LIQUOR SERVICE UNDER THE LEASE SHALL BE ATTRIBUTED ONLY TO THE RESTAURANT LICENSEE LEASING THE MIXED COCKTAIL OFF-SALE PRIVILEGE. THE RESTAURANT LICENSEE LEASING THE OFF-SALE PRIVILEGE IS NOT RESPONSIBLE FOR VIOLATIONS COMMITTED BY THE LESSOR.

3. THE RESTAURANT LICENSEE SHALL PAY TO THE DEPARTMENT ANY LEASE ADDENDUM PAYMENTS IN FULL IN ADVANCE.

4. THE PROCEDURE TO PAY THE LEASE ADDENDUM AMOUNT TO THE LESSOR SHALL BE THE SAME as THE PROCEDURE ADOPTED BY THE DEPARTMENT PURSUANT TO SUBSECTION B, PARAGRAPH 6 OF THIS SECTION. END_STATUTE

Sec. 3. Section 4-206.01, Arizona Revised Statutes, is amended to read:

START_STATUTE4-206.01. Bar, beer and wine bar or liquor store licenses; number permitted; fee; sampling privileges; off-sale permit

A. The director shall determine the total number of spirituous liquor licenses by type and in each county. The director shall publish a listing of that information as determined by the director.

B. In each county, the director, each year, shall issue additional bar or liquor store licenses at the rate of one of each type for each additional ten thousand person increase over the population in that county as of July 1, 2010. For every license that has been revoked or reverted in any county, the director may issue a new license of the same series in the same county, except that if there are more than five licenses of a particular class, the director may issue five new licenses plus an additional number of new licenses equivalent to twenty percent of the difference between the number of revoked or reverted licenses per year and five. The director may waive the issuance of licenses in a county for one year where there has been no request made to the department for the issuance of a new license of that series. For the purposes of this subsection, the population of a county is deemed to be the population estimated by the office of economic opportunity as of July 1 of each year.

C. In each county, the director, each year, shall issue additional beer and wine bar licenses at the rate of one for each additional five thousand person increase over the population in that county as of July 1, 2010. Beginning January 1, 2022, in each county, the director, each year, shall issue additional beer and wine bar licenses at the rate of one for each additional ten thousand person increase over the population in that county as of July 1, 2010. For every license that has been surrendered, revoked or reverted in any county, the director may issue a new license of the same series in the same county, except that if there are more than five licenses of a particular class, the director may issue five new licenses plus an additional number of new licenses equivalent to twenty percent of the difference between the number of surrendered, revoked or reverted licenses per year and five. The director may waive the issuance of licenses in a county for one year if there has been no request made to the department for the issuance of a new license of that series. For the purposes of this subsection, the population of a county is deemed to be the population estimated as of July 1 of each year by the office of economic opportunity.

D. A person issued a license authorized by subsection B or C of this section shall pay an additional issuance fee equal to the license's fair market value that shall be paid to the state general fund. An appraisal shall be conducted to determine the fair market value of that license type in a specific county. The fair market value is defined to mean the price arrived at in good faith that a knowledgeable and willing buyer will pay and is computed by determining the average value, or weighted average value if there are trends in license pricing in that county, of licenses of the same type, free of any encumbrances, sold on the open market in the same county during the prior twelve months, but if there are not three or more sales then the fair market value is determined by two appraisals furnished to the department by independent professional appraisers employed by the director. The valuation method under both approaches shall take into account trends in the value of licenses of the specific type during the previous twelve months. A new license authorized pursuant to subsection B or C of this section may not be issued to a person or entity that has had a similar license revoked or reverted unless the person or entity provides the director with satisfactory proof that all previous liens on the revoked or reverted license have been satisfied in full.

E. The director shall employ professional appraisal services to determine the fair market value of bar, beer and wine bar or liquor store licenses.

F. If more than one person applies for an available license, a priority of applicants shall be determined by a random selection method prescribed by the director, except that the number of times that a person may enter the random selection process shall not exceed the number of licenses of that series that are available for issuance. For the purposes of this subsection, a partnership, limited liability company, association, company or corporation is considered the same person if it is owned, managed, operated or controlled by the same controlling person.

G. Bar licenses and beer and wine bar licenses shall be issued and used only if the clear primary purpose and actual primary use is for on-sale retailer privileges. The off-sale privileges associated with a bar license and a beer and wine bar license shall be limited to use, which is clearly auxiliary to the active primary on-sale privilege. A bar license or a beer and wine bar license shall not be issued or used if the associated off-sale use, by total retail spirituous liquor sales, exceeds thirty percent of the sales price of on-sale spirituous liquors by the licensee at that location. For dual licenses issued pursuant to a single site or where a second license is issued to a site that already has a spirituous liquor license, other than settlement licenses issued as provided by law, the applicant has the burden of establishing that public convenience and the best interest of the community will be served by the issuance of the license.

H. The director may issue a beer and wine store license to the holder of a beer and wine bar license simultaneously at the same premises. An applicant for a beer and wine bar license and a beer and wine store license may consolidate the application and may apply for both licenses at the same time. The holder of each license shall fully comply with this title. A beer and wine bar license and beer and wine store license on the same premises shall be owned by and issued to the same licensee.

I. The director may issue a bar or beer and wine bar license to the holder of a liquor store license issued simultaneously at the same premises. An applicant for a liquor store license and a bar or beer and wine bar license may consolidate the application and may apply for both licenses at the same time. The holder of each license shall fully comply with this title. A liquor store license and a bar or beer and wine bar license on the same premises shall be owned by and issued to the same licensee.

J. The director may issue a restaurant license to the holder of a beer and wine bar license issued simultaneously at the same premises. An applicant for a restaurant license and a beer and wine bar license may consolidate the application and may apply for both licenses at the same time. The holder of each license shall fully comply with this title. A restaurant license and a beer and wine bar license on the same premises shall be owned by and issued to the same licensee. The limitation stated in subsection G of this section with respect to the off-sale privileges of the beer and wine bar licenses shall be measured against the on-sales of beer and wine sales of the establishment. For the purposes of compliance with section 4-205.02, subsection M, paragraph 2, it shall be conclusively presumed that all on-premises sales of spirituous liquors are made under the authority of the restaurant license.

K. An applicant for a liquor store license or a beer and wine store license and the licensee of a liquor store license or a beer and wine store license may apply for sampling privileges associated with the license. Beer and wine store premises containing less than five thousand square feet must dedicate at least seventy-five percent of retail shelf space to the sale of spirituous liquor in order to be eligible for sampling privileges. A person desiring a sampling privilege associated with a liquor store license shall apply to the director on a form prescribed and furnished by the director. The application for sampling privileges may be filed for an existing license or may be submitted with an initial license application. The request for sampling approval, the review of the application and the issuance of approval shall be conducted under the same procedures for the issuance of a spirituous liquor license prescribed in section 4-201. After a sampling privilege has been issued for a liquor store license or a beer and wine store license, the sampling privilege shall be noted on the license itself and in the records of the department. The sampling rights associated with a license are not transferable. The director may charge a fee for processing each application for sampling privileges and a renewal fee as provided in this section. A city or town shall not charge any fee relating to the issuance or renewal of a sampling privilege. Notwithstanding section 4-244, paragraph 19, a liquor store licensee or a beer and wine store licensee that holds a license with sampling privileges may provide spirituous liquor sampling subject to the following requirements:

1. Any open product shall be kept locked by the licensee when the sampling area is not staffed.

2. The licensee is otherwise subject to all other provisions of this title. The licensee is liable for any violation of this title committed in connection with the sampling.

3. The licensed retailer shall make sales of sampled products from the licensed retail premises.

4. The licensee shall not charge any customer for the sampling of any products, except that the licensee may charge a fee for bona fide educational classes conducted in a classroom by an instructor on the licensed premises where the sampling of any spirituous liquor product is incidental to the course taught and to the course materials presented.

5. The sampling shall be conducted under the supervision of an employee of a sponsoring distiller, vintner, brewer, wholesaler or retail licensee.

6. Accurate records of sampling products dispensed shall be retained by the licensee.

7. Sampling shall be limited to three ounces of beer or cooler-type products, one and one-half ounces of wine and one ounce of distilled spirits per person, per brand, per day.

8. The sampling shall be conducted only on the licensed premises.

L. If a beer and wine bar license and a beer and wine store license are issued at the same premises, for the purposes of reporting liquor purchases under each license, all spirituous beverages purchased for sampling are conclusively presumed to be purchased under the beer and wine bar license and all spirituous liquor sold off-sale are conclusively presumed to be purchased under the beer and wine store license.

M. The director may issue a beer and wine store license to the holder of a bar license simultaneously at the same premises. An applicant for a beer and wine store license and a bar license may consolidate the application and may apply for both licenses at the same time. The holder of each license shall fully comply with this title. A beer and wine store license and a bar license on the same premises shall be owned by and issued to the same licensee. If a beer and wine store license and a bar license are issued at the same premises, for purposes of reporting liquor purchases under each license, all off-sale beer and wine sales are conclusively presumed to be purchased under the beer and wine store license. END_STATUTE

Sec. 4. 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 a liquor licensee with on-sale retail privileges may apply to the director to extend the licensed premises on an individual day or hour basis, or on a regular recurring basis or on an ongoing limited use basis to contiguous private property that is owned or leased by the applicant licensee or to public or private property that the applicant licensee has permission to use. 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 director may include noncontiguous private property on the extended premises if the property meets the requirements of the department rules applicable to regularly licensed premises. The applicant licensee shall submit a copy of the application, including the proposed days and times that the extended premises will be used, 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. The local governing body may conduct an optional safety inspection of the extended premises on the day of the event, before the event if the extended premises are ready for use before the event or before the local governing body or designee has made its recommendations, whichever is soonest.

B. The application shall contain a plan and an accurate diagram that designates the proposed physical arrangement of the proposed extended premises, including the location of ingress and egress from the extended premises and other features of the extended premises as required by the director or as required to conform with applicable building code and fire safety requirements.

B. c. 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 director shall determine the appropriate security measures that the applicant licensee shall use to control spirituous liquor service on the extended premises and to protect public health and safety. 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.

5. Be designed in a manner to ensure that security and oversight of the extended premises is provided by the applicant licensee.

C. d. The applicant licensee shall file with the application and may modify from time to time a schedule showing the proposed 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 any modification to the department and to the local governing body.

E. The licensee may not modify the physical arrangement of the extended premises to use additional space or a different space and may not modify the location of ingress or egress or the security to be provided without notifying the local governing body and the department at least ten days in advance of the proposed modification. The department may consult with the local governing body and may approve, reject or modify the proposed modification. Further compliance with subsection A of this section is not required if the only proposed modification is to reduce the size of the extended premises.

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

F. h. 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.

I. A permit for an extended premises is valid for six consecutive months or less, which is calculated from the first date of the extended premises to the last date of the extended premises.

J. Subject to section 4-224, this section does not exempt the applicant licensee from complying with any local governing body event permit requirements.

K. This section does not apply to a permanent change in the premises and does not prevent the department, together with a city, town or county, from waiving the requirements of this section for an application or event. END_STATUTE

Sec. 5. 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) (h) The producer or wholesaler may not provide samples to the retailer or the retailer's employees.

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

(l) (k) 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 $700. For the purposes of this subsection, "promotional items":

1. Means items of equipment, supplies, novelties or other advertising specialties that conspicuously display the brand name of a spirituous liquor product. Promotional items do

2. does not include signs, 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