SB1556 - 571R

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

Section 1. Section 3-314, Arizona Revised Statutes, is amended to read:

START_STATUTE3-314. Industrial hemp licenses; applications; fees; fingerprinting requirements; renewal; revocation; applicability

A. A grower, harvester, transporter or processor shall obtain an industrial hemp license from the department.

B. A grower, harvester, transporter or processor shall apply for a license pursuant to rules and orders adopted by the director.

C. An application for an original or renewal industrial hemp license shall comply with all of the following:

1. Be on a form that is provided by the department.

2. Include complete and accurate information.

3. Be accompanied by the license fee prescribed by the director. The director shall deposit, pursuant to sections 35-146 and 35-147, fees collected under this paragraph in the industrial hemp trust fund established by section 3-315.

D. An applicant shall provide proof to the department of having a valid fingerprint clearance card issued pursuant to section 41-1758.07 for the purpose of validating applicant eligibility.

E. A license issued pursuant to this section is valid for one year, unless revoked, and may be renewed as provided by the department. Rather than renewing a licensee's license every year, a licensee may renew the licensee's license every two years by paying a license fee that is twice the amount designated by the fee schedule in rule that is adopted by the director and other applicable fees. Licensees that renew every two years shall comply with any annual reporting requirements.

F. The department may revoke or refuse to issue or renew a license for a violation of any law of this state, any federal law or any rule or order adopted by the director.

G. A member of an Indian tribe may apply for a license pursuant to this section. If a member of an Indian tribe is issued a license pursuant to this section, the member is subject to the requirements prescribed in this article.

h. This article does not apply to an adult hemp beverages manufacturer as defined in section 4-101 that is not engaged as a grower, harvester, transporter or processor of industrial hemp. END_STATUTE

Sec. 2. Heading change

The heading to title 4, Arizona Revised Statutes, is changed from "ALCOHOLIC BEVERAGES" to "ALCOHOLIC BEVERAGES AND ADULT HEMP BEVERAGES".

Sec. 3. 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) 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) A weapon is brandished, displayed or used.

(iv) 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. "Adult hemp beverage" means any beverage that contains less than thirty milligrams per liter by volume of total tetrahydrocannabinol, that is derived from industrial hemp and that is intended for human consumption.

3. "Adult hemp beverages manufacturer" means any individual, partnership, corporation, cooperative association or other business entity that is licensed to manufacture hemp-derived tetrahydrocannabinol into adult hemp beverages products.

4. "Adult hemp beverages multiple-serving container" means any resealable container that contains an adult hemp beverage and that has an internal volume of at least three hundred seventy-five milliliters or 12.68 fluid ounces.

5. "Adult hemp beverages single-serving container" means any nonresealable container that contains an adult hemp beverage and that has an internal volume of at least two hundred milliliters or 6.76 fluid ounces.

2. 6. "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. 7. "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. 8. "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. 9. "Board" means the state liquor board.

6. 10. "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 12, 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. 11. "Broken package" means any container of spirituous liquor on which the United States tax seal has been broken or removed or any container of spirituous liquor or adult hemp beverages from which the cap, cork or seal placed on the container by the manufacturer has been removed.

8. 12. "Club" includes any of the following organizations where the sale of spirituous liquor OR adult hemp beverageS 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 OR adult hemp beverages, but solely to a bona fide club, where the sale of liquor OR adult hemp beverages 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. 13. "Company" or "association", when used in reference to a corporation, includes successors or assigns.

10. 14. "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. 15. "Controlling person" means a person directly or indirectly possessing control of an applicant or licensee.

12. 16. "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. 17. "Craft producer" means a licensed farm winery, a licensed microbrewery or a licensed craft distiller.

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

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

16. 20. "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.

17. 21. "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.

18. 22. "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.

19. 23. "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.

24. "Hemp or Industrial hemp":

(a) has the same meaning as industrial hemp as defined in section 3-311.

(b) DOES NOT INCLUDE MARIJUANA AS DEFINED IN SECTION 36-2850.

25. "hemp beverages MANUFACTURE" AND "hemp beverages MANUFACTURING" MEANS TO COMPOUND, BLEND, INFUSE OR OTHERWISE MAKE OR PREPARE AN ADULT HEMP BEVERAGE.

26. "hemp-derived tetrahydrocannabinol" means delta-9 tetrahydrocannabinol extracted from industrial hemp that is water SOLUBLE and used in the manufacture of adult hemp beverages for human consumption.

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

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

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

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

24. 31. "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.

25. 32. "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.

26. 33. "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.

27. 34. "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 other than an adult hemp beverage, 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.

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

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

30. 37. "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.

38. "Permit" means a permit issued pursuant to this title.

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

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

(a) Means the area from which the licensee is authorized to sell, dispense or serve spirituous liquors OR adult hemp beverages under the provision of the license.

(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.

41. "Produced" means spirituous liquor produced by a licensed craft producer or a producer that is federal excise tax paid, bottled, labeled and commercially available for wholesale or retail.

33. 42. "Registered alcohol or adult hemp beverage delivery contractor":

(a) Means a person who delivers spirituous liquor OR adult hemp beverages 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.

34. 43. "Registered mail" includes certified mail.

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

36. 45. "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.

37. 46. "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.

38. 47. "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.

39. 48. "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.

49. "total tetrahydrocannabinol" means any combination of tetrahydrocannabinolic acid or a tetrahydrocannabinol component or any derivative thereof.

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

41. 51. "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.

42. 52. "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.

43. 53. "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.

44. 54. "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. 4. Section 4-112, Arizona Revised Statutes, is amended to read:

START_STATUTE4-112. Powers and duties of board and director of department of liquor licenses and control; investigations; county and municipal regulation; definition

A. The board shall:

1. Grant and deny applications in accordance with the provisions of this title.

2. Adopt rules in order to carry out the provisions of this section.

3. Hear appeals and hold hearings as provided in this section.

B. Except as provided in subsection A of this section, the director shall administer the provisions of this title, including:

1. Adopting rules:

(a) For carrying out the provisions of this title.

(b) For the proper conduct of the business to be carried on under each specific type of spirituous liquor or ADULT HEMP BEVERAGEs license.

(c) To enable and assist state officials and political subdivisions to collect taxes levied or imposed in connection with spirituous liquors or ADULT HEMP BEVERAGES.

(d) For the issuance and revocation of certificates of registration of retail agents, including provisions governing the shipping, storage and delivery of spirituous liquors or ADULT HEMP BEVERAGES by registered retail agents, the keeping of records and the filing of reports by registered retail agents.

(e) To establish requirements for licensees under section 4-209, subsection B, paragraph 12.

2. Subject to title 41, chapter 4, article 4, employing necessary personnel and fixing their compensation pursuant to section 38-611.

3. Keeping an index record that is a public record open to public inspection and that contains the name and address of each licensee and the name and address of any person having an interest, either legal or equitable, in each license as shown by any written document that is placed on file in the office of the board.

4. Providing the board with supplies and personnel as directed by the board.

5. Responding in writing to any law enforcement agency that submits an investigative report to the department relating to a violation of this title, setting forth what action, if any, the department has taken or intends to take on the report and, if the report lacks sufficient information or is otherwise defective for use by the department, what the agency must do to remedy the report.

6. Taking steps that are necessary to maintain effective liaison with the department of public safety and all local law enforcement agencies in the enforcement of this title including the laws of this state against the consumption of spirituous liquor by persons under the legal drinking age.

7. Providing training to law enforcement agencies in the proper investigation and reporting of violations of this title.

C. The director shall establish within the department a separate investigations unit that has as its sole responsibility the investigation of compliance with this title, including the investigation of licensees alleged to have sold or distributed spirituous liquor OR ADULT HEMP BEVERAGES in any form to persons under the legal drinking age. Investigations conducted by this unit may include covert undercover investigations.

D. All employees of the department of liquor licenses and control, except members of the state liquor board and the director of the department, shall be employed by the department in the manner prescribed by the department of administration.

E. The director may enter into a contract or agreement with any public agency for any joint or cooperative action as provided for by title 11, chapter 7, article 3.

F. The board or the director may take evidence, administer oaths or affirmations, issue subpoenas requiring attendance and testimony of witnesses, cause depositions to be taken and require by subpoena duces tecum the production of books, papers and other documents that are necessary for the enforcement of this title. Proceedings held during the course of a confidential investigation are exempt from title 38, chapter 3, article 3.1. If a person refuses to obey a subpoena or fails to answer questions as provided by this subsection, the board or the director may apply to the superior court in the manner provided in section 12-2212. The board or director may serve subpoenas by personal service or certified mail, return receipt requested.

G. The director may:

1. Examine books, records and papers of a licensee.

2. Require applicants, licensees, employees who serve, sell or furnish spirituous liquors to retail customers, managers and managing agents to take training courses approved by the director in spirituous liquor or ADULT HEMP BEVERAGES handling and spirituous liquor or ADULT HEMP BEVERAGE laws and rules. The director shall adopt rules that set standards for approving training courses. The director may suspend or revoke the previous approval of trainers who do not adhere to course administration requirements prescribed by the department or who do not meet course standards. If the director suspends or revokes the previous approval of a trainer pursuant to this paragraph, the trainer may appeal to the board pursuant to section 4-210.02 as if the suspension or revocation was a sanction against a licensee. After January 1, 2019, The rules for on-sale retailer basic training and on-sale retailer management training shall include security procedures for security personnel assigned to monitor admission of patrons, interaction with patrons, calls to law enforcement and strategies for use of force and for the use of de-escalation techniques. If the retailer uses a registered security guard, the retailer shall attempt to verify the validity and status of the security guard's registration certificate. The department's licensed investigators may participate and receive compensation as lecturers at approved training courses within this state's jurisdiction that are conducted by other entities but shall not participate in in-house training programs for licensees.

3. Delegate to employees of the department authority to exercise powers of the director in order to administer the department.

4. Regulate signs that advertise a spirituous liquor or ADULT HEMP BEVERAGE product at licensed retail premises.

5. Cause to be removed from the marketplace spirituous liquor or ADULT HEMP BEVERAGEs that may be contaminated.

6. Regulate the age and conduct of erotic entertainers at licensed premises. The age limitation governing these erotic entertainers may be different from other employees of the licensee.

7. Issue and enforce cease and desist orders against any person or entity that sells beer, wine, or spirituous liquor OR ADULT HEMP BEVERAGEs without an appropriate license or permit.

8. Confiscate wines carrying a label including a reference to Arizona or any Arizona city, town or place unless at least seventy-five percent by volume of the grapes used in making the wine were grown in this state.

9. Accept and expend private grants of monies, gifts and devises for conducting educational programs for parents and students on the repercussions of underage alcohol consumption. State general fund monies shall not be expended for the purposes of this paragraph. If the director does not receive sufficient monies from private sources to carry out the purposes of this paragraph, the director shall not provide the educational programs prescribed in this paragraph. Grant monies received pursuant to this paragraph are nonlapsing and do not revert to the state general fund at the close of the fiscal year.

10. Procure fingerprint scanning equipment and provide fingerprint services to license applicants and licensees. The department may charge a fee for providing these services.

11. Accept electronic signatures on all department and licensee forms and documents and applications. The director may adopt requirements that would require facsimile signatures to be followed by original signatures within a specified time period.

12. For use after January 1, 2019, Adopt a form that is required to be used by all on-sale retailers that hire or designate employees to serve as security personnel. All security personnel job applicants and employees for on-sale retailers shall complete the form, which shall be notarized, before assignment to a security role. The form shall require the applicant or other person to disclose whether in the previous five years the person has been a registered sex offender or pled guilty to, pled no contest to or been convicted of any offense that constitutes assault, homicide, domestic violence, sexual misconduct, misconduct involving a deadly weapon or a drug violation that constitutes the illegal sale, manufacturing, cultivation or transportation for sale of marijuana, a dangerous drug or a narcotic drug. A licensee may not hire or assign to a role as security personnel any person who fails to complete the form or if the whose form discloses one of the listed offenses within the previous five years. The licensee shall maintain on file affidavits of all security personnel hired or designated by the licensee. The form may not be required for a peace officer who is certified by the Arizona peace officer standards and training board or other security personnel who hold a current security guard registration certificate or armed security guard registration certificate issued pursuant to title 32, chapter 26.

H. A county or municipality may enact and enforce ordinances regulating the age and conduct of erotic entertainers at licensed premises in a manner at least as restrictive as rules adopted by the director.

I. For the purposes of this section, "security personnel":

1. Includes individuals whose primary assigned responsibilities include the security and safety of employees and patrons of an on-sale retailer premises. Security personnel

2. Does not include a person whose primary responsibilities include checking the identification cards of patrons to determine compliance with age requirements. END_STATUTE

Sec. 5. Section 4-114, Arizona Revised Statutes, is amended to read:

START_STATUTE4-114. Interest in business prohibited; forfeiture of office

A. Except for a member designated by the governor to be appointed from the industry, no member of the board or the director or any employee of the department shall be financially interested directly or indirectly in any business licensed to deal in spirituous liquors or ADULT HEMP BEVERAGES.

B. Violation of this section by the director or any member of the board shall be deemed a resignation by such person, and a violation by an employee of the department shall result in his the employee's immediate dismissal. END_STATUTE

Sec. 6. Section 4-201, Arizona Revised Statutes, is amended to read:

START_STATUTE4-201. Licensing; application procedure in city, town or county; burden of proof

A. A person desiring a license to manufacture, sell or deal in spirituous liquors OR ADULT HEMP BEVERAGES shall apply to the director on a form prescribed and furnished by the director.

B. A person who files an application for a license within an incorporated city or town shall file the application with the director. The director shall remit the application to the city or town clerk. The city or town clerk shall immediately file a copy of the application in the clerk's office and post a copy for a period of twenty days in a conspicuous place on the front of the premises where the business is proposed to be conducted, with a statement requiring any natural person who is a bona fide resident residing or owning or leasing property within a one-mile radius from the premises proposed to be licensed, and who is in favor of or opposed to the issuance of the license, to file written arguments in favor of or opposed to the issuance of the license with the clerk within twenty days after the date of posting. The posting shall be limited to a copy of the license application and shall not contain any attachments filed with the application. The written argument shall contain the natural person's complete name, street address or post office box address and written or electronic signature. If the written arguments are filed by a person on behalf of a corporation or other legal entity or association, the written arguments must be accompanied by a copy of the entity's organizing document, a designation of the office or position that the person holds within the organization and a copy of the written appointment of the person to speak on behalf of the organization. If the written arguments are filed by a neighborhood association, block watch or other unincorporated association, written arguments must be accompanied by a letter of authority designating that person as a spokesperson. The posting shall contain substantially the following:

Notice

A hearing on a liquor license application OR ADULT HEMP BEVERAGEs LICENSE APPLICATION shall be held before the local governing body at the following date, time and place:

(Insert date, time and address)

The local governing body will recommend to the state liquor board whether the board should grant or deny the license. The state liquor board may hold a hearing to consider the recommendation of the local governing body. Any person residing or owning or leasing property within a one-mile radius may contact the state liquor board in writing to register as a protestor. To request information regarding procedures before the board and notice of any board hearings regarding this application, contact the state liquor board at:

(Insert address and telephone number).

No arguments shall be filed or accepted by the city or town clerk thereafter. This subsection does not prevent a bona fide resident residing or owning or leasing property within a one-mile radius from the premises proposed to be licensed from testifying in favor of or in opposition to the issuance of the license, regardless of whether or not the person is a user or nonuser of spirituous liquor or adult hemp beverages.

C. The governing body of the city, town or county shall then enter an order recommending approval or disapproval within sixty days after the filing of the application and shall file a certified copy of the order with the director. If the recommendation is for disapproval, a statement of the specific reasons containing a summary of the testimony or other evidence supporting the recommendation for disapproval shall be attached to the order. All petitions submitted to the governing body within the twenty-day period for filing protests shall be transmitted to the director with the certified copy of the order.

D. If a person applies for a license to conduct a spirituous liquor or adult hemp beverage business outside an incorporated city or town, the director shall remit the application to the clerk of the board of supervisors of the county where the applicant desires to do business, and the proceedings by the clerk and board of supervisors shall be as provided for cities and towns.

E. On receipt of an application for a spirituous liquor license or adult hemp beverages MANUFACTURER license, the director shall set the application for a hearing by the board on a date following the expiration of the time fixed for the submitting of the certified order by the governing body of the city or town or the board of supervisors. If the city or town or the county recommends approval of the license, a hearing is not required unless the director, the board or any aggrieved party requests a hearing on the grounds that the public convenience and the best interest of the community will not be substantially served if a license is issued. Any natural person residing or owning or leasing property within a one-mile radius of the proposed location may file a written protest with the director on a form prescribed by the director not later than fifteen calendar days after action by the local governing body or sixty days after the filing of the application, whichever is sooner. The director shall allow protests to be submitted by e-mail email. The written argument shall contain the natural person's complete name, street address or post office box address and written or electronic signature. If the written arguments are filed by a person on behalf of a corporation or other legal entity or association, the written arguments must be accompanied by a copy of the entity's organizing document, a designation of the office or position that the person holds within the organization and a copy of the written appointment of the person to speak on behalf of the organization. If the written arguments are filed by a neighborhood association, block watch or other unincorporated association, written arguments must be accompanied by a letter of authority designating that person as a spokesperson. If no hearing is requested by the director, the board or any aggrieved party, the application may be approved by the director. If the recommendation is for disapproval of an application, the board shall hold a hearing. If the city, town or county recommends approval of the license pursuant to subsection C of this section or makes no recommendation, the director may cancel the hearing and issue the license unless the board or any aggrieved party requests a hearing. If the reason for the protest is clearly removed or deemed satisfied by the director, the board shall cancel the hearing. If the board cancels the hearing, the department may administratively issue an order without the applicant licensee or other parties present. The certified order, the reasons contained in the order and the summary of the testimony and other evidence supporting the city, town or county disapproval of the recommendation shall be read into the record before the board and shall be considered as evidence by the board. The board shall consider the certified order together with other facts and a report of the director relating to the qualifications of the applicant. If the governing body of the city or town or the board of supervisors fails to return to the director, as provided in subsections subsection C and D of this section, its order of disapproval, no hearing is required. An application shall be approved or disapproved within one hundred five days after the filing of the application. If, after a hearing by the board where a license has been approved, a formal written order is not entered within thirty days after the hearing, the decision of the board is deemed entered on the thirtieth day after the hearing.

F. A hearing may be conducted by an administrative law judge at the request of the board to make findings and recommendations for use by the board in determining whether to grant or deny a license. The administrative law judge shall submit a report of findings to the board within twenty days after the hearing. The board may affirm, reverse, adopt, modify, supplement, amend or reject the administrative law judge's report in whole or in part.

G. Except for a person-to-person transfer of a transferable license for use at the same location and as otherwise provided in section 4-203, subsection A, in all proceedings before the governing body of a city or town, the board of supervisors of a county or the board, the applicant bears the burden of showing that the public convenience requires and that the best interest of the community will be substantially served by the issuance of a license.

H. In order to prevent the proliferation of spirituous liquor licenses and adult hemp beverages licenses, the department may deny a license to a business on the grounds that the business is inappropriate for the sale of spirituous liquor or adult hemp beverages. An inappropriate business is one that cannot clearly demonstrate that the sale of spirituous liquor or adult hemp beverages is directly connected to its primary purpose and that the sale of spirituous liquor or adult hemp beverages is not merely incidental to its primary purpose.

I. The board shall adopt, by rule, guidelines that state criteria for use in determining whether the public convenience requires and the best interest of the community will be substantially served by the issuance or transfer of a liquor license or adult hemp beverages license at the location applied for. These guidelines shall govern the recommendations and other approvals of the department and the local governing authority.

J. If the governing body of a city or town recommends disapproval by a two-thirds vote of the members present and voting on an application for the issuance or transfer of a spirituous liquor license or adult hemp beverages license that, if approved, would result in a license being issued at a location either having no license or having a license of a different series, the application shall not be approved unless the board decides to approve the application by a two-thirds vote of the members present and voting. END_STATUTE

Sec. 7. Section 4-202, Arizona Revised Statutes, is amended to read:

START_STATUTE4-202. Qualifications of licensees; application; background information; prior convictions

A. Every spirituous liquor licensee and adult hemp beverages licensee, other than a club licensee, a corporation licensee, a limited liability company licensee or an out-of-state licensee, shall be a citizen of the United States and a bona fide resident of this state or a legal resident alien who is a bona fide resident of this state. If a partnership, each partner shall be a citizen of the United States and a bona fide resident of this state or a legal resident alien who is a bona fide resident of this state, except that for a limited partnership an individual general partner is required to meet the qualifications of an individual licensee, a corporate general partner is required to meet the qualifications of a corporate licensee and a limited partner is not required to be a citizen of the United States, a legal resident alien or a bona fide resident of this state. If a corporation or limited liability company, it shall be a domestic corporation or a foreign corporation or a limited liability company that has qualified to do business in this state. A person shall hold a club license, corporation license, limited liability company license, partnership license or out-of-state license through an agent who shall be is a natural person and meet who meets the qualifications for licensure, except that an agent for an out-of-state license as specified in section 4-209, subsection B, paragraph 2 need not be a resident of this state. Notice of change of agent shall be filed with the director within thirty days after a change. For the purposes of this subsection, "agent" means a person who is designated by an applicant or licensee to receive communications from the department and to file documents and sign documents for filing with the department on behalf of the applicant or licensee.

B. A person shall file an application for a spirituous liquor license or an adult hemp beverages manufacturer license on a form prescribed by the director. The director shall require any applicant and may require any controlling person, other than a bank or licensed lending institution, to furnish background information and to submit a full set of fingerprints to the department. The department of liquor licenses and control shall submit the fingerprints to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41-1750 and Public Law 92-544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation. If a license is issued or transferred when fees are waived pursuant to section 4-209, subsection I, no an additional background check is not required if the person has already completed a background investigation in connection with the continuing business.

C. Each applicant or licensee shall designate a person who shall be is responsible for managing the premises. The designated person may be the applicant or licensee. The manager shall be a natural person and shall meet all the requirements for licensure. The same person may be designated as the manager for more than one premises owned by the same licensee. Notice of a change in the manager shall be filed with the director within thirty days after a change.

D. No license shall be issued to any person who, within one year before application, has had a license revoked. The director shall not issue an interim permit or restaurant license to any person who, at the same location, has been required to surrender a restaurant license pursuant to section 4-205.02, subsection D or section 4-213 until twelve months after the date of the surrender. No license shall be issued to or renewed for any person who, within five years before application, has been convicted of a felony, or convicted of an offense in another state that would be a felony in this state. For a conviction of a corporation to be a basis for a denial under this section, the limitations that are provided in section 4-210, subsection A, paragraph 8 shall apply. No corporation shall have its annual license issued or renewed unless it has on file with the department a list of its officers and directors and any stockholders who own ten percent or more of the corporation.

E. The department of liquor licenses and control shall receive criminal history record information from the department of public safety for applicants for employment with the department of liquor licenses and control or for a license issued by the department of liquor licenses and control.

F. The department shall not issue or renew a license for any person who on the request of the director fails to provide the department with complete financial disclosure statements indicating all financial holdings of the person or any other person in or relating to the license applied for, including all cosignatories on financial holdings, land, buildings, leases or other forms of indebtedness that the applicant has incurred or will incur. END_STATUTE

Sec. 8. Section 4-203, Arizona Revised Statutes, is amended to read:

START_STATUTE4-203. Licenses; issuance; transfer; reversion to state; tastings; rules; off-sale privileges; order requirements

A. A spirituous liquor license including, if applicable, the privilege to manufacture, sell or deal in adult hemp beverages, or an adult hemp beverage manufacturer license shall be issued only after satisfactory showing of the capability, qualifications and reliability of the applicant and, with the exception of wholesaler, producer, government or club licenses, that the public convenience requires and that the best interest of the community will be substantially served by the issuance. If an application is filed for the issuance of a transferable or nontransferable license, other than for a craft distiller license, a microbrewery license or a farm winery license, for a location that on the date the application is filed has a valid license of the same series, or in the case of a restaurant license application filed for a location with a valid hotel-motel license, issued at that location, there shall be a rebuttable presumption that the public convenience and best interest of the community at that location was established at the time the location was previously licensed. The presumption may be rebutted by competent contrary evidence. The presumption shall not apply once the licensed location has not been in use for more than one hundred eighty days and the presumption shall not extend to the personal qualifications of the applicant.

B. The license shall be to manufacture, sell or deal in spirituous liquors or adult hemp beverages only at the place and in the manner provided in the license. A separate license shall be issued for each specific business, and each shall specify:

1. The particular spirituous liquors or adult hemp beverages that the licensee is authorized to manufacture, sell or deal in.

2. The place of business for which issued.

3. The purpose for which the liquors or adult hemp beverages may be manufactured or sold.

C. A spirituous liquor license issued to a bar, a liquor store or a beer and wine bar shall be transferable as to any permitted location within the same county, if the transfer meets the requirements of an original application. A spirituous liquor license may be transferred to a person qualified to be a licensee, if the transfer is pursuant to either judicial decree, nonjudicial foreclosure of a legal or equitable lien, including security interests held by financial institutions pursuant to section 4-205.05, a sale of the license, a bona fide sale of the entire business and stock in trade, or other bona fide transactions that are provided for by rule. Any change in ownership of the business of a licensee, directly or indirectly, as defined by rule is deemed a transfer, except that there is no transfer if a new artificial person is added to the ownership of a licensee's business but the controlling persons remain identical to the controlling persons that have been previously disclosed to the director as part of the licensee's existing ownership. the new owner of a license transferred pursuant to this subsection that includes licensing for adult hemp beverages may elect to remove adult hemp beverages from the transferred license by notifying the department.

D. All applications for a new license pursuant to section 4-201 or for a transfer to a new location pursuant to subsection C of this section shall be filed with and determined by the director, except when the governing body of the city or town or the board of supervisors receiving an application pursuant to section 4-201 orders disapproval of the application or when the director, the state liquor board or any aggrieved party requests a hearing. The application shall then be presented to the state liquor board, and the new license or transfer shall not become effective unless approved by the state liquor board.

E. A person who assigns, surrenders, transfers or sells control of a spirituous liquor license or business that has a spirituous liquor license shall notify the director within thirty business days after the assignment, surrender, transfer or sale. A spirituous liquor license shall not be leased or subleased. A concession agreement entered into under section 4-205.03 is not considered a lease or sublease in violation of this section.

F. If a person other than those persons originally licensed acquires control over a license or licensee, the person shall file notice of the acquisition with the director within thirty business days after the acquisition of control and a list of officers, directors or other controlling persons on a form prescribed by the director. There is no acquisition of control if a new person is added to the ownership of a licensee's business but the controlling persons remain identical to the controlling persons that have been previously disclosed to the director as part of the licensee's existing ownership. All officers, directors or other controlling persons shall meet the qualifications for licensure as prescribed by this title. On request, the director shall conduct a preinvestigation before the assignment, sale or transfer of control of a license or licensee, the reasonable costs of which, not more than $1,000, shall be borne by the applicant. The preinvestigation shall determine whether the qualifications for licensure as prescribed by this title are met. On receipt of notice of an acquisition of control or request of a preinvestigation, the director, within fifteen days after receipt, shall forward the notice of the acquisition of control to the local governing body of the city or town, if the licensed premises is in an incorporated area, or the county, if the licensed premises is in an unincorporated area. The director shall include in the notice to the local governing body written instructions on how the local governing body may examine, free of charge, the results of the department's investigation regarding the capabilities, qualifications and reliability of all officers, directors or other controlling persons listed in the application for acquisition of control. The local governing body, or the governing body's designee, may provide the director with a recommendation, either in favor of or against the acquisition of control, within sixty days after the director mails the notice, but section 4-201 does not apply to the acquisition of control provided for in this section. A local governing body may charge not more than one fee, regardless of the number of licenses held by the applicant, for review of one or more applications for acquisition of control submitted to the department at the same time and for the same entity. Within one hundred five days after filing the notice of the acquisition of control, the director shall determine whether the applicant is qualified, capable and reliable for licensure. A recommendation by the local governing body, or the governing body's designee, against the acquisition of control or denial by the director shall be set for a hearing before the board. The person who has acquired control of a license or licensee has the burden of an original application at the hearing, and the board shall make its determination pursuant to section 4-202 and this section with respect to capability, reliability and qualification.

G. A licensee who holds a license in nonuse status for more than five months shall be required to pay a $100 surcharge for each month thereafter. The surcharge shall be paid at the time the license is returned to active status. A license automatically reverts to the state after being held in continuous nonuse for more than thirty-six months. The director may waive the surcharge and may extend the time period provided in this subsection for good cause if the licensee files a written request for an extension of time to place the license in active status before the date of the automatic reversion. Unless the reverted license of the licensee has been subsequently reissued, the director shall relieve a licensee or its legal representative from a prior license reversion under this section if the request for such relief is filed in writing not later than two years after the date of reversion. A license shall not be deemed to have gone into active status if the license is transferred to a location that at the time of or immediately before the transfer had an active license of the same type, unless the licenses are under common ownership or control.

H. A restructuring of a licensee's business is not an acquisition of control, a transfer of a spirituous liquor license or the issuance of a new spirituous liquor license or an adult hemp beverages manufacturer license if both of the following apply:

1. All of the controlling persons of the licensee and the new business entity are identical.

2. There is no change in control or beneficial ownership.

I. If subsection H of this section applies, the licensee's history of violations of this title is the history of the new business entity. The director may prescribe a form and shall require the applicant to provide the necessary information to ensure compliance with this subsection and subsections F and G of this section.

J. Notwithstanding subsection B of this section, the holder of a retail license in this state having off-sale privileges, except a bar, beer and wine bar or restaurant licensee, may take orders by telephone, mail, fax or catalog, through the internet or by other means for the sale and delivery of spirituous liquor or adult hemp beverages off of the licensed premises to a person in this state in connection with the sale of spirituous liquor or adult hemp beverages. Notwithstanding the definition of "sell" prescribed in section 4-101, the placement of an order and payment pursuant to this section is not a sale until delivery has been made. At the time that the order is placed, the licensee shall inform the purchaser that state law requires a purchaser of spirituous liquor or adult hemp beverages to be at least twenty-one years of age and that the person accepting delivery of the spirituous liquor or the adult hemp beverages is required to comply with this state's age identification requirements as prescribed in section 4-241, subsections A and K. The licensee may maintain a delivery service and may contract with one or more independent contractors, that may also contract with one or more independent contractors, or may contract with a common carrier for delivery of spirituous liquor or adult hemp beverages if the spirituous liquor is or adult hemp beverages are loaded for delivery at the premises of the retail licensee in this state and delivered in this state. Except if the person delivering the order has personally retrieved and bagged or otherwise packaged the container of spirituous liquor for delivery and the licensee records, or requires to be recorded electronically, the identification information for each delivery, all containers of spirituous liquor or adult hemp beverages delivered pursuant to this subsection shall be conspicuously labeled with the words "contains alcohol or adult hemp beverages, signature of person who is twenty-one years of age or older is required for delivery". The licensee is responsible for any violation of this title or any rule adopted pursuant to this title that is committed in connection with any sale or delivery of spirituous liquor or adult hemp beverages. Delivery must be made by an employee of the licensee or other authorized person as provided by this section who is at least twenty-one years of age to a customer who is at least twenty-one years of age and who displays an identification at the time of delivery that complies with section 4-241, subsection K. The retail licensee shall collect payment for the full price of the spirituous liquor or the adult hemp beverages from the purchaser before the product leaves the licensed premises. The director shall adopt rules that set operational limits for the delivery of spirituous liquors or adult hemp beverages by the holder of a retail license having off-sale privileges. With respect to the delivery of spirituous liquor or adult hemp beverages, for any violation of this title or any rule adopted pursuant to this title that is based on the act or omission of a licensee's employee or other authorized person, the mitigation provision of section 4-210, subsection G applies, with the exception of the training requirement. For the purposes of this subsection and notwithstanding the definition of "sell" prescribed in section 4-101, section 4-241, subsections A and K apply only at the time of delivery. For the purposes of compliance with this subsection, an independent contractor, a subcontractor of an independent contractor, the employee of an independent contractor or the employee of a subcontractor is deemed to be acting on behalf of the licensee when making a delivery of spirituous liquor or adult hemp beverages for the licensee.

K. Except as provided in subsection J of this section, Arizona licensees may transport spirituous liquors OR ADULT HEMP BEVERAGES for themselves in vehicles owned, leased or rented by the licensee.

L. Notwithstanding subsection B of this section, an off-sale retail licensee may provide consumer tasting of wines OR ADULT HEMP BEVERAGES off of the licensed premises subject to all applicable provisions of section 4-206.01.

M. The director may adopt reasonable rules to protect the public interest and prevent abuse by licensees of the activities permitted such licensees by subsections J and L of this section.

N. Failure to pay any surcharge prescribed by subsection G of this section or failure to report the period of nonuse of a license shall be grounds for revocation of the license or grounds for any other sanction provided by this title. The director may consider extenuating circumstances if control of the license is acquired by another party in determining whether or not to impose any sanctions under this subsection.

O. If a licensed location has not been in use for three years, the location must requalify for a license pursuant to subsection A of this section and shall meet the same qualifications required for issuance of a new license except when the director deems that the nonuse of the location was due to circumstances beyond the licensee's control and an extension of time has been granted pursuant to subsection G of this section.

P. If the licensee's interest is forfeited pursuant to section 4-210, subsection L, the location shall requalify for a license pursuant to subsection A of this section and shall meet the same qualifications required for issuance of a new license except when a bona fide lienholder demonstrates mitigation pursuant to section 4-210, subsection K.

Q. The director may implement a procedure for the issuance of a license with a licensing period of two years.

R. For any sale of a farm winery or craft distiller or change in ownership of a farm winery or craft distiller directly or indirectly, the business, stock-in-trade and spirituous liquor may be transferred with the ownership, in compliance with the applicable requirements of this title.

S. Notwithstanding subsection B of this section, bar, beer and wine bar, liquor store, beer and wine store or restaurant licensees in this state may take orders by telephone, mail, fax or catalog, through the internet or by other means for the sale and delivery of spirituous liquor OR ADULT HEMP BEVERAGES off the licensed premises as follows:

1. Bar licensees for beer, wine, distilled spirits, and mixed cocktails AND ADULT HEMP BEVERAGES.

2. Beer and wine bar licensees for beer, and wine AND ADULT HEMP BEVERAGES.

3. Liquor store licensees for beer, wine, distilled spirits, and mixed cocktails AND ADULT HEMP BEVERAGES.

4. Beer and wine store licensees for beer, and wine AND ADULT HEMP BEVERAGES.

5. Restaurant licensees for any of the following:

(a) Mixed cocktails, with the sale of menu food items for consumption on or off the licensed premises, if the restaurant holds a permit issued pursuant to section 4-203.07 and section 4-205.02, subsection K or a lease pursuant to section 4-203.06.

(b) Beer if the restaurant holds a permit issued pursuant to section 4-205.02, subsection H.

(c) Beer, wine, and distilled spirits and adult hemp beverages if the restaurant holds an off-sale privileges lease with a bar or liquor store pursuant to section 4-203.07.

(d) Beer, and wine and adult hemp beverages if the restaurant holds an off-sale privileges lease with a beer and wine bar pursuant to section 4-203.07.

T. Notwithstanding the definition of "sell" prescribed in section 4-101, placing an order and paying for that order pursuant to subsection S of this section is not a sale until delivery has been made. At the time that the order is placed, the licensee shall inform the purchaser that state law requires a purchaser of spirituous liquor or adult hemp beverages to be at least twenty-one years of age and that the person accepting delivery of the spirituous liquor or adult hemp beverage is required to comply with this state's age identification requirements as prescribed in section 4-241, subsections A and K. The licensee may maintain a delivery service and may contract with one or more alcohol and adult hemp beverage delivery contractors registered pursuant to section 4-205.13 for delivery of spirituous liquor or adult hemp beverages if the spirituous liquor is or the adult hemp beverageS ARE packaged and tamperproof sealed by the bar, beer and wine bar, liquor store, beer and wine store or restaurant licensee or the licensee's employee and is loaded for delivery at the premises of the restaurant, beer and wine bar, liquor store, beer and wine store or bar licensee in this state and delivered in this state on the same business day. A liquor store or beer and wine store licensee may contract with one or more independent contractors as provided in subsection J of this section for delivery of spirituous liquor or adult hemp beverages if the spirituous liquor is or adult hemp beverageS ARE loaded for delivery at the premises of the liquor store or beer and wine store licensee in this state and delivered in this state on the same business day. All containers of spirituous liquor or adult hemp beverages delivered pursuant to subsection S of this section shall be tamperproof sealed and conspicuously labeled with the words "contains alcohol or adult hemp beverages, signature of person who is twenty-one years of age or older is required for delivery". The licensee is responsible for any violation of this title or any rule adopted pursuant to this title that is committed in connection with any sale or delivery of spirituous liquor or adult hemp beverages. Delivery must be made by an employee of the licensee or an employee or authorized independent contractor of a registered alcohol delivery contractor as provided by this section who is at least twenty-one years of age and delivery must be made to a customer who is at least twenty-one years of age and who displays an identification at the time of delivery that complies with section 4-241, subsection K. The restaurant, beer and wine bar, liquor store, beer and wine store or bar licensee shall collect payment for the full price of the spirituous liquor or adult hemp beverage from the purchaser before the product leaves the licensed premises. The director shall adopt rules that set operational limits for the delivery of spirituous liquor or adult hemp beverage pursuant to this subsection and subsection S of this section with respect to the delivery of spirituous liquor. For any violation of this title or any rule adopted pursuant to this title that is based on the act or omission of a licensee's employee or a registered alcohol delivery contractor, the mitigation provision of section 4-210, subsection G applies, with the exception of the training requirement. For the purposes of this subsection and notwithstanding the definition of "sell" prescribed in section 4-101, section 4-241, subsections A and K apply only at the time of delivery. An alcohol and adult hemp beverage delivery contractor, a subcontractor of an alcohol and adult hemp beverage delivery contractor, an employee of an alcohol and adult hemp beverage delivery contractor or an employee of a subcontractor is deemed to be acting on behalf of the licensee when making a delivery of spirituous liquor or adult hemp beverages for the licensee. For the purposes of this subsection, "business day" means between the hours of 6:00 a.m. of one day and 2:00 a.m. of the next day.

U. A licensee that has off-sale privileges and that delivers spirituous liquor or adult hemp beverages as prescribed in this section shall complete a written record of each delivery at the time of delivery. The written record shall include all of the following:

1. The name of the licensee making the delivery.

2. The complete address of the licensee making the delivery.

3. The licensee's license number.

4. The date and time of the delivery.

5. The address where the delivery was made.

6. The type and brand of all spirituous liquor or adult hemp beverage delivered.

V. A licensee that has off-sale privileges and that delivers spirituous liquor or adult hemp beverages as prescribed in this section shall obtain the following information from the individual who accepts delivery:

1. The individual's name.

2. The individual's date of birth.

3. The individual's signature. The licensee making the delivery may use an electronic signature system to comply with the requirements of this paragraph. END_STATUTE

Sec. 9. Section 4-204, Arizona Revised Statutes, is amended to read:

START_STATUTE4-204. Personal representative or fiduciary acting for licensee

A. A person acting as administrator, executor or guardian of the estate of any licensee or a person acting as receiver for any licensee, trustee of the bankrupt estate of any licensee or assignee for the benefit of creditors of a licensee is authorized, upon on receiving permission from the director, to sell and deal in spirituous liquors or adult hemp beverages under authority of the license issued to the licensee for whom the person is acting for a period not exceeding twenty-four months from after the date of the appointment of such person as administrator, executor, guardian, receiver, trustee or assignee for the benefit of creditors.

B. The provisions of This section shall does not apply if at any time during the twenty-four months an administrator, executor or guardian of the estate of a licensee who has received the permission from the director as provided in subsection A of this section transfers the license to the surviving spouse or the guardian of the minor child of the licensee.

C. A person, authorized representative or assignee, meeting the qualifications of section 4-202, not licensed under the provisions of this chapter, and owning or possessing spirituous liquor or adult hemp beverages as a result of enforcement of a security interest in the property of a wholesaler licensed under this chapter is authorized, upon on receiving permission from the director, to sell such spirituous liquor or adult hemp beverages to a licensee authorized to sell spirituous liquor or adult hemp beverages for resale. Sections 4-201, 4-203 and 4-243.01 shall do not apply to nor restrict the authority granted under this provision subsection. END_STATUTE

Sec. 10. Section 4-205, Arizona Revised Statutes, is amended to read:

START_STATUTE4-205. Issuance of club license; regulatory provisions; revocation

A. The director may issue one club license to any club as defined in section 4-101.

B. The holder of a club license is authorized to sell and serve alcoholic beverages or adult hemp beverages for consumption only within the licensed establishment owned, leased or occupied by the club, and only to bona fide members of the club, and to serve and sell to members' bona fide guests. Attendance at private clubs is limited to enrolled members of the club and their spouses, families and bona fide guests. Admitted nonmember guests shall not exceed more than fifty percent of attendance during any month. This provision shall not limit the ability of a member or the club to host wedding receptions, group meetings, civic association meetings, scheduled social functions, including bingo games, and other member or club hosted functions where individuals are not admitted on the basis of being a guest of a member of the club and attendance at the event shall not be considered in computing the fifty percent requirement. Member recruitment events that are hosted by the club or other members where individuals are not admitted on the basis of being a guest of a member of the club or not in attendance at other specified events authorized in this section shall be limited to not more than twelve events in a calendar year for each club.

C. No member and no officer, agent or employee of a club licensee shall be paid or shall directly or indirectly receive, in the form of salary or other compensation, any of the profits from the revenue producing activities of the club or from the distribution or sale of alcoholic beverages or adult hemp beverages to the members of the club or to its guests, beyond the amount of the salary as fixed and voted on at a regular meeting by the members of the club licensee or by its governing body out of the general revenue of the licensee, nor shall such salaries or compensation be in excess of reasonable compensation for the services actually performed.

D. The director may revoke a club license issued pursuant to this section if the licensee ceases to operate as a bona fide club as defined in section 4-101.

E. A club may not hold a spirituous liquor license or an adult hemp beverages manufacturer license other than one issued pursuant to this section, except that any club that on January 1, 1975 holds a spirituous liquor license other than one issued pursuant to this section may use the license until such time as the license is revoked or reverted. END_STATUTE

Sec. 11. Section 4-205.01, Arizona Revised Statutes, is amended to read:

START_STATUTE4-205.01. Hotel-motel license; issuance; revocation

A. The director may issue a hotel-motel license to any hotel or motel in this state that has in conjunction with such hotel or motel a restaurant where food is served.

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

C. The holder of a hotel-motel license may sell and serve spirituous liquors or adult hemp beverages solely for consumption on the licensed premises. For the purpose of this subsection, "licensed premises" shall include all public and private rooms, facilities and areas in which spirituous liquors or adult hemp beverages may be sold or served in the normal operating procedures of the hotel or motel.

D. In addition to other grounds prescribed in this title upon which a license may be revoked, the director may revoke a hotel-motel license issued pursuant to this section in any case in which the licensee ceases to operate as a hotel or motel, as prescribed in subsection A of this section.

E. For the purposes of this section, the licensee shall be subject to the standards and qualifications of a restaurant licensee as provided in section 4-205.02. If an independent person or entity manages and supervises the sale and service of spirituous liquor or adult hemp beverages at the premises pursuant to section 4-243.04, subsection A, paragraph 3, the person or entity may contract with the owner of the premises to sell and serve food on the premises. For the purpose of determining whether forty per cent percent of the licensee's gross revenues are derived from the sale of food, sales of food made by the owner of the premises are deemed sales of food made by the licensee. END_STATUTE

Sec. 12. 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 or adult hemp beverages.

C. The holder of a restaurant license may sell and serve spirituous liquors or adult hemp beverages 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 or adult hemp beverages pursuant to regular operating procedures and practices and that are contiguous to the restaurant or a noncontiguous patio pursuant to section 4-101, paragraph 32 40. 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 or adult hemp beverages, 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 or adult hemp beverages on the licensed premises, regardless of whether the sales of spirituous liquor or adult hemp beverages 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. 13. Section 4-205.04, Arizona Revised Statutes, is amended to read:

START_STATUTE4-205.04. Farm winery license; issuance; regulatory provisions; retail site; fee; definition

A. The director may issue a farm winery license to any person who meets the requirements of subsection C of this section. Each location that engages in producing or manufacturing these products must obtain a separate farm winery license. The licensee may not transfer the farm winery license from person to person or from location to location.

B. An applicant for a farm winery license, at the time of filing the application for the license, shall accompany the application with the license fee. A person who holds a farm winery license shall report annually at the end of each calendar year, at the time and in the manner as the director prescribes, the amount of wine produced or manufactured by the licensee during the calendar year. In addition to any provision of this title, if the total amount of wine produced or manufactured during the year exceeds the amount permitted annually by the license, the licensee shall apply for and receive a producer's license only on surrender of the farm winery license or licenses.

C. A person may be licensed as a farm winery to sell wine produced or manufactured if in a calendar year it produces at least two hundred gallons and not more than forty thousand gallons of wine and if the winery either holds a winery permit issued by the United States alcohol and tobacco tax and trade bureau or has a contract pursuant to subsection D of this section for the production or manufacturing of wine from grapes or other fruit grown on at least five producing acres of land owned or controlled by the applicant and the land has been devoted to fruit growing for at least three consecutive calendar years. The total quantity of adult hemp beverages sold shall not exceed twenty thousand gallons in a calendar year and the total quantity of adult hemp beverages manufactured shall not be aggregated with the total quantity of wine produced. A licensed farm winery may make sales and deliveries of wine or adult hemp beverages only as specifically provided in this section and as follows:

1. A licensed farm winery may make sales and deliveries of wine or adult hemp beverages to wholesalers licensed to sell wine or adult hemp beverages under this title.

2. A licensed farm winery may serve wine or adult hemp beverages produced or manufactured on the premises for the purpose of sampling the wine or adult hemp beverages. The wine may include wine produced pursuant to subsection D of this section and section 4-243.03.

3. A representative of the licensed farm winery may consume small amounts of the products of the licensed farm winery on the premises for the purpose of sampling the wine or adult hemp beverage. The wine may include wine produced pursuant to subsection D of this section and section 4-243.03.

4. A licensed farm winery may sell to a consumer physically present on the premises wine or adult hemp beverages produced or manufactured on the premises in the original container for consumption on or off the premises. The wine may include wine produced pursuant to subsection D of this section and section 4-243.03.

5. A licensed farm winery may purchase and sell wine produced, packaged and labeled OR ADULT HEMP BEVERAGES MANUFACTURED by another licensed farm winery for sampling and consumption on or off the premises only if the retail sale is to a consumer physically present on the premises of the farm winery, except that the sales of wine produced, packaged and labeled OR ADULT HEMP BEVERAGES MANUFACTURED by another winery may not exceed twenty percent of the farm winery's sales by volume. The percentage limitation shall not apply to wine produced pursuant to subsection D of this section and section 4-243.03.

6. If the licensed farm winery is not otherwise engaged in the business of a distiller, vintner, brewer, rectifier, blender or other producer of spirituous liquor in any jurisdiction, the licensed farm winery may hold licenses prescribed in section 4-209, subsection B, paragraph 12 on the licensed farm winery premises or other retail premises. Except as provided in paragraph 5 of this subsection, the licensed farm winery shall purchase all other spirituous liquor or adult hemp beverages for sale at the on-sale retail premises from wholesalers that are licensed in this state, except that a licensed farm winery may:

(a) Purchase wine or adult hemp beverages from other farm wineries pursuant to paragraph 7 of this subsection.

(b) Make deliveries of the wine that the farm winery produces or the adult hemp beverages that it manufactures to the farm winery's own commonly controlled retail licensed premises.

7. A licensed farm winery that produces not more than twenty thousand gallons of wine and that manufactures not more than twenty THOUSAND gallons of adult hemp beverages in a calendar year may make sales and deliveries of the wine or adult hemp beverages that the licensed farm winery produces to on-sale and off-sale retailers.

8. Notwithstanding section 4-244, paragraphs 3 and 7, an on-sale or off-sale retailer may purchase and accept delivery of wine or adult hemp beverages from a licensed farm winery pursuant to paragraph 7 of this subsection.

9. A licensed farm winery that produces not more than twenty thousand gallons of wine and manufactures not more than twenty thousand gallons of adult hemp beverages in a calendar year may make sales and deliveries of wine that the licensed farm winery produces or adult hemp beverages that the farm winery manufactures to consumers off of the licensed premises and that is ordered by telephone, mail, fax or catalogue, through the internet or by other means if all of the following apply:

(a) The purchaser of the wine or adult hemp beverage provided the licensed farm winery with verification of the purchaser's legal age to purchase alcohol.

(b) The shipping container in which the wine or adult hemp beverage is shipped is marked to require the signature on delivery of an adult who is of legal age to purchase alcohol or adult hemp beverages and delivery confirmation.

(d) The wine is or adult hemp beverages are delivered by the licensed farm winery or shipped by the licensed farm winery by a common carrier to a residential or business address other than a premises licensed pursuant to this title.

(e) The purchaser could have carried the wine or adult hemp beverages lawfully into or within this state.

(f) The delivery is made by a person who is at least twenty-one years of age.

(g) The farm winery collects payment for the price of the spirituous liquor or adult hemp beverages not later than at the time of delivery.

10. A licensed farm winery may make sales and deliveries as expressly permitted by sections 4-203.03, 4-203.04 and 4-244.04.

D. A person otherwise qualified to receive a farm winery license may enter into a custom crush arrangement where a licensed winery produces or manufactures wine from grapes or other fruit supplied by the person. The winery receiving the fruit shall be licensed by the United States alcohol and tobacco tax and trade bureau and the department and is responsible for filing all reports that relate to its wine production or manufacturing with the United States alcohol and tobacco tax and trade bureau and the department. Each person supplying the grapes or other fruit shall first apply for and receive a farm winery license and shall report to the department all volumes of wine from its custom crush arrangements, which shall not be allocated to the gallonage of the receiving farm winery if the supplying farm winery has an active basic permit issued by the United States alcohol and tobacco tax and trade bureau.

E. On application by a farm winery licensee, the director may authorize a farm winery licensee to operate up to two remote tasting and retail premises if:

1. The wine or adult hemp beverages sold at the premises is are limited to wine produced or manufactured by the licensed farm winery or adult hemp beverages manufactured by the licensed farm winery and wines produced or manufactured by other licensed farm wineries or adult hemp beverages manufactured by other licensed farm wineries, including wines produced or manufactured pursuant to subsection D of this section and section 4-243.03. The farm winery may sell wine or adult hemp beverages to a consumer physically present on the premises for consumption on or off the premises. Sales of wines or adult hemp beverages not produced or manufactured by the farm winery are limited to not more than twenty percent of the total sales by volume at that location. The percentage limitation shall not apply to wine produced pursuant to subsection D of this section and section 4-243.03.

2. The farm winery licensee:

(a) Remains responsible for the premises.

(b) Obtains approval for the premises from the local governing body before submitting an application to the department. A copy of an order from the local governing body recommending approval of the premises must be filed with the department as part of the application.

(d) Has an agent who is a natural person who meets the qualifications of licensure in this state.

(e) Meets the qualifications for a license pursuant to section 4-203, subsection A.

F. A farm winery licensee may hold a craft distiller license issued pursuant to section 4-205.10. The farm winery and craft distiller licensee is subject to all other requirements of this section and section 4-205.10. The farm winery may provide sampling and sales of the distilled spirits and adult hemp beverages pursuant to section 4-205.10, subsection C, paragraphs 2 and 3 on the same premises as the wine sampling and retail sales.

G. The farm winery is liable for any violation committed in connection with any sale or delivery of the wine and adult hemp beverage. The rules adopted by the director pursuant to section 4-203, subsection J apply to the delivery of wine and adult hemp beverages under subsection C, paragraph 9 of this section. An act or omission of any person who makes a sale or delivery of wine or adult hemp beverages for a licensee under subsection C, paragraph 9 of this section is deemed to be an act or omission of the licensee for the purposes of section 4-210, subsection A, paragraph 9.

H. A farm winery that sells or delivers wine or adult hemp beverages pursuant to this section shall:

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

2. File all returns or reports required by law.

I. A delivery of wine or adult hemp beverages by a farm winery to a purchaser in this state is a transaction deemed to have occurred in this state.

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

K. The director may charge an additional farm winery license fee adopted pursuant to section 4-209 for issuing licenses, authorizations or approvals pursuant to subsections D and E of this section.

L. The farm winery licensee that operates primarily as a remote tasting room premises may exchange the farm winery license for a remote tasting room license without an additional fee, not later than December 31, 2018. The new remote tasting room license must be connected to a farm winery license, with common ownership, that complies with all requirements for a farm winery license pursuant to subsections C and E of this section.

M. l. Production and storage space of the farm winery is excluded from the licensed farm winery premises and is not the public area unless that space is also used for the sale of wine or adult hemp beverages to the public or consumption of or sampling of wine or adult hemp beverages by the public or to provide other services to the public. Pursuant to section 4-118, the director, the director's agents or any peace officer may inspect spaces excluded by this subsection. For the purposes of this subsection, "public area" means a place within a farm winery that is accessible to the public and in which the farm winery authorizes the presence of members of the public.

m. For the purposes of this section, with respect to adult hemp beverages, "manufacture" or "manufacturing" means to compound, blend, infuse or otherwise make or prepare an adult hemp beverages product. END_STATUTE

Sec. 14. Section 4-205.05, Arizona Revised Statutes, is amended to read:

START_STATUTE4-205.05. Disposal of seized or recovered liquor and adult hemp beverages

A. The director may issue a temporary permit of any series authorizing the disposal at public auction of spirituous liquor or adult hemp beverages that has have been seized by any agency of this state, the federal government, any political subdivision of this state, any financial institution as defined in section 6-101 that has a security interest in a license, the federal government pursuant to statute or a trustee in bankruptcy that acquires the spirituous liquor or adult hemp beverages of a debtor. A bid at a public auction shall not be accepted from a licensee if the spirituous liquors or adult hemp beverages offered for sale at the auction were seized or acquired from that licensee. The director shall issue the permit only if presented with proper documents of seizure by the appropriate official or the appointment of a trustee in bankruptcy. The director may dispose of seized spirituous liquor or adult hemp beverages in whole or in part by public auction, by providing the spirituous liquor or adult hemp beverages to law enforcement for training and investigation purposes only or by authorizing a qualified person to recycle the spirituous liquor or adult hemp beverages.

B. Spirituous liquor and adult hemp beverages with a stated expiration date on the label shall not be offered for sale at public auction after the expiration date and shall either be destroyed or disposed of as provided in this section. The licensed wholesaler that distributes the spirituous liquor brand or adult hemp beverage in that sales territory may, but is not required to, accept a return of the spiritous liquor or adult hemp beverage at no cost for disposal or to enable it to be returned to the supplier. END_STATUTE

Sec. 15. Section 4-205.06, Arizona Revised Statutes, is amended to read:

START_STATUTE4-205.06. Hotel or motel minibars; rules; definitions

A. Notwithstanding any other statute, a hotel or motel may sell spirituous liquor or adult hemp beverages in sealed containers in individual portions to its registered guests at any time by means of a minibar located in the guest rooms of those registered guests, if all of the following conditions are met:

1. Before providing a key, magnetic card or other similar device required to attain access to the minibar in a particular guest room to the registered guest, or before otherwise providing access to the minibar to the registered guest, the licensee verifies that each registered guest to whom a key, magnetic card or similar device is provided or to whom access is otherwise provided is not a person under the legal drinking age.

2. All employees handling the spirituous liquors or adult hemp beverages to be placed in the minibar in any guest room, including an employee who inventories or restocks and replenishes the spirituous liquors or adult hemp beverages in the minibar, are at least eighteen years of age.

3. The minibar is not replenished or restocked with spirituous liquor or adult hemp beverages between the hours of 2:00 a.m. and 6:00 a.m.

4. The minibar is located on the premises of a person who has been issued an on-sale retailer's license.

5. The minibar contains no not more than thirty individual portions of spirituous liquor or adult hemp beverages at any one time.

B. A minibar may be part of another cabinet or similar device, whether refrigerated in whole or in part or nonrefrigerated, from which nonalcoholic beverages or food may be purchased by the guests in hotel or motel guest rooms. The portion of the cabinet or similar device in which spirituous liquors or adult hemp beverages are stored shall comply with the requirements of this section.

C. The director may prescribe rules to regulate the use of a minibar, including rules on the size of containers of spirituous liquors or adult hemp beverages and may by rule reduce from thirty the number of containers of spirituous liquor or adult hemp beverages placed in the minibar.

D. For the purposes of this section:

1. "Hotel" or "motel" means an establishment that is licensed to sell spirituous liquors or adult hemp beverages and that contains guest room accommodations with respect to which the predominant relationship existing between the occupants of the rooms and the owner or operator of the establishment is that of innkeeper and guest. For the purposes of this paragraph, the existence of other legal relationships as between some occupants and the owner or operator is immaterial.

2. "Minibar" means a closed container, either refrigerated in whole or in part or nonrefrigerated, where access to the interior is restricted by means of a locking device that requires the use of a key, magnetic card or similar device. END_STATUTE

Sec. 16. Section 4-205.08, Arizona Revised Statutes, is amended to read:

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

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

B. An applicant for a microbrewery license, at the time of filing the application for the license, shall accompany the application with the license fee. Persons holding a microbrewery license shall report annually at the end of each calendar year, at the time and in the manner as the director prescribes, the amount of beer or adult hemp beverages produced or manufactured by them during the calendar year and the amount delivered pursuant to subsection D, paragraph 4, subdivision (b) of this section. If the total amount of beer that is produced or adult hemp beverages manufactured during the calendar year exceeds the amount permitted annually by the license, the licensee shall apply for and receive a producer's license only on surrender of the microbrewery license or licenses and shall have no continuing rights as a microbrewery under this section. On the surrender of the microbrewery license or licenses, the licensee shall transfer, surrender or otherwise relinquish control of all of its retail licenses located remotely from a microbrewery.

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

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

2. Make sales and deliveries of beer that the microbrewery produces or ADULT HEMP BEVERAGEs that the microbrewery manufactures to persons licensed to sell beer OR ADULT HEMP BEVERAGES under this title through wholesalers licensed under this title or as provided in subsection D, paragraph 4, subdivision (a) or (b) of this section.

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

4. Serve beer produced or manufactured on the premises or adult hemp beverages manufactured on the premises for the purpose of sampling the beer OR ADULT HEMP BEVERAGES.

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

6. Maintain at no charge a tapping equipment system of a licensed retailer when the microbrewery sells beer as provided in subsection D, paragraphs 3 and 4 of this section, including cleaning the tapping equipment system and replacing bonnet washers, friction rings, valve stems, hardware, unions, clamps, air tees, screws, tapping devices, tower heads and single air and beer lines.

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

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

2. The microbrewery shall not produce or manufacture more than six million two hundred thousand gallons of beer in a calendar year. tHE TOTAL QUANTITY OF ADULT HEMP BEVERAGES MANUFACTURED SHALL NOT EXCEED TWENTY THOUSAND GALLONS IN A CALENDAR YEAR AND THE TOTAL QUANTITY OF ADULT HEMp BEVERAGES MANUFACTURED SHALL NOT BE AGGREGATED WITH THE TOTAL QUANTITY OF BEER PRODUCED.

3. If retail operations are conducted in conjunction with the microbrewery, the microbrewery may sell other spirituous liquor products OR ADULT HEMP BEVERAGE PRODUCTS if the microbrewery holds an on-sale retail license for a bar, beer and wine bar or restaurant. The microbrewery may be issued up to a combined total of seven retail licenses in this state, whether the premises are located on or adjacent to a microbrewery or remotely from a microbrewery. The limit on the number of retail licenses applies on an aggregated basis to all microbreweries OR OTHER PRODUCER OR MANUFACTURER LICENSES that are under common control of any person with control of the microbrewery.

4. The microbrewery may make sales and deliveries of beer that it has produced or manufactured adult hemp beverages it has manufactured to both:

(a) Retail licensees that meet the requirements prescribed in paragraph 3 of this subsection in any amount.

(b) Any other retail licensee in a cumulative amount not to exceed ninety-three thousand gallons OF BEER OR TWENTY THOUSAND GALLONS OF ADULT HEMP BEVERAGES in total for all licensed retailers in any calendar year.

E. A microbrewery that produces or manufactures more than one million two hundred forty thousand gallons of beer in a calendar year maintains all of the rights associated with a microbrewery license, except that the microbrewery shall not:

1. Apply for or receive a retail license pursuant to subsection D, paragraph 3 of this section for premises that are located remotely from the microbrewery.

2. Make sales or deliveries of beer that the microbrewery has produced or manufactured ADULT HEMP BEVERAGES IT HAS manufactured to any retail licensee as provided in subsection D, paragraph 4 of this section, except for the microbrewery's retail licensees on or adjacent to the microbrewery.

F. The gallonage amounts OF BEER OR ADULT HEMP BEVERAGES prescribed in subsection D, paragraph 2 and subsection E of this section apply to the aggregate manufacture or production of all microbreweries that are under common control of any person with control of the microbrewery.

G. A microbrewery that is otherwise engaged as a distiller, vintner, brewer, rectifier, blender or other producer of spirituous liquor OR manufacturer of ADULT HEMP BEVERAGES in any jurisdiction is prohibited from holding any retail license that is located remotely from a microbrewery. This subsection does not prohibit a person with control of more than one microbrewery from conducting retail operations remotely from a microbrewery pursuant to subsection D, paragraph 3 of this section.

H. A microbrewery that sells or delivers beer OR ADULT HEMP BEVERAGES pursuant to this section shall:

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

2. File all returns or reports required by law.

I. A delivery of beer OR ADULT HEMP BEVERAGES by a microbrewery to a purchaser in this state is a transaction deemed to have occurred in this state.

J. The director shall adopt rules to administer this section.

k. For the purposes for this section, with respect to adult hemp beverages "manufacture" or "manufacturing" means to compound, blend, infuse or otherwise make or prepare an adult hemp beverage product. END_STATUTE

Sec. 17. Section 4-205.10, Arizona Revised Statutes, is amended to read:

START_STATUTE4-205.10. Craft distiller license; issuance; regulatory provisions; fee; definition

A. The director may issue a craft distiller license to any person that meets the requirements of subsection C of this section. Each location that engages in producing and bottling these products must obtain a separate craft distiller license. The licensee may not transfer the craft distiller license from person to person or from location to location and may not also hold a producer's license. The licensee and all commonly controlled craft distiller licensees may not manufacture or produce more than twenty thousand gallons of distilled spirits in a calendar year. For the purposes of this section, annual gallonage shall be the total proof gallons of finished distilled product available for wholesale or retail sale as defined by 26 United States Code section 5002 and rules adopted pursuant to this section or its successor.

B. Persons holding a craft distiller license shall report annually at the end of each calendar year, at the time and in the manner as the director prescribes, the amount of distilled spirits that is produced or manufactured adult hemp beverages manufactured by that licensee during the calendar year. In addition to any other provision of this title, if the total amount of distilled spirits OR ADULT HEMP BEVERAGES that is are produced or manufactured during the year exceeds exceed the amount that is permitted annually by the license, the licensee shall apply for and, on qualification, receive a producer's license only on the surrender of the craft distiller license and shall have no continuing rights as a craft distiller licensee under this section.

C. A person may be licensed as a craft distiller to sell distilled spirits that are produced or manufactured by the person or adult hemp beverages manufactured if in a calendar year the person produces or manufactures not more than twenty thousand gallons of distilled spirits and manufacturers not more than twenty thousand gallons of adult hemp beverages and may make sales and deliveries of distilled spirits or adult hemp beverages only as specified in this section and subject to the following criteria:

1. A licensed craft distiller may make sales and deliveries of distilled spirits or adult hemp beverages to wholesalers that are licensed to sell distilled spirits or adult hemp beverages under this title.

2. A licensed craft distiller may serve distilled spirits that are produced or manufactured adult hemp beverages manufactured on the premises for the purpose of consumption on the premises and may charge for samples on the premises of the craft distiller.

3. A licensed craft distiller may sell distilled spirits that are produced or manufactured adult hemp beverages that are manufactured on the premises in the original container for consumption off the premises to a consumer who is physically present on the premises.

4. The licensed craft distiller may hold one license prescribed in section 4-209, subsection B, paragraph 6 or 12 on or adjacent to the licensed craft distiller premises. The licensed craft distiller shall purchase all other spirituous liquor or adult hemp beverages for sale at the on-sale retail premises from wholesalers that are licensed in this state, except that a licensed craft distiller may:

(a) Purchase distilled spirits or adult hemp beverages from other craft distillers that are licensed in this state. Sales of craft distillery products not produced or manufactured by the craft distiller shall be limited to no not more than twenty percent of the total sales by volume.

(b) Make deliveries of the distilled spirits or adult hemp beverages that the craft distiller manufactures or produces to any commonly controlled retail licensed premises or to the craft distiller's remote tasting rooms and that are authorized pursuant to this paragraph.

5. A licensed craft distiller that produces not more than three thousand five hundred sixty-six gallons of distilled spirits in a calendar year may make sales and deliveries of distilled spirits that the licensed craft distiller produces or adult hemp beverages that the licensed craft distiller manufactures to on-sale and off-sale retailers.

6. Notwithstanding section 4-244, paragraphs 3 and 7, an on-sale or off-sale retailer may purchase and accept delivery of distilled spirits or adult hemp beverages from a licensed craft distiller pursuant to paragraph 5 of this subsection.

7. A licensed craft distiller may make sales and deliveries of distilled spirits that the licensed craft distiller manufactures or produces or adult hemp beverages that the licensed craft distiller manufactures to consumers off of the licensed premises if the sale or delivery is ordered by telephone, mail, fax, catalogue, the internet or by other means if all of the following conditions exist:

(a) The purchaser of the distilled spirits or adult hemp beverages provided the licensed craft distiller with verification of the purchaser's legal age to purchase alcohol and a copy of same is maintained in the records of the craft distiller.

(b) The shipping container in which the distilled spirits or adult hemp beverages are shipped is marked to require the signature on delivery of an adult who is of legal age to purchase alcohol and delivery confirmation.

(d) The distilled spirits or adult hemp beverages are shipped to a residential or business address other than a premises licensed pursuant to this title.

(e) The purchaser could have carried the distilled spirits or adult hemp beverages lawfully into or within this state.

(f) A person who is at least twenty-one years of age makes the delivery.

(g) The craft distiller collects payment for the price of the spirituous liquor no or adult hemp beverages not later than at the time of delivery.

8. The total quantity of adult hemp beverages manufactured shall not exceed twenty thousand gallons in a calendar year and the total quantity of adult hemp beverages manufactured shall not be aggregated with the total quantity of distilled spirits produced.

D. On application by a craft distiller licensee, the director may authorize a craft distiller licensee to operate two other remote tasting and retail premises if:

1. The distilled spirits or adult hemp beverages sold at the premises are limited to distilled spirits produced or manufactured adult hemp beverages manufactured by the licensed craft distillery and distilled spirits produced or manufactured ADULT HEMP beverages manufactured by another licensed craft distillery. The craft distillery may sell to a consumer physically present on the premises distilled spirits produced or adult hemp beverages manufactured by the craft distillery or by other licensed craft distilleries in the original container for consumption on or off the premises. The sales of the distilled spirits produced or manufactured or adult hemp beverages manufactured by other craft distilleries shall not exceed twenty percent of the craft distillery's total sales by volume.

2. The craft distiller licensee:

(a) Remains responsible for the premises.

(d) Has an agent who is a natural person who meets the qualifications of licensure in this state.

(e) Meets the qualifications for a license pursuant to section 4-203, subsection A.

(f) For a tasting room with a shared patio, meets the requirements prescribed in section 4-205.12.

E. A craft distiller licensee may hold a farm winery license issued pursuant to section 4-205.04. The craft distiller licensee and farm winery licensee are subject to all other requirements of this section and section 4-205.04. The craft distiller may provide sampling and retail sales of distilled spirits or adult hemp beverages pursuant to subsection C, paragraphs 2 and 3 of this section on the same premises as the wine sampling and retail sales.

F. The craft distiller is liable for any violation that is committed in connection with any sale or delivery of the distilled spirits or adult hemp beverages. The rules adopted by the director pursuant to section 4-203, subsection J apply to the delivery of distilled spirits and adult hemp beverages under subsection C of this section. An act or omission of any person who makes a sale or delivery of distilled spirits for a licensee under subsection C of this section is deemed to be an act or omission of the licensee for the purposes of section 4-210, subsection A, paragraph 9.

G. A craft distiller that sells or delivers distilled spirits or adult hemp beverages pursuant to this section shall:

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

2. File all returns or reports that are required by law.

H. A delivery of distilled spirits or adult hemp beverages by a craft distiller to a purchaser in this state is a transaction deemed to have occurred in this state.

I. The production and storage space of the craft distiller are excluded from the public area of the licensed craft distiller premises. Pursuant to section 4-118, the director, the director's agents or any peace officer may inspect spaces excluded by this subsection. For the purposes of this subsection:

1. "Production and storage space" means a bonded area, tax-paid storage area and area that provides no services to the public.

2. "Public area" means a place within a licensed and bonded craft distiller that is accessible to the public and in which the craft distiller sells and samples tax-paid product and authorizes the presence of members of the public.

J. The director may adopt rules in order to administer this section.

K. The director may charge a fee adopted pursuant to section 4-209 for the issuance of a license pursuant to this section.

L. The director may issue a craft distiller license to be located on the same parcel of land as a farm winery licensed pursuant to section 4-205.04.

m. For the purposes for this section, with respect to adult hemp beverages "manufacture" means to compound, blend, infuse or otherwise make or prepare an adult hemp beverage product. END_STATUTE

Sec. 18. Section 4-205.13, Arizona Revised Statutes, is amended to read:

START_STATUTE4-205.13. Registered alcohol and adult hemp beverages delivery contractor; issuance; fees; regulatory provisions

A. The director may register any person in this state as an alcohol and adult hemp beverages delivery contractor for the purposes of delivering spirituous liquor from a bar, beer and wine bar, liquor store, beer and wine store or restaurant licensee to a consumer in this state pursuant to section 4-203, subsections S and T.

B. A person shall apply to be a registered alcohol and adult hemp beverages delivery contractor on a form prescribed by the director. The director shall require an applicant to provide the controlling person's identification and any background information deemed necessary to identify the person and to demonstrate proof of the person's authority to conduct business in this state, including copies of any required state or local business licenses or permits. The director may establish and charge a registration fee and a renewal fee to be used for administrative and enforcement costs associated with alcohol and adult hemp beverages delivery contractors.

C. The department shall maintain a list of registered alcohol and adult hemp beverages delivery contractors that are not otherwise in penalty status pursuant to subsection G of this section.

D. The department may require new registered alcohol and adult hemp beverages delivery contractors to complete an approved training course in accordance with section 4-112, subsection G, paragraph 2. A registered alcohol and adult hemp beverages delivery contractor is subject to examinations conducted pursuant to section 4-112, subsection G, paragraph 1.

E. The director may refuse to register a person as an alcohol and adult hemp beverages delivery contractor for good cause and may not register any person as an alcohol and adult hemp beverages delivery contractor if the person has been convicted of a felony in this state or any other state within five years immediately preceding the application.

F. A registered alcohol and adult hemp beverages delivery contractor may deliver spirituous liquor and adult hemp beverages to a consumer in this state on behalf of a bar, beer and wine bar, liquor store, beer and wine store or restaurant in this state pursuant to section 4-203, subsections S and T, if the registered alcohol delivery contractor complies with this title. A registered alcohol and adult hemp beverages delivery contractor may contract with one or more independent subcontractors for the delivery of spirituous liquor and adult hemp beverages to a consumer in this state on behalf of a bar, beer and wine bar, liquor store, beer and wine store or restaurant in this state pursuant to section 4-203, subsections S and T. An alcohol and adult hemp beverages delivery contractor, a subcontractor of an alcohol and adult hemp beverages delivery contractor, an employee of an alcohol and adult hemp beverages delivery contractor or an employee of a subcontractor is deemed to be acting on behalf of the licensee when making a delivery of spirituous liquor and adult hemp beverages for the licensee.

G. In addition to all other action that may be taken by the director for a violation of this title or the rules adopted pursuant to this title by a registered alcohol and adult hemp beverages delivery contractor and its employees or subcontractors and employees of subcontractors, the department may limit the right of the registered alcohol and adult hemp beverages delivery contractor to deliver spirituous liquor and adult hemp beverages on behalf of a licensee for a period of up to one year, after which the alcohol and adult hemp beverages delivery contractor shall register with the department to resume delivery of spirituous liquor and adult hemp beverages. Any penalty issued pursuant to this subsection may be appealed to the board pursuant to section 4-210.02. END_STATUTE

Sec. 19. Section 4-206.01, Arizona Revised Statutes, is amended to read:

START_STATUTE4-206.01. Bar, beer and wine bar, liquor store and adult hemp beverages 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 and adult hemp beverages, exceeds thirty percent of the sales price of on-sale spirituous liquors and adult hemp beverages 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 and adult hemp beverages 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 or adult hemp beverages 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 or adult hemp beverages 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 or adult hemp beverages 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 or adult hemp beverages product are 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 or adult hemp beverages 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 or adult hemp 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 and adult hemp beverages sales are conclusively presumed to be purchased under the beer and wine store license. END_STATUTE

Sec. 20. Section 4-207.01, Arizona Revised Statutes, is amended to read:

START_STATUTE4-207.01. Submission of floor plan required; alteration of licensed premises; ingress and egress to off-sale package sales in on-sale licensed premises

A. No licensee of premises approved for transfer or an original location of on-sale spirituous liquor license shall open such licensed premises to the public for sale of spirituous liquor or adult hemp beverages until the licensee shall first have filed with the director floor plans and diagrams completely disclosing and designating the physical arrangement of the licensed premises, including whether the licensee intends to sell spirituous liquor or adult hemp beverages by means of a drive-through or other physical feature of the licensed premises that allows a customer to purchase spirituous liquor or adult hemp beverages without leaving the customer's vehicle, and shall have secured the written approval of the director to so open and operate such premises. The director may require the installation and maintenance of physical barriers around outside serving areas to control liquor or adult hemp beverages service, delineate licensed premises and control the ingress and egress to and from the licensed premises for the purpose of providing for the safety of patrons and preventing underage possession and consumption, the removal of alcohol or adult hemp beverages from the premises, the unauthorized bringing of alcohol or adult hemp beverages onto the premises and the unauthorized consumption of alcohol or adult hemp beverages in a public area or thoroughfare.

B. No licensee shall alter or change the physical arrangement of his the licensee's licensed premises so as to encompass greater space or the use of different or additional entrances, openings or accommodations than the space, entrance or entrances, openings or accommodations offered to the public at the time of issuance of the licensee's license or a prior written approval of the licensed premises, without first having filed with the director floor plans and diagrams completely disclosing and designating the proposed physical alterations of the licensed premises, including the addition of a drive-through or other physical feature to the licensed premises that allows a customer to purchase spirituous liquor or adult hemp beverages without leaving the customer's vehicle, and shall have secured the written approval by the director. This subsection shall apply applies to any person to person person-to-person transfer of the licensed premises. The director may charge a fee for review of floor plans and diagrams submitted by a licensee pursuant to this section.

C. The provisions of This section shall not be construed to does not prohibit in any way off-sale package sales in on-sale licensed premises, but the permission to open the premises to the public under subsections A and B shall not be granted if the licensee under the privilege provided for off-sale under an on-sale license proposes to maintain an off-sale operation with ingress and egress directly from the outside of such premises to such off-sale operation other than the ingress and egress provided for the on-sale operation of the licensed premises.

D. The provisions of This section shall apply APPLIES to all applications, transfers and alterations. END_STATUTE

Sec. 21. Section 4-207.02, Arizona Revised Statutes, is amended to read:

START_STATUTE4-207.02. Multiple licensees with joint premises

A. One or more on-sale spirituous liquor licensees with the same type of bar, beer and wine bar, restaurant or remote tasting room license may apply to the director for a joint premises permit. The premises of each applicant shall be adjacent to and fully contiguous to the joint premises. The proposed joint premises shall be limited to common areas that are pedestrian only and that are not immediately adjacent to a road, driveway or parking area. Application for a joint premises permit 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 joint premises. The applicant licensee shall submit a copy of the application to the local governing body before submitting the application to the director. The local governing body may review the application and provide an advisory recommendation to the director. The applicants shall submit a security plan that addresses the requirements prescribed in this section. The director may approve or deny the application, or approve the application for some but not all of the applicants based on the applicant's demonstration of ability to comply with the requirements prescribed in this section. If the application is approved, the joint premises area shall be considered an extension of premises for each of the approved applicants, subject to the following conditions:

1. The licensees implement security measures necessary to ensure that an individual under the legal drinking age does not purchase, possess or consume spirituous liquor or adult hemp beverages on the licensed premises.

2. The licensees install and maintain temporary or permanent physical barriers around the joint premises or other security measures, including electronic surveillance and the use of security personnel and signage, that are fully in place while spirituous liquor is or adult hemp beverages are served and consumed. The barriers or other security measures shall be placed to achieve the following purposes:

(a) To control spirituous liquor or adult hemp beverages service.

(b) To delineate the licensed premises.

(d) To provide for the safety of patrons.

(e) To prevent underage possession and consumption of spirituous liquor or adult hemp beverages.

(f) To prevent the removal of spirituous liquor or adult hemp beverages from the premises.

(g) To prevent the unauthorized carrying of spirituous liquor or adult hemp beverages onto the premises.

(h) To prevent the unauthorized consumption of spirituous liquor or adult hemp beverages in a public area or thoroughfare.

3. The director may require that, during the time the premises are being used as joint premises under a permit, the participating licensees identify the spirituous liquor beverages or adult hemp beverages sold by each licensee by using distinguishable containers.

B. The licensees shall file with the director and may modify from time to time a schedule showing the days and time periods when the joint premises will be in use.

C. Each licensee that is approved for the joint premises shall comply fully with all applicable requirements of this title and any rules adopted pursuant to this title.

D. Each joint licensee that shares the joint premises as provided in this section may be held liable for any violation of this title. One or more licensees may be cited for a violation of this title that occurs on the premises, if the circumstances warrant the citation.

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

F. The department may consolidate complaints, proceedings and hearings with respect to complaints or matters against one or more licensees with joint premises permits.

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

H. The department may charge a fee in an amount prescribed by the director for the review and processing of an application submitted pursuant to this section.

I. Notwithstanding any other law, a joint premises permit may be suspended summarily and without appeal for up to ten days if the director determines that good cause exists for the suspension.

J. A permit issued pursuant to this section is not transferable.

K. A permit issued pursuant to this section shall be issued for one year and may be annually renewed. END_STATUTE

Sec. 22. Section 4-207.03, Arizona Revised Statutes, is amended to read:

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

A. 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, 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 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 earliest.

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.

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 and adult hemp beverages 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 or adult hemp beverages on the extended premises.

3. Prevent the unauthorized removal of spirituous liquor or adult hemp beverages from the extended premises.

4. Prevent the unauthorized carrying of spirituous liquor or adult hemp beverages onto the extended premises.

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

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 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.

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.

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

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 or adult hemp beverages 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. 23. Section 4-208, Arizona Revised Statutes, is amended to read:

START_STATUTE4-208. Rejection as to location

A. The director shall not accept an application nor issue a license to sell or deal in spirituous liquors at a location for which a prior application has been rejected until twelve months after the date of the prior rejection.

B. No application for a license to deal in spirituous liquors or adult hemp beverages shall be filed with nor accepted by the director within five years after the date of the rejection of the last of two previous applications at the same location has been rejected by the board or the director on the basis of lack of public convenience and necessity or denied on appeal pursuant to section 4-211. It shall be incumbent upon on the applicant for a license filed after the expiration of the five-year period to establish that there have been significant changes of fact in respect to the location which that justify the issuance of a license to deal in spirituous liquor or adult hemp beverages. END_STATUTE

Sec. 24. Section 4-209, Arizona Revised Statutes, is amended to read:

START_STATUTE4-209. Fees for license, application, issuance, renewal and transfer; late renewal penalty; seasonal operation; surcharges

A. A fee shall accompany an application for an original license or transfer of a license, or in case of renewal, shall be paid in advance. Every license expires annually, except that a license may be renewed for a two-year period pursuant to subsection M of this section if no compliance penalties have been issued to that location during the year before the renewal. A licensee who fails to renew the license on or before the due date shall pay a penalty of $150, which the licensee shall pay with the renewal fee. A license renewal that is deposited, properly addressed and postage prepaid in an official depository of the United States mail on or before the due date shall be deemed filed and received by the department on the date shown by the postmark or other official mark of the United States postal service stamped on the envelope. If the due date falls on a Saturday, Sunday or other legal holiday, the renewal shall be considered timely if it is received by the department on the next business day. The director may waive a late renewal penalty if good cause is shown by the licensee. A licensee who fails to renew the license on or before the due date may not sell, purchase or otherwise deal in spirituous liquor until the license is renewed. A license that is not renewed within sixty days after the due date is deemed terminated. The director may renew the terminated license if good cause is shown by the licensee. Except an application fee for a permit pursuant to section 4-203.07 and section 4-205.02, subsection K and leases pursuant to sections 4-203.06 and 4-203.07, an application fee for an original license or the transfer of a license shall be $100, which shall be retained by this state.

B. Issuance fees for original licenses shall be:

1. For an in-state producer's license to manufacture or produce spirituous liquor or adult hemp beverages in this state, $1,500.

2. Except as provided in paragraph 15 of this subsection, for an out-of-state producer's, exporter's, importer's or rectifier's license, $200.

3. For a microbrewery license, $300.

4. For a wholesaler's license to sell spirituous liquors or adult hemp beverages, $1,500.

5. For a government license issued in the name of a state agency, state commission, state board, county, city, town, community college or state university or the national guard, $100.

6. For a bar license, which is an on-sale retailer's license to sell all spirituous liquors or adult hemp beverages primarily by individual portions and in the original containers, $1,500.

7. For a beer and wine bar license, which is an on-sale retailer's license to sell beer, and wine and adult hemp beverages primarily by individual portions and in the original containers, $1,500.

8. For a conveyance license issued to an operating railroad company, to sell all spirituous liquors in individual portions or in the original containers on all passenger trains operated by the railroad company, or to an operating airline company, to sell or serve spirituous liquors solely in individual portions on all passenger planes operated by the airline company, or to a boat operating in the waters of this state, to sell all spirituous liquors in individual portions or in the original containers for consumption on the boat, $1,500.

9. For a liquor store license, which is an off-sale retailer's license to sell all spirituous liquors or adult hemp beverages, $1,500.

10. For a beer and wine store license, which is an off-sale retailer's license to sell beer, and wine or adult hemp beverages, $1,500.

11. For a hotel-motel license issued as such, to sell and serve spirituous liquors or adult hemp beverages solely for consumption on the licensed premises of the hotel or motel, $1,500.

12. For a restaurant license issued as such, to sell and serve spirituous liquors or adult hemp beverages solely for consumption on the licensed premises of the restaurant, $1,500. For a permit issued under section 4-205.02, subsection H allowing for the sale of beer for the consumption off the licensed premises pursuant to section 4-244, paragraph 32, subdivision (c), the director may charge a fee. For an application for a permit pursuant to section 4-203.07 and section 4-205.02, subsection K, the director may charge a fee. The director may establish and charge fees for lease applications pursuant to sections 4-203.06 and 4-203.07.

13. For a farm winery license, $100. The director may charge a licensed farm winery a fee pursuant to section 4-205.04, subsection K.

14. For a club license issued in the name of a bona fide club qualified under this title to sell all spirituous liquors or adult hemp beverages on-sale, $1,000.

15. For an out-of-state winery that sells not more than two hundred forty gallons of wine in this state in a calendar year, $25.

16. The department may charge a fee For a craft distiller license, a fee established by the department.

17. The department may charge a fee For registering an alcohol AND ADULT HEMP BEVERAGES delivery contractor pursuant to section 4-205.13, a fee established by the department.

18. For an adult hemp beverages manufacturer's license issued to an in-state or out-of-state manufacturer, a fee established by the department.

19. For a permit issued to an independent testing laboratory pursuant to section 4-225, a fee established by the department.

C. The department may issue licenses with staggered renewal dates to distribute the renewal workload as uniformly as practicable throughout the twelve months of the calendar year. If a license is issued less than six months before the scheduled renewal date of the license, as provided by the department's staggered license renewal system, one-half of the annual license fee shall be charged.

D. The annual fees for licenses shall be:

1. For an in-state producer's license to manufacture or produce spirituous liquors or adult hemp beverages in this state, $350.

2. Except as provided in paragraph 15 of this subsection, for an out-of-state producer's, exporter's, importer's or rectifier's license, $50.

3. For a microbrewery license, $300.

4. For a wholesaler's license, to sell spirituous liquors or adult hemp beverages, $250.

5. For a government license issued to a county, city or town, community college or state university or the national guard, $100.

6. For a bar license, which is an on-sale retailer's license to sell all spirituous liquors or adult hemp beverages primarily by individual portions and in the original containers, $150.

7. For a beer and wine bar license, which is an on-sale retailer's license to sell beer, and wine or adult hemp beverages primarily by individual portions and in the original containers, $75.

8. For a conveyance license issued to an operating railroad company, to sell all spirituous liquors in individual portions or in the original containers on all passenger trains operated by the railroad company, or to an operating airline company, to sell or serve spirituous liquors solely in individual portions on all passenger planes operated by the airline company, or to a boat operating in the waters of this state, to sell all spirituous liquor in individual portions or in the original containers for consumption on the boat, $225.

9. For a liquor store license, which is an off-sale retailer's license to sell all spirituous liquors or adult hemp beverages, $50.

10. For a beer and wine store license, which is an off-sale retailer's license to sell beer, and wine or adult hemp beverages, $50.

11. For a hotel-motel license issued as such, to sell and serve spirituous liquors or adult hemp beverages solely for consumption on the licensed premises of the hotel or motel, $500.

12. For a restaurant license issued as such, to sell and serve spirituous liquors or adult hemp beverages solely for consumption on the licensed premises of the restaurant, $500, and for a restaurant license that is allowed to continue operating as a restaurant pursuant to section 4-213, subsection E, an additional amount established by the director. The department shall transfer this amount to the state treasurer for deposit in the state general fund. The director may establish an annual fee for a permit pursuant to section 4-203.07 and section 4-205.02, subsection K. The director may charge annual lease amounts pursuant to sections 4-203.06 and 4-203.07.

13. For a farm winery license, $100. The director may charge a licensed farm winery an annual fee pursuant to section 4-205.04, subsection K.

14. For a club license issued in the name of a bona fide club qualified under this title to sell all spirituous liquors or adult hemp beverages on-sale, $150.

15. For an out-of-state winery that sells not more than two hundred forty gallons of wine in this state in a calendar year, $25.

16. The director may charge a fee For the annual renewal of a craft distiller license, a fee established by the department.

17. The department may charge a fee For the annual registration renewal of a registered alcohol and adult hemp beverages delivery contractor pursuant to section 4-205.13, a fee established by the department.

E. Where the business of an on-sale retail licensee is seasonal, not extending over periods of more than six months in any calendar year, the licensee may designate the periods of operation and a license may be granted for those periods only, on payment of one-half of the fee prescribed in subsection D of this section.

F. Transfer fees from person to person for licenses transferred pursuant to section 4-203, subsection C shall be $300.

G. Transfer fees from location to location, as provided for in section 4-203, shall be $100.

H. Assignment fees for a change of agent, as provided for in section 4-202, subsection A, an acquisition of control, as provided for in section 4-203, subsection F, or a restructuring, as provided for in section 4-203, subsection H, shall be $100, except that where a licensee holds multiple licenses and requests multiple, simultaneous changes, the change of agent, acquisition of control or restructuring fee for the first license shall be $100 and the fee for all remaining licenses shall be $50 each, except that the aggregate fees shall not exceed $1,000 for all change of agents, $1,000 for all acquisitions of control and $1,000 for all restructurings.

I. No fee shall be charged by the department for an assignment of a liquor license in probate or an assignment pursuant to the provisions of a will or pursuant to a judicial decree in a domestic relations proceeding that assigns ownership of a business that includes a spirituous liquor license to one of the parties in the proceeding. In the case of nontransferable licenses, no fee shall be charged by the department for the issuance of a license for a licensed business pursuant to a transfer of the business in probate or pursuant to the provisions of a will or pursuant to a judicial decree in a domestic relations proceeding that assigns ownership of the business to one of the parties in the proceeding.

J. The director shall assess a surcharge of $30 on all licenses prescribed in subsection D, paragraphs 6, 7 and 12 of this section. Monies from the surcharge shall be used by the department exclusively for the costs of an auditor and support staff to review compliance by applicants and licensees with the requirements of section 4-205.02, subsection E. The department shall assess the surcharge as part of the annual license renewal fee.

K. The director shall assess a surcharge of $35 on all licenses prescribed in this section. Monies from the surcharge shall be used by the department exclusively for the costs of an enforcement program to investigate licensees who have been the subject of multiple complaints to the department. The enforcement program shall respond to complaints against licensees by neighborhood associations, by neighborhood civic groups and from municipal and county governments. The department shall assess the surcharge as part of the annual license renewal fee.

L. The director shall assess a surcharge of $20 on all licenses prescribed in subsection D, paragraphs 11 and 12 of this section and $35 on all other licenses prescribed in this section. Monies from the surcharge and from surcharges imposed pursuant to subsection K of this section shall be used by the department exclusively for the costs of a neighborhood association interaction and liquor enforcement management unit. The unit shall respond to complaints from neighborhood associations, neighborhood civic groups and local governing authorities regarding liquor violations. The director shall report the unit's activities and the use of monies from the surcharge or surcharges imposed pursuant to subsection K of this section to the board at each board meeting or as the board may direct.

M. Licenses may be renewed every two years with payment of license fees that are twice the amount designated in subsection D of this section and other applicable fees. Licensees renewing every two years must comply with annual reporting requirements. The director may adopt reasonable rules to allow licensees to renew every two years.

N. The department shall use all monies received from application fees for permits issued pursuant to section 4-205.02, subsection K, leases pursuant to sections 4-203.06 and 4-203.07 and registrations pursuant to section 4-205.13 for administrative costs associated with the permit, registration or lease and enforcement of this chapter. END_STATUTE

Sec. 25. Section 4-210, Arizona Revised Statutes, is amended to read:

START_STATUTE4-210. Grounds for revocation, suspension and refusal to renew; notice; complaints; hearings; defense

A. After notice and hearing, the director may suspend, revoke or refuse to renew any license, registration, lease or permit issued pursuant to this chapter for any of the following reasons:

1. There occurs on the licensed premises repeated acts of violence.

2. The licensee, registrant, lessee or permittee fails to satisfactorily maintain the capability, qualifications and reliability requirements of an applicant for a license, registration, lease or permit prescribed in section 4-202, 4-203, 4-203.06, 4-203.07 or 4-205.13.

3. The licensee, registrant, lessee, permittee or controlling person knowingly files with the department an application or other document that contains material information that is false or misleading or while under oath knowingly gives testimony in an investigation or other proceeding under this title that is false or misleading.

4. The licensee, registrant, lessee, permittee or controlling person is on the premises habitually intoxicated.

5. The licensed, registered, leased or permitted business is delinquent for more than one hundred twenty days in paying taxes, penalties or interest in an amount that exceeds $250 to this state or to any political subdivision of this state.

6. The licensee or controlling person obtains, assigns, transfers or sells a spirituous liquor license OR ADULT HEMP BEVERAGES manufacturer LICENSE without complying with this title or leases or subleases a license.

7. The licensee, registrant, lessee or permittee fails to keep for two years and make available to the department on reasonable request all invoices, records, bills or other papers and documents relating to the purchase, sale and delivery of spirituous liquors OR ADULT HEMP BEVERAGES and, in the case of a restaurant or hotel-motel licensee, all invoices, records, bills or other papers and documents relating to the purchase, sale and delivery of food.

8. The licensee, registrant, lessee, permittee or controlling person is convicted of a felony, provided that for a conviction of a corporation to serve as a reason for any action by the director, conduct that constitutes the corporate offense and was the basis for the felony conviction must have been engaged in, authorized, solicited, commanded or recklessly tolerated by the directors of the corporation or by a high managerial agent acting within the scope of employment.

9. The licensee, registrant, lessee, permittee or controlling person violates or fails to comply with this title, any rule adopted pursuant to this title or any liquor law of this state or any other state.

10. The licensee, registrant, lessee or permittee fails to take reasonable steps to protect the safety of a customer of the licensee, registrant, lessee or permittee or any other person entering, leaving or remaining on the licensed premises when the licensee knew or reasonably should have known of the danger to the person, or the licensee fails to take reasonable steps to intervene by notifying law enforcement officials or otherwise to prevent or break up an act of violence occurring on the licensed premises or immediately adjacent to the premises when the licensee knew or reasonably should have known of the acts of violence. The duty to protect a customer or other person on the licensed premises does not limit the licensee from using, as necessary, reasonable intervention, reasonable restraint or reasonable removal of a person from the premises to prevent that person from injuring other persons on the premises or damaging or disrupting the premises.

11. The licensee, registrant, lessee, permittee or controlling person knowingly associates with a person who has engaged in racketeering, as defined in section 13-2301, or who has been convicted of a felony, and the association is of a nature as to create a reasonable risk that the licensee, registrant, lessee or permittee will fail to conform to the requirements of this title or of any criminal statute of this state.

12. A licensee that is a liquor store as defined in section 46-297 violates the restrictions on use of automatic teller machines or point-of-sale terminals regarding electronic benefit transfer cards prescribed in section 4-242.01.

13. There occurs on the licensed premises a serious act of violence. For the purposes of this paragraph, "serious act of violence" means an act of violence in which a serious injury causes the death or critical injury of a person and the injuries would be obvious to a reasonable person.

14. The licensee fails to report a serious act of violence that occurs on the licensed premises. For the purposes of this paragraph, "serious act of violence" means an act of violence in which a serious injury causes the death or critical injury of a person and the injuries would be obvious to a reasonable person.

15. The licensee, registrant, lessee or permittee violates an order of the board.

B. For the purposes of:

1. Subsection A, paragraph 8 of this section, "high managerial agent" means an officer of a corporation or any other agent of the corporation in a position of comparable authority with respect to the formulation of corporate policy.

2. Subsection A, paragraphs 9 and 10 of this section, acts or omissions of an employee of a licensee that violate this title or rules adopted pursuant to this title are deemed to be acts or omissions of the licensee. Acts or omissions by an employee or licensee committed during the time the licensed premises were operated pursuant to an interim permit or without a license may be charged as if they had been committed during the period the premises were duly licensed.

C. The director may suspend, revoke or refuse to issue, transfer or renew a license, registration, lease or permit under this section based solely on the unrelated conduct or fitness of any officer, director, managing agent or other controlling person if the controlling person retains any interest in or control of the licensee, registrant, lessee or permittee after sixty days following written notice to the licensee, registrant, lessee or permittee. If the controlling person holds stock in a corporate licensee, registrant, lessee or permittee or is a partner in a partnership licensee, registrant, lessee or permittee, the controlling person may only divest himself of the controlling person's interest by transferring the interest to the existing stockholders or partners who must demonstrate to the department that they meet all the requirements for licensure, registration, leasing or permitting. For the purposes of this subsection, the conduct or fitness of a controlling person is unrelated if it would not be attributable to the licensee, registrant, lessee or permittee.

D. If the director finds, based on clear and convincing evidence in the record, that a violation involves the use by the licensee, registrant, lessee or permittee of a drive-through or walk-up service window or other physical feature of the licensed premises that allows a customer to purchase spirituous liquor OR ADULT HEMP BEVERAGES without leaving the customer's vehicle or, with respect to a walk-up service window that prevents the licensee, registrant, lessee or permittee from fully observing the customer, and that the use of that drive-through or walk-up service window or other physical feature caused the violation, the director may suspend or terminate the licensee's, registrant's, lessee's or permittee's use of the drive-through or walk-up service window or other physical feature for the sale of spirituous liquor OR ADULT HEMP BEVERAGES, in addition to any other sanction.

E. The director may refuse to transfer any license, registration, lease or permit or issue a new license, registration, lease or permit at the same location if the director has filed a complaint against the license, registration, lease, permit or location that has not been resolved alleging a violation of any of the grounds stated in subsection A of this section until the time the complaint has been finally adjudicated.

F. The director shall receive all complaints of alleged violations of this chapter and is responsible for investigating all allegations of a violation of, or noncompliance with, this title, any rule adopted pursuant to this title or any condition imposed on the licensee, registrant, lessee or permittee by the license, registration, lease or permit. When the director receives three complaints from any law enforcement agency resulting from three separate incidents at a licensed, leased or permitted establishment or by a registrant within a twelve-month period, the director shall transmit a written report to the board setting forth the complaints, the results of any investigation conducted by the law enforcement agency or the department relating to the complaints and a history of all prior complaints against the license, registration, lease or permit and their disposition. The board shall review the report and may direct the director to conduct further investigation of a complaint or to serve a licensee, registrant, lessee or permittee with a complaint and notice of a hearing pursuant to subsection G of this section.

G. On the director's initiation of an investigation or on the receipt of a complaint and an investigation of the complaint as deemed necessary, the director may cause a complaint and notice of a hearing to be directed to the licensee, registrant, lessee or permittee that states the violations alleged against the licensee, registrant, lessee or permittee and directing the licensee, registrant, lessee or permittee, within fifteen days after service of the complaint and notice of a hearing, to appear by filing with the director an answer to the complaint. Failure of the licensee, registrant, lessee or permittee to answer may be deemed an admission by the licensee, registrant, lessee or permittee of commission of the act charged in the complaint. The director may then vacate the hearing and impose any sanction provided by this article. The director may waive any sanction for good cause shown, including excusable neglect. With respect to any violation of this title or any rule adopted pursuant to this title that is based on the act or omission of a licensee's, registrant's, lessee's or permittee's employee, the director shall consider evidence of mitigation presented by the licensee, registrant, lessee or permittee and established by a preponderance of the evidence that the employee acted intentionally and in violation of the express direction or policy adopted by the licensee, registrant, lessee or permittee and communicated to the employee and that the employee successfully completed training in a course approved by the director pursuant to section 4-112, subsection G, paragraph 2. The director may set the hearing before the director or an administrative law judge on any of the grounds stated in subsection A of this section. Instead of issuing a complaint, the director may provide for informal disposition of the matter by consent agreement or may issue a written warning to the licensee, registrant, lessee or permittee. If a warning is issued, the licensee, registrant, lessee or permittee may reply in writing and the director shall keep a record of the warning and the reply.

H. A hearing shall conform to the requirements of title 41, chapter 6, article 10. At the hearing an attorney or corporate officer or employee of a corporation may represent the corporation. The revoking, suspending or refusing to renew a license, registration, lease or permit for unpaid taxes, penalties or interest pursuant to subsection A, paragraph 5 of this section is a contested case with the department of revenue pursuant to section 42-1251.01.

I. The expiration, cancellation, revocation, reversion, surrender, acceptance of surrender or termination in any other manner of a license, registration, lease or permit does not prevent the initiation or completion of a disciplinary proceeding pursuant to this section against the licensee, registrant, lessee or permittee or license, registration, lease or permit. An order issued pursuant to a disciplinary proceeding against a license, registration, lease or permit is enforceable against other licenses, registrations, leases or permits or subsequent licenses, registrations, leases or permits in which the licensee, registrant, lessee, permittee or controlling person of the license, registration, lease or permit has a controlling interest.

J. The department shall provide the same notice as is provided to the licensee, registrant, lessee or permittee to a lienholder, which has provided a document under section 4-112, subsection B, paragraph 3, of all disciplinary or compliance action with respect to a license, registration, lease or permit issued pursuant to this title. The state is not liable for damages for any failure to provide any notice pursuant to this subsection.

K. In any disciplinary action pursuant to this title, a lienholder may participate in the determination of the action. The director shall consider mitigation on behalf of the lienholder if the lienholder proves all of the following by a preponderance of the evidence:

1. That the lienholder's interest is a bona fide security interest. For the purposes of this paragraph, "bona fide security interest" means the lienholder provides actual consideration to the licensee, registrant, lessee or permittee or the licensee's, registrant's, lessee's or permittee's predecessor in interest in exchange for the lienholder's interest. Bona fide security interest includes a lien taken by the seller of a license, registration, lease or permit as security for the seller's receipt of all or part of the purchase price of the license, registration, lease or permit.

2. That a statement of legal or equitable interest was filed with the department before the alleged conduct occurred that is the basis for the action against the license, registration, lease or permit.

3. That the lienholder took reasonable steps to correct the licensee's, registrant's, lessee's or permittee's prior actions, if any, or initiated an action pursuant to available contract rights against the licensee, registrant, lessee or permittee for the forfeiture of the license, registration, lease or permit after being provided with notice by the department of disciplinary action as provided in subsection J of this section.

4. That the lienholder was free of responsibility for the conduct that is the basis for the proposed revocation.

5. That the lienholder reasonably attempted to remain informed by the licensee, registrant, lessee or permittee about the business's conduct.

L. If the director decides not to revoke the license, registration, lease or permit based on the circumstances provided in subsection K of this section, the director may issue an order requiring either, or both, of the following:

1. The forfeiture of all interest of the licensee, registrant, lessee or permittee in the license, registration, lease or permit.

2. The lienholder to pay any civil monetary penalty imposed on the licensee, registrant, lessee or permittee.

M. If any on-sale licensee proposes to provide large capacity entertainment events or sporting events with an attendance capacity exceeding a limit established by the director, the director may request a security plan from the licensee that may include trained security officers, lighting and other requirements. This subsection exclusively prescribes the security requirements for a licensee and does not create any civil liability for this state, its agencies, agents or employees or a person licensed under this title or agents or employees of a licensee.

N. The director may consider as a mitigating factor or defense to a complaint against a licensee for a violation of subsection A, paragraph 10 or 13 of this section that the licensee acted reasonably, responsibly and as expeditiously as possible by asking for intervention by a peace officer to prevent or to break up a riot, a fight, an altercation or tumultuous conduct. END_STATUTE

Sec. 26. Section 4-212, Arizona Revised Statutes, is amended to read:

START_STATUTE4-212. Injunctions

If the board or the director has reasonable grounds to believe that a person is violating section 4-244.05 or 4-250.01 or is manufacturing, selling or dealing in spirituous liquor OR ADULT HEMP BEVERAGES without a valid license, permit or registration in violation of this title, the board or the director may apply to the superior court for a temporary restraining order and other injunctive relief prohibiting the specific acts complained of by the board or the director. END_STATUTE

Sec. 27. Section 4-213, Arizona Revised Statutes, is amended to read:

START_STATUTE4-213. Restaurant audit

A. The director may require a restaurant to submit an audit of its records to demonstrate compliance with section 4-205.02. The director shall not require an establishment to submit to such an audit more than once a year after the initial twelve months of operation and shall not audit the first three months of operation even if the establishment is allowed to continue operating as a restaurant pursuant to subsection E of this section.

B. Except as provided in subsection D of this section, the department shall audit accounts, records and operations of a licensee that cover a twelve month twelve-month period. When conducting an audit, the department shall use generally accepted auditing standards. An establishment that averages at least forty percent of its gross revenue from the sale of food during the twelve month twelve-month audit period shall be deemed to comply with the gross revenue requirements of section 4-205.02. The twelve month twelve-month audit period shall fall within the sixteen months immediately preceding the beginning of the audit.

C. If the audit or a consent agreement that may be offered at the discretion of the director and that is signed by the licensee and the director reveals that the licensee did not meet the definition of a restaurant as prescribed in section 4-205.02 and the percentage of food sales determined by the audit or consent agreement was:

1. Less than thirty percent, notwithstanding section 4-209, subsection A, the director shall deem the license to have been surrendered or may revoke the license as provided in section 4-205.02, subsection D.

2. At least thirty percent but less than thirty-seven percent, the department shall allow the licensee a six-month period to continue to operate under the restaurant license, during which the licensee shall either:

(a) Replace the license with a bar or beer and wine bar license, except that, at the end of that six-month period, the department shall revoke the restaurant license or the licensee shall surrender the restaurant license.

(b) Obtain permission from the department to continue operating with a restaurant license pursuant to subsection E of this section.

3. At least thirty-seven percent but less than forty percent, the licensee shall be granted a period of one year to continue to operate under the restaurant license, during which the licensee shall attempt to increase the food percentage to at least forty percent. If the licensee does not increase the percentage of food sales to at least forty percent, the department shall allow the licensee a six-month period to continue to operate under the restaurant license, during which the licensee shall either:

(a) Replace the license with a bar or beer and wine bar license, except that, at the end of the six-month period, the department shall revoke the restaurant license or the licensee shall surrender the restaurant license.

(b) Obtain permission from the department to continue operating with a restaurant license pursuant to subsection E of this section.

D. The department may conduct an audit of a licensee described in section 4-209, subsection B, paragraph 12 after twelve months following the beginning of operations as a restaurant by the licensee to determine compliance by the licensee with section 4-205.02, except that the department may conduct an audit of a licensee within the first twelve months of operation if the licensee has made a substantial modification in the restaurant equipment, service or entertainment items or seating capacity during that twelve-month period, in which event the department may conduct the audit for a period of less than twelve months.

E. A restaurant licensee may continue to operate with its restaurant license if its food sales are at least thirty percent and less than forty percent and the department approves the continuation of the restaurant license pursuant to this subsection and subsections C, F, G, H and I of this section. The department shall not approve more than fifteen restaurant licenses pursuant to this subsection and subsections C, F, G, H and I of this section in any fiscal year. The department shall not approve any additional licenses pursuant to this subsection and subsections C, F, G, H and I of this section from consent agreements entered into or audits conducted in any fiscal year after 2012-2013. The department may approve a request submitted by the licensee to continue to operate with its restaurant license only if all of the following apply at the time the licensee files its request with the department:

1. The restaurant has a sufficient number of cooks, food preparation personnel and wait staff to prepare and provide the restaurant services that are necessary for the menu offered by the licensee.

2. The restaurant's equipment is of a sufficient grade and the size of the restaurant's kitchen is appropriate to the menu offered and the kitchen occupies not less than twenty percent of the total floor space of the licensed premises.

3. The menu is of a type consistent with a restaurant operation. In making a determination pursuant to this paragraph, the department may consider the proportion of food sales to alcohol sales, the price of spirituous liquor beverages, ADULT HEMP BEVERAGES and food served by the licensee and whether the licensee provides reduced price or complimentary food and beverages.

4. Not more than thirty percent of the public interior area floor space consists of pool tables, dart or arcade games, barstools, cocktail tables and similar types of seating and dance floors, and the aggregate area of all dance floors on the premises is not greater than ten percent of the total floor space of the public area of the premises.

5. The name of the restaurant does not include terms associated with alcohol consumption, such as "bar", "tavern", "pub", "spirits", "club", "lounge", "cabaret", "cantina" or "saloon".

6. Disposable dinnerware and smallware, including dining utensils, are not used except in outdoor areas.

F. If the department intends to approve a restaurant's continuation of operation pursuant to subsection E of this section:

1. The department shall advise the governing body of the city or town if the premises are within the incorporated limits of a city or town or the county of the department's intent.

2. The city or town or the county shall post a notice for at least twenty days on the licensed premises that the licensee has made a request for continuation to operate with a restaurant license and invite bona fide residents who own, lease or reside on property within a one mile one-mile radius of the licensed premises to file written comments with the department regarding the request within thirty days after the first posting of the notice.

G. If the local jurisdiction through its governing body or its authorized agent does not object within ninety days, the licensee may continue its operation as a restaurant.

H. If the department intends to disapprove a restaurant's continuation of operation pursuant to subsection E of this section, or if the local jurisdiction or its agent timely objects to its continuation, the department shall set a hearing before the board and the local jurisdiction shall post a notice of the hearing for a period of at least twenty days on the licensed premises. The city or town or the county may testify at the hearing and bona fide residents who own, lease or reside on property within a one mile one-mile radius of the licensed premises may testify before the board regarding the licensee's request. The board shall determine whether the restaurant may continue its operation based on consideration of the criteria listed in subsection E of this section.

I. A restaurant licensee may continue to operate with its restaurant license pursuant to subsection E of this section if the restaurant and the restaurant licensee continue to meet the requirements of this subsection, subsection E of this section and any other statute. As a condition of continuing operation as a restaurant under subsection E of this section, the department may require the licensee to specifically acknowledge the representations made by the licensee regarding its operations in support of the licensee's continuing operation as a restaurant. Notwithstanding subsection A of this section, if the licensee changes its operation in any way that materially and detrimentally affects the representations made by the licensee, the department may audit the licensee or terminate the license without an audit.

J. Notwithstanding section 4-209, subsection D, paragraph 12, the state treasurer shall deposit five percent of the annual fee for a restaurant that is permitted allowed to continue operating as a restaurant pursuant to subsection E of this section in the driving under the influence abatement fund established by section 28-1304. END_STATUTE

Sec. 28. Section 4-215, Arizona Revised Statutes, is amended to read:

START_STATUTE4-215. Regional shopping centers; commercial offices and retail centers; extension of premises; application; approval; fee; definition

A. The owner or management of a regional shopping center that encompasses at least four hundred thousand square feet of retail space, on behalf of retail licensees located at the shopping center, may apply to the director, on a form prescribed by the director, for an extension of premises pursuant to this section.

B. Notwithstanding the square footage of a commercial office and retail center, the manager of the commercial office and retail center, jointly with one or more licensees at the commercial office and retail center, may apply, on a form prescribed by the director, for an extension of premises pursuant to this section if all of the following apply:

1. The commercial office and retail center is under one management company.

2. The proposed extended premises are at a central location within the commercial office and retail center with limited ingress and egress.

3. The proposed extended premises are designed in a manner that the management can provide security and oversight of the extended premises.

C. The premises extension, if issued, shall allow designated on-sale retail licensees to sell spirituous liquor OR ADULT HEMP BEVERAGES and to allow patrons to consume spirituous liquor OR ADULT HEMP BEVERAGES throughout a designated pedestrian area of the regional shopping center or commercial office and retail center.

D. At least sixty days before submitting the application to the director, the regional shopping center or commercial office and retail center shall submit a copy of the application to the local governing body for review. The local governing body has sixty days after the regional shopping center or commercial office and retail center submits the application to the local governing body to review the application and provide advisory recommendations to the director. The director may not accept an application before the local governing body review period has elapsed or the local governing body makes its advisory recommendations, whichever is sooner.

E. The application shall include the requirement that the regional shopping center or commercial office and retail center provide plans or diagrams designating the specific extension of premises requested within the regional shopping center or commercial office and retail center. The plan shall delineate the physical arrangement of the extended premises, including showing the locations of ingress to and egress from the extended premises and other features of the extended premises as the director may require.

F. The extended premises authorized by the department may include only areas limited to pedestrian traffic and may not include or be bisected by a public or private roadway unless the private roadway is blocked to vehicular traffic or is immediately adjacent to a public or private roadway. To delineate the extended premises and to control spirituous liquor OR ADULT HEMP BEVERAGES service in the extended premises, the plan may use physical barriers, signage, electronic surveillance, security guards, cordons or a combination of these barriers and strategies.

G. The application shall include a provision that the regional shopping center or commercial office and retail center designate the times of spirituous liquor OR ADULT HEMP BEVERAGES service on the extended premises. The regional shopping center or commercial office and retail center may file with the director a request to modify the designated times of spirituous liquor OR ADULT HEMP BEVERAGES service, and the director, for good cause shown, may modify the designated times of spirituous liquor OR ADULT HEMP BEVERAGES service.

H. Retail licensees that are subject to an extension of premises are responsible for compliance with this title on the extended premises.

I. An extension of premises is subject to the following:

1. The department may charge a fee in an amount prescribed by the director for reviewing and processing an application submitted pursuant to this section.

2. The director may set day and time limits on using the extended premises and establish security requirements as a condition of approval.

3. The extended premises under this section may not overlap the licensed premises of any other licensee under this title that is not subject to the extension of premises.

4. The regional shopping center, the manager of the commercial office and retail center and on-sale retail licensees may not alter the physical arrangement of the extended premises to use additional or different space, locations of ingress or egress or accommodations without first complying with the process provided in subsection A or B of this section.

5. Notwithstanding any other law, the director may cancel or suspend an on-sale retail licensee's approval to extend its premises under this section for good cause at any time. The regional shopping center, the manager of the commercial office and retail center or the licensee may appeal an order to cancel or suspend the approval in accordance with the administrative appeal provisions provided in this title.

6. An extension of premises issued pursuant to this section is not transferable.

J. For the purposes of this section, "local governing body" means the county board of supervisors if the regional shopping center or commercial office and retail center is located in an unincorporated area or the governing body of the city or town if the regional shopping center or commercial office and retail center is located in a city or town. END_STATUTE

Sec. 29. Title 4, chapter 2, article 1, Arizona Revised Statutes, is amended by adding section 4-216, to read:

START_STATUTE4-216. Adult hemp beverages manufacturer license; issuance; regulations; fees; definition

A. AN ADULT HEMP BEVERAGEs MANUFACTURER LICENSE SHALL BE REQUIRED FOR MANUFACTURING INDUSTRIAL HEMP INTO ADULT HEMP BEVERAGEs PRODUCTS and offering those products for sale in this state.

B. The director may issue an adult hemp beverages MANUFACTURER license to any person, INCLUDING A PRODUCER OR CRAFT PRODUCER LICENSED UNDER THIS TITLE, who HAS DEMONSTRATED OR demonstrates the capabilIty to meet the requirements of this section and sections 4-202, 4-203 and 4-225.

C. A LICENSED PRODUCER OR CRAFT PRODUCER MAY ELECT TO APPLY FOR THE an ADULT HEMP BEVERAGES manufacturer license UNDER THE producer's CURRENT LICENSE OR APPLY FOR A NEW ADULT HEMP BEVERAGES manufacturer LICENSE THROUGH ANOTHER LEGAL ENTITY UNDER COMMON OWNERSHIP. A NEW DEMONSTRATION OF QUALIFICATIONS, CAPABILITY AND RELIABILITY FOR LICENSure UNDER SECTIONS 4-202 AND 4-203 is not REQUIRED FOR A CURRENTLY LICENSED PRODUCER OR CRAFT PRODUCER IF THE RIGHT TO ALSO MANUFACTURE ADULT HEMP BEVERAGES IS APPLIED FOR UNDER A CURRENT LICENSE. Each location that engages in manufacturing adult hemp beverages products shall obtain a separate adult hemp beverages MANUFACTURER license. The licensee may not transfer the license from person to person or from location to location.

D. At the time of filing the application for an adult hemp beverages manufacturer license, An applicant shall accompany the application with the fee FOR ADDING TO A CURRENT LICENSE OR OBTAINING A NEW LICENSE. The director may determine the amount of the fee. A person who holds an adult hemp beverages MANUFACTURER license shall report annually at the end of each calendar year, at the time and in the manner as the director prescribes, the amount of adult hemp beverages manufactured by the licensee during the calendar year.

E. A licensed adult hemp beverages MANUFACTURER may do all of the following:

1. Sell adult hemp beverages manufactured on the licensee's premises to consumers of legal age who are physically present on the manufacturer's premises for consumption on or off the premises.

2. Make sales and deliveries of adult hemp beverages THAT the LICENSEE manufactures to persons licensed or permitted under this title to sell adult hemp beverages through wholesalers licensed under this title.

3. Make sales and deliveries of adult hemp beverages that the LICENSEE manufactures to persons licensed to sell adult hemp beverages in another state if lawful under the laws of that state.

4. Serve adult hemp beverages manufactured on the licensee's premises for the purpose of sampling the adult hemp beverages.

5. Allow a representative of the LICENSEE to consume small amounts of the adult hemp beverageS MANUFACTURED on the licensee's premises for the purpose of sampling the products.

F. EXCEPT AS EXPRESSLY ALLOWED UNDER this section or SECTION 4-205.04, 4-205.08, 4-205.09, 4-205.10, 4-205.11, 4-205.12, 4-205.14 OR 4-243.02, AN ADULT HEMP BEVERAGEs MANUFACTURER licensee is prohibited from holding any retail license under this Title or selling directly to a retailer or consumer.

G. AN ADULT HEMP BEVERAGEs MANUFACTURER LICENSE MAY BE STACKED ON THE SAME OR CONTIGUOUS PREMISES WITH A PRODUCER OR CRAFT PRODUCER LICENSE HELD UNDER COMMON OWNERSHIP.

H. On or before JULY 1, 2026, THE DIRECTOR SHALL ADOPT RULES pursuant to title 41, chapter 6 to carry out this section.

I. For the purposes of this section, "MANUFACTURE" AND "MANUFACTURING":

1. Means tO COMPOUND, BLEND, INFUSE OR OTHERWISE MAKE OR PREPARE AN ADULT HEMP BEVERAGEs PRODUCT.

2. DOES NOT INCLUDE EXTRACTION OF CANNABINOIDS FROM INDUSTRIAL HEMp. END_STATUTE

Sec. 30. Section 4-222, Arizona Revised Statutes, is amended to read:

START_STATUTE4-222. Registration of retail agents; fees

A. Every person who holds a bar, beer and wine bar, liquor store, beer and wine store, club, hotel-motel or restaurant license and who is authorized by other similarly licensed retailers to act as their retail agent shall register with the director. Such registration shall be in accordance with the rules adopted by the director pursuant to section 4-112 and shall also include a listing of the names and business addresses of those similarly licensed retailers who have authorized him the person to act as their retail agent. While possessing a certificate of registration, a retail agent shall be entitled to purchase and shall accept delivery of spirituous liquors or adult hemp beverages for which he the retail agent is licensed for and on behalf of himself the retail agent and those similarly licensed retailers who have authorized him the retail agent to act as their retail agent with the delivery to be made at the retail agent's licensed premises or other location authorized by the department. On the termination of such authorization by any retailer, the retail agent shall promptly notify the director. Nothing in This section shall does not require a wholesaler to sell malt beverages or adult hemp beverages to a registered retail agent for distribution to other retailers.

B. A fee of five dollars $5 shall be collected for each registered retailer in this state, and a fee of fifty dollars $50 for each registered agent for a distillery, winery, brewery, importer or broker having its place of manufacture or business outside of the this state.

C. The director shall issue a certificate of registration to each person so registered as provided in this section, and may, for good cause shown, cancel any certificate of registration so issued. END_STATUTE

Sec. 31. Section 4-223, Arizona Revised Statutes, is amended to read:

START_STATUTE4-223. Authority of cities and towns to tax transactions involving spirituous liquors or adult hemp beverages; prohibitions

A. In addition to the taxes provided for in this chapter, incorporated cities and towns shall have the power to levy a tax on the privilege of engaging or continuing in the business of selling spirituous liquor or adult hemp beverages at retail within their corporate limits and to impose a permit tax or fee, but this section shall does not apply to wholesalers licensed under section 4-209.

B. This section shall does not be construed to give to incorporated cities and towns power to prohibit the production, manufacture, sale, distribution, and disposal of intoxicating spirituous liquors or adult hemp beverages. END_STATUTE

Sec. 32. Section 4-224, Arizona Revised Statutes, is amended to read:

START_STATUTE4-224. Local ordinances; prohibitions

A city, town or county shall not adopt ordinances or regulations in conflict with the provisions of this title or any rules adopted pursuant to this title, including, but not limited to, ordinances or regulations pertaining to hours and days of spiritous liquor sales or adult hemp beverages sales and ordinances or regulations that conflict with the definition of restaurant in section 4-205.02. A city, town or county shall not limit any right granted by the license, by this title or by any rules adopted pursuant to this title. A city, town or county may enforce lawful zoning requirements. Zoning shall not be a basis for protesting or denying a license under this title. END_STATUTE

Sec. 33. Repeal

Section 4-225, Arizona Revised Statutes, is repealed.

Sec. 34. Title 4, chapter 2, article 2, Arizona Revised Statutes, is amended by adding a new section 4-225, to read:

START_STATUTE4-225. Adult hemp beverages; rules; testing; labeling

A. A PRODUCER, CRAFT PRODUCER OR ADULT HEMP BEVERAGEs MANUFACTURER SHALL HAVE All ADULT HEMP BEVERAGEs TESTED before DISTRIBUTION TO A WHOLESALER. THE TESTING SHALL DETERMINE THE POTENCY AND AMOUNTS OF THE SUBSTANCES prescribed in subsection b OF THIS SECTION. NO ADULT HEMP BEVERAGEs PRODUCT SHALL BE DISTRIBUTED OR SOLD IN THIS STATE that has not been tested or THAT CONTAINS MORE THAN THE MAXIMUM AMOUNT OF TOTAL TETRAHYDROCANNABINOL that is ALLOWED UNDER THIS TITLE OR THE MAXIMUM AMOUNT that is STATED FOR ANY SUBSTANCE prescribed IN SUBSECTION B OF THIS SECTION. NO PRODUCT SHALL HAVE A VARIANCE OF MORE THAN TEN PERCENT below or ABOVE THE MAXIMUM TOTAL TETRAHYDROCANNABINOL LIMIT.

B. On or before JULY 1, 2026, THE DEPARTMENT SHALL ADOPT RULES SPECIFYING PASS or fail ACTION LEVELS AND VARIANCE LEVELS that are ALLOWED FOR POTENCY, SAFETY AND TOXICITY WITH RESPECT TO THE TESTING REQUIRED BY THIS SECTION. ALL ADULT HEMP BEVERAGES OFFERED FOR SALE OR DISTRIBUTION IN THIS STATE SHALL CONTAIN ONLY NATURALLY OCCURRING CANNABINOIDS AND SHALL BE TESTED FOR POTENCY AND THE PRESENCE OF PESTICIDES, MICROBIALS, RESIDUAL SOLVENTS AND HEAVY METALS.

C. A PRODUCER or adult hemp beverages manufacturer SHALL CONTRACT WITH AN APPROVED INDEPENDENT TESTING LABORATORY TO PROVIDE THE TESTING AND CERTIFICATE OF ANALYSIS that is REQUIRED pursuant to THIS SECTION. AN INDEPENDENT TESTING LABORATORY that PROVIDes TESTING SHALL USE HIGH-PERFORMANCE LIQUID CHROMATOGRAPHY FOR ANY SEPARATION AND MEASUREMENT that is REQUIRED IN THE TESTING.

D. An independent testing laboratory that performs testing of adult hemp beverages pursuant to this section shall meet all of the following requirements:

1. Be a qualified laboratory that is approved by the department to analyze the potency of adult hemp beverages and test adult hemp beverages for harmful contaminants in accordance with the requirements of this section and ANY applicable rules.

2. Hold an ISO 17025 accreditation or be registered with the Federal Drug Enforcement Administration in accordance with 21 code of federal regulations section 1301.13.

3. Have no direct or indirect interest in the entity whose product is being tested.

4. Have no direct or indirect interest in any producer, MANUFACTURER, wholesaler or retailer licensed under this title.

E. EACH ADULT HEMP BEVERAGE TESTED IN ACCORDANCE WITH THIS SECTION SHALL BE ACCOMPANIED BY A VALIDLY ISSUED CERTIFICATE OF ANALYSIS FROM AN APPROVED INDEPENDENT TESTING LABORATORY TO DEMONSTRATE all of the following:

1. THE BATCH IDENTIFICATION NUMBER.

2. THE DATE RECEIVED.

3. THE DATE OF COMPLETION.

4. ThE METHOD OF ANALYSIS FOR EACH TEST CONDUCTED.

5. PROOF THAT THE CERTIFICATE OF ANALYSIS IS CONNECTED TO THE PRODUCT.

F. EACH BATCH OF ADULT HEMP BEVERAGEs MANUFACTURED SHALL UNDERGO TESTING AND OBTAIN A CERTIFICATE OF ANALYSIS BY AN APPROVED INDEPENDENT TESTING LABORATORY.

G. All ADULT HEMP BEVERAGEs SHALL HAVE AN EXPIRATION DATE ON THE LABEL THAT CONFORMS WITH APPLICABLE LAW AND SHALL BE NOt MORE THAN TWO YEARS after THE DATE OF PUBLICATION OF THE PRODUCT'S CERTIFICATE OF ANALYSIS that is REQUIRED UNDER THIS SECTION.

H. THE DEPARTMENT SHALL do both of the following:

1. MAINTAIN AND POST ON the department's WEBSITE A REGISTRY OF INDEPENDENT TESTING LABORATORIES THAT the department approves TO TEST ADULT HEMP BEVERAGEs.

2. DEVELOP A PERMIT APPLICATION BY WHICH INDEPENDENT TESTING LABORATORIES ARE APPROVED AND LISTED ON THE DEPARTMENT'S WEBSITE. THE PERMIT APPLICATION SUBMITTED BY A POTENTIALLY QUALIFYING independent testing LABORATORY MUST INCLUDE A SAMPLE CERTIFICATE OF ANALYSIS ISSUED BY THE APPLYING LABORATORY.

I. THE LABEL OF AN ADULT HEMP BEVERAGE OFFERED FOR DISTRIBUTION AND SALE IN THIS STATE SHALL CONTAIN all of THE FOLLOWING INFORMATION:

1. The brand name.

2. The sIZE OF THE CONTAINER AND SERVING SIZE.

3. The nET WEIGHT OR VOLUME of the product.

4. A list OF INGREDIENTS, INCLUDING:

(a) The aMOUNT OF ANY ADVERTISED CANNABINOID IN MILLIGRAMS.

(b) The AMOUNT OF ANY PRIMARY CANNABINOID IN MILLIGRAMS.

5. The batch number.

6. A STATEMENT THAT USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL.

7. A STATEMENT THAT THE PRODUCT CONTAINS HEMP-DERIVED TETRAHYDROCANNABINOL CANNABINOIDS AND THAT CONSUMPTION OF CERTAIN TETRAHYDROCANNABINOL CANNABINOIDS MAY IMPAIR YOUR ABILITY TO DRIVE OR OPERATE HEAVY MACHINERY.

8. A STATEMENT TO KEEP OUT OF THE REACH OF CHILDREN AND PETS.

9. A STATEMENT OR ICON THAT THE PRODUCT IS intended for use by PERSONS twenty-one years of age OR OLDER only.

10. A STATEMENT THAT CONSUMING ADULT HEMP BEVERAGE PRODUCTS MAY RESULT IN A FAILED DRUG TEST.

11. A STATEMENT THAT THIS PRODUCT HAS NOT BEEN EVALUATED BY THE FOOD AND DRUG ADMINISTRATION AND THIS PRODUCT IS NOT INTENDED TO DIAGNOSE, TREAT, CURE OR PREVENT ANY DISEASE.

12. THE EXPIRATION DATE.

J. All aDULT HEMP BEVERAGEs PACKAGING SHALL INCLUDE A WEBSITE LINK BY INCLUDING A QUICK RESPONSE CODE THAT LINKS TO THE PRODUCER'S WEBSITE, THE PRODUCER'S CERTIFICATE OF ANALYSIS PROVIDED BY AN INDEPENDENT TESTING LABORATORY AND THE PRODUCER'S NAME, PHYSICAL ADDRESS, TELEPHONE NUMBER AND EMAIL ADDRESs. END_STATUTE

Sec. 35. Section 4-226, Arizona Revised Statutes, is amended to read:

START_STATUTE4-226. Exemptions

This title does not apply to the following:

1. Drugstores selling spirituous liquors only on prescription.

2. Any confectionery candy containing less than five percent by weight of alcohol.

3. Ethyl alcohol intended for use or used for the following purposes:

(a) Scientific, chemical, mechanical, industrial and medicinal purposes. For the purposes of this paragraph subdivision, medicinal purposes do not include ethyl alcohol or spirituous liquor that contains marijuana or usable marijuana as defined in section 36-2801.

(b) By those authorized to procure spirituous liquor or ethyl alcohol tax-free, as provided by the acts of Congress and regulations promulgated under the acts of Congress.

(c) In the manufacture of denatured alcohol produced and used as provided by the acts of Congress and regulations promulgated under the acts of Congress.

(d) In the manufacture of patented, patent, proprietary, medicinal, pharmaceutical, antiseptic, toilet, scientific, chemical, mechanical and industrial preparations or products, unfit and not used for beverage purposes.

(e) In the manufacture of flavoring extracts and syrups unfit for beverage purposes.

4. The purchase, storage, distribution, service or consumption of wine in connection with the bona fide practice of a religious belief or as an integral part of a religious exercise by a church recognized by the United States internal revenue service under section 501(c)(3) of the internal revenue code and in a manner not dangerous to public health or safety. This exemption does not apply to any alleged violation of section 4-244, paragraph 9, 34, 35 or 41.

5. Beer or wine produced for personal or family use that is not for sale. The beer or wine may be removed from the premises where it was made and exhibited at organized affairs, exhibitions or competitions, such as homebrewers' or home winemakers' contests, tasting or judging.

6. The manufacture or sale of bitters products that have been classified and approved as a nonbeverage product or unfit for beverage purposes by the United States alcohol and tobacco tax and trade bureau. This paragraph is consistent with the classification guidelines as established and administered by the United States alcohol and tobacco tax and trade bureau.

7. The extraction of cannabinoids from industrial hemp, the product of which is an extract used to manufacture an adult hemp beverages product. END_STATUTE

Sec. 36. Section 4-227, Arizona Revised Statutes, is amended to read:

START_STATUTE4-227. Qualified retail cooperatives; pricing; definitions

A. A wholesaler shall sell its product to a qualified retail cooperative at prices established by the quantity of spirituous liquor or adult hemp beverages being purchased.

B. As used in this section:

1. "Product" means a particular brand of spirituous liquor or adult hemp beverages in a designated size container or a mix of brands and containers when sold on a combined basis established by the wholesaler that is offered on quantity discount terms established by the wholesaler.

2. "Qualified retail cooperative" means a retail cooperative of two or more retail licensees or licenses. END_STATUTE

Sec. 37. Section 4-227.01, Arizona Revised Statutes, is amended to read:

START_STATUTE4-227.01. Channel pricing; definition

A. The wholesaler may employ channel pricing to sell its product to on-sale licensees at a different price than the wholesaler sells its product to off-sale licensees. All channel pricing discounts must be:

1. Based on the volume of the product delivered within a twenty-four hour period.

2. Made equally available to each retailer in that retailer's channel.

B. If an establishment has multiple licenses at the same location and the licenses are not from the same channel, the spirituous liquor or adult hemp beverages shall be sold under the channel that represents the primary use of the premises.

C. For the purposes of this section, "product" means a particular brand of spirituous liquor or adult hemp beverages in a designated size container or a mix of brands and containers when sold on a combined basis as established by the wholesaler that is offered in quantity discount terms established by the wholesaler. END_STATUTE

Sec. 38. Section 4-241, Arizona Revised Statutes, is amended to read:

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

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 adult hemp beverages or entering a portion of a licensed premises when the primary use is the sale or service of spirituous liquor or adult hemp beverages 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 or adult hemp beverages 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 adult hemp beverages or to enter a portion of a licensed premises when the primary use is the sale or service of spirituous liquor or adult hemp beverages 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 or adult hemp beverages 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.

8. A valid unexpired border crossing card issued by the United States government that contains a photograph of the person and the person's date of birth.

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 or adult hemp beverages 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 or adult hemp beverages 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 or adult hemp beverages to a person under the legal drinking age by misrepresenting the age of such person or who orders, requests, receives or procures spirituous liquor or adult hemp beverages 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 or adult hemp beverages 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 or adult hemp beverages are 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 committing 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 or adult hemp beverages 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 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 or adult hemp products 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 or adult hemp beverages. An adult shall not accompany the person onto the premises of the licensee.

6. The person does not consume any spirituous liquor or adult hemp products.

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 whether the person ordering, purchasing, attempting to purchase or otherwise procuring or attempting to procure the serving or delivery of spirituous liquor or adult hemp beverages or entering a portion of a licensed premises when the primary use is the sale or service of spirituous liquor or adult hemp beverages 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. 39. Section 4-242, Arizona Revised Statutes, is amended to read:

START_STATUTE4-242. Sale of spiritous liquor or adult hemp beverages on credit prohibited; exceptions

A. It is unlawful for a retail licensee, or an employee or agent of a licensee, to sell or offer to sell, directly or indirectly, or to sanction the sale on credit of spirituous liquor or adult hemp beverages to a retailer's customer, or to give, lend or advance money or anything of value to a retail customer for the purpose of purchasing or bartering for spirituous liquor or adult hemp beverages, except that sales of spirituous liquor or adult hemp beverages consumed on the retail licensed premises may be included on bills rendered to registered guests in hotels and motels, and spirituous liquor sales or adult hemp beverages sales for on or off premises consumption may be made with credit cards approved by the director, and sales of spirituous liquor or adult hemp beverages consumed on the premises of private clubs may be included on bills rendered to bona fide members.

B. Any wholesaler or producer may engage in credit transactions with any other wholesaler or producer. END_STATUTE

Sec. 40. 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 or adult hemp beverages, directly or indirectly, or through an affiliate:

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

2. To induce a retailer by any form of commercial bribery to purchase spirituous liquor or adult hemp beverages from the producer or wholesaler to the exclusion, in whole or in part, of spirituous liquor or adult hemp beverages 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 or adult hemp beverages.

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

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 or adult hemp beverages 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 adult hemp beverage 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 adult hemp beverages or any other gifts or benefits to the on-sale retailer.

(f) All sampling procedures shall comply with applicable 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, two ounces of adult hemp beverage products, 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, twelve ounces of adult hemp beverage products 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 may not provide samples to the retailer or the retailer's employees.

(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 or adult hemp beverages.

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

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

C. Notwithstanding subsection A, paragraph 4 of this section, any wholesaler of any spirituous liquor or adult hemp beverages 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.

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

Sec. 41. Section 4-243.01, Arizona Revised Statutes, is amended to read:

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

A. It is unlawful:

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

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

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

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

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

(d) A farm winery that is licensed under section 4-205.04 and that is subject to the limits prescribed in section 4-205.04, subsection C, paragraph 7.

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

(f) A craft distiller that is licensed under section 4-205.10 and that is subject to the limits prescribed in section 4-205.10, subsection C, paragraph 5.

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

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

D. On determination by the department of revenue that a primary source of supply has violated this section, a wholesaler may not accept any shipment of spirituous liquor or adult hemp beverages from such primary source of supply for a period of one year.

E. For the purposes of this section:

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

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

Sec. 42. Section 4-243.02, Arizona Revised Statutes, is amended to read:

START_STATUTE4-243.02. Sale of beer, wine, distilled spirits or adult hemp beverages by producer; limitations

A. A person who holds a producer's license may sell beer produced by the producer through the producer's own on-sale retail premises if:

1. The producer also holds an on-sale retail license.

2. The retail sale of the beer is on or adjacent to the premises of the producer.

B. A person who holds a producer's license may sell wine, or distilled spirits or adult hemp beverages produced by the producer at the producer's licensed premises. END_STATUTE

Sec. 43. Section 4-243.04, Arizona Revised Statutes, is amended to read:

START_STATUTE4-243.04. On-sale retail licensees; ownership interests; conditions

A. Notwithstanding section 4-243, a distiller, vintner, brewer, rectifier, blender or other producer of spirituous liquor or adult hemp beverages may have a direct or indirect ownership interest or a financial interest in the license, premises or business on of an on-sale retail licensee if each of the following conditions are met:

1. The retail licensee purchases all spirituous liquor or adult hemp beverages for sale at the premises from wholesalers that are licensed in this state.

2. The retail licensee does not purchase or sell any brand of spirituous liquor or adult hemp beverages produced by the distiller, vintner, brewer, rectifier, blender or other producer of spirituous liquor or adult hemp beverages or by any of its subsidiaries or affiliates.

3. The sale and service of spirituous liquor or adult hemp beverages at the premises is an independent business that is owned, managed and supervised by a person or entity that is not employed by and does not have an ownership interest in the retailer's license, premises or business and is not employed by and does not have an ownership interest in the distiller, vintner, brewer, rectifier, blender or other producer of spirituous liquor or adult hemp beverages. The person owning, managing and supervising the sale and service of spirituous liquor or adult hemp beverages on the premises of the on-sale retail licensee shall be properly licensed by the department and shall have entered into a commercial lease or operating or management agreement with the owner or operator of the premises. This paragraph does not prohibit the sale and service of spirituous liquor or adult hemp beverages by employees of the owner or operator of the premises who act under the supervision of the independent licensee. This paragraph does not prevent the payment of rent, rent calculated as a percentage of gross receipts or a percentage of gross receipts from the sale of spirituous liquor or adult hemp beverages to the owner or operator of the premises.

B. Notwithstanding section 4-243, a distiller, vintner, brewer, rectifier, blender or other producer of spirituous liquor Or adult hemp beverages may directly or indirectly furnish, give, rent, lend or sell to an on-sale retail licensee equipment, fixtures, signs, furnishings, money or other things of value if each of the following conditions are met:

1. The retail licensee purchases all spirituous liquor or adult hemp beverages for sale at the premises from wholesalers that are licensed in this state.

3. The retail licensee is a franchisee of a person that is affiliated with the distiller, vintner, brewer, rectifier, blender or other producer of spirituous liquor or adult hemp beverages and the compensation paid by the retail licensee as a franchise fee or royalty is not based on revenue derived from the sale of spirituous liquor or adult hemp beverages. END_STATUTE

Sec. 44. Section 4-244, Arizona Revised Statutes, is amended to read:

START_STATUTE4-244. Unlawful acts; definition

It is unlawful:

1. For a person to buy for resale, sell or deal in spirituous liquors or adult hemp beverages in this state without first having procured a license duly issued by the board, except that the director may issue a temporary permit of any series pursuant to section 4-205.05 to a trustee in bankruptcy to acquire and dispose of the spirituous liquor or adult hemp beverages of a debtor.

2. For a person to sell or deal in alcohol for beverage purposes or adult hemp beverages without first complying with this title.

3. For a distiller, vintner, brewer or wholesaler knowingly to sell, dispose of or give spirituous liquor or adult hemp beverages to any person other than a licensee except in sampling wares as may be necessary in the ordinary course of business, except in donating spirituous liquor to a nonprofit organization that has obtained a special event license for the purpose of charitable fundraising activities or except in donating spirituous liquor with a cost to the distiller, brewer or wholesaler of up to $500 in a calendar year to an organization that is exempt from federal income taxes under section 501(c) (3), (4), (6) or (7) of the internal revenue code and not licensed under this title.

4. For a distiller, vintner or brewer to require a wholesaler to offer or grant a discount to a retailer, unless the discount has also been offered and granted to the wholesaler by the distiller, vintner or brewer.

5. For a distiller, vintner or brewer to use a vehicle for trucking or transporting spirituous liquors or adult hemp beverages unless there is affixed to both sides of the vehicle a sign showing the name and address of the licensee and the type and number of the person's license in letters not less than three and one-half inches in height.

6. For a person to take or solicit orders for spirituous liquors or adult hemp beverages unless the person is a salesman or solicitor of a licensed wholesaler, a salesman or solicitor of a distiller, brewer, vintner, importer or broker or a registered retail agent.

7. For any retail licensee to purchase spirituous liquors or adult hemp beverages from any person other than a solicitor or salesman of a wholesaler licensed in this state.

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

9. Except as provided in paragraphs 10 and 11 of this section, for a licensee or other person to sell, furnish, dispose of or give, or cause to be sold, furnished, disposed of or given, to a person under the legal drinking age or for a person under the legal drinking age to buy, receive, have in the person's possession or consume spirituous liquor or adult hemp beverages. This paragraph does not prohibit the employment by an off-sale retailer of persons who are at least sixteen years of age to check out, if supervised by a person on the premises who is at least eighteen years of age, package or carry merchandise, including spirituous liquor or adult hemp beverages, in unbroken packages, for the convenience of the customer of the employer, if the employer sells primarily merchandise other than spirituous liquor or adult hemp beverages.

10. For a licensee to employ a person under eighteen years of age to manufacture, sell or dispose of spirituous liquors or adult hemp beverages. This paragraph does not prohibit the employment by an off-sale retailer of persons who are at least sixteen years of age to check out, if supervised by a person on the premises who is at least eighteen years of age, package or carry merchandise, including spirituous liquor or adult hemp beverages, in unbroken packages, for the convenience of the customer of the employer, if the employer sells primarily merchandise other than spirituous liquor or adult hemp beverages.

11. For an on-sale retailer to employ a person under eighteen years of age in any capacity connected with the handling of spirituous liquors or adult hemp beverages. This paragraph does not prohibit the employment by an on-sale retailer of a person under eighteen years of age who cleans up the tables on the premises for reuse, removes dirty dishes, keeps a ready supply of needed items and helps clean up the premises.

12. For a licensee, when engaged in waiting on or serving customers, to consume spirituous liquor or adult hemp beverages or for a licensee or on-duty employee to be on or about the licensed premises while in an intoxicated or disorderly condition.

13. For an employee of a retail licensee, during that employee's working hours or in connection with such employment, to give to or purchase for any other person, accept a gift of, purchase for the employee or consume spirituous liquor or adult hemp beverages, except that:

(a) An employee of a licensee, during that employee's working hours or in connection with the employment, while the employee is not engaged in waiting on or serving customers, may give spirituous liquor or adult hemp beverages to or purchase spirituous liquor or adult hemp beverages for any other person.

(b) An employee of an on-sale retail licensee, during that employee's working hours or in connection with the employment, while the employee is not engaged in waiting on or serving customers, may taste samples of beer, adult hemp beverages or wine of not more than four ounces per day or distilled spirits of not more than two ounces per day provided by an employee of a wholesaler or distributor who is present at the time of the sampling.

(c) An employee of an on-sale retail licensee, under the supervision of a manager as part of the employee's training and education, while not engaged in waiting on or serving customers may taste samples of distilled spirits of not more than two ounces per educational session or beer, adult hemp beverages or wine of not more than four ounces per educational session, and provided that a licensee does not have more than two educational sessions in any thirty-day period.

(d) An unpaid volunteer who is a bona fide member of a club and who is not engaged in waiting on or serving spirituous liquor or adult hemp beverages to customers may purchase for himself and consume spirituous liquor or adult hemp beverages while participating in a scheduled event at the club. An unpaid participant in a food competition may purchase for himself and consume spirituous liquor or adult hemp beverages while participating in the food competition.

(e) An unpaid volunteer of a special event licensee under section 4-203.02 may purchase and consume spirituous liquor while not engaged in waiting on or serving spirituous liquor to customers at the special event. This subdivision does not apply to an unpaid volunteer whose responsibilities include verification of a person's legal drinking age, security or the operation of any vehicle or heavy machinery.

(f) A representative of a producer or wholesaler participating at a special event under section 4-203.02 may consume small amounts of the products of the producer or wholesaler on the premises of the special event for the purpose of quality control.

14. For a licensee or other person to serve, sell or furnish spirituous liquor or adult hemp beverages to a disorderly or obviously intoxicated person, or for a licensee or employee of the licensee to allow a disorderly or obviously intoxicated person to come into or remain on or about the premises, except that a licensee or an employee of the licensee may allow an obviously intoxicated person to remain on the premises for not more than thirty minutes after the state of obvious intoxication is known or should be known to the licensee for a nonintoxicated person to transport the obviously intoxicated person from the premises. For the purposes of this section, "obviously intoxicated" means inebriated to the extent that a person's physical faculties are substantially impaired and the impairment is shown by significantly uncoordinated physical action or significant physical dysfunction that would have been obvious to a reasonable person.

15. For an on-sale or off-sale retailer or an employee of such retailer or an alcohol and adult hemp beverages delivery contractor to sell, dispose of, deliver or give spirituous liquor or adult hemp beverages to a person between the hours of 2:00 a.m. and 6:00 a.m., except that:

(a) A retailer with off-sale privileges may receive and process orders, accept payment or package, load or otherwise prepare spirituous liquor or adult hemp beverages for delivery at any time, if the actual deliveries to customers are made between the hours of 6:00 a.m. and 2:00 a.m., at which time section 4-241, subsections A and K apply.

(b) The governor, in consultation with the governor's office of highway safety and the public safety community in this state, may issue an executive order that extends the closing time until 3:00 a.m. for spirituous liquor or adult hemp beverages sales in connection with a professional or collegiate national sporting championship event held in this state.

16. For a licensee or employee to knowingly allow any person on or about the licensed premises to give or furnish any spirituous liquor or adult hemp beverages to any person under twenty-one years of age or knowingly allow any person under twenty-one years of age to have in the person's possession spirituous liquor or adult hemp beverages on the licensed premises.

17. For an on-sale retailer or an employee of such retailer to allow a person to consume or possess spirituous liquors or adult hemp beverages on the premises between the hours of 2:30 a.m. and 6:00 a.m., except that if the governor extends the closing time for a day for spirituous liquor or adult hemp beverages sales pursuant to paragraph 15 of this section it is unlawful for an on-sale retailer or an employee of such retailer on that day to allow a person to consume or possess spirituous liquor or adult hemp beverages on the premises between the hours of 3:30 a.m. and 6:00 a.m.

18. For an on-sale retailer to allow an employee or for an employee to solicit or encourage others, directly or indirectly, to buy the employee drinks or anything of value in the licensed premises during the employee's working hours. An on-sale retailer shall not serve employees or allow a patron of the establishment to give spirituous liquor or adult hemp beverages to, purchase liquor or adult hemp beverages for or drink liquor or adult hemp beverages with any employee during the employee's working hours.

19. For an off-sale retailer or employee to sell spirituous liquor or adult hemp beverages except in the original unbroken container, to allow spirituous liquor or adult hemp beverages to be consumed on the premises or to knowingly allow spirituous liquor or adult hemp beverages to be consumed on adjacent property under the licensee's exclusive control.

20. For a person to consume spirituous liquor or adult hemp beverages in a public place, thoroughfare or gathering. The license of a licensee allowing a violation of this paragraph on the premises shall be subject to revocation. This paragraph does not apply to the sale of spirituous liquors or adult hemp beverages on the premises of and by an on-sale retailer. This paragraph also does not apply to a person consuming beer or wine from a broken package in a public recreation area or on private property with permission of the owner or lessor or on the walkways surrounding such private property or to a person consuming beer or wine from a broken package in a public recreation area as part of a special event or festival that is conducted under a license secured pursuant to section 4-203.02 or 4-203.03.

21. For a person to possess or to transport spirituous liquor or adult hemp beverages that is manufactured in a distillery, winery, brewery or rectifying plant contrary to the laws of the United States and this state. Any property used in transporting such spirituous liquor or adult hemp beverages shall be forfeited to the state and shall be seized and disposed of as provided in section 4-221.

22. For an on-sale retailer or employee to allow a person under the legal drinking age to remain in an area on the licensed premises during those hours in which its primary use is the sale, dispensing or consumption of alcoholic beverages or adult hemp beverages after the licensee, or the licensee's employees, know or should have known that the person is under the legal drinking age. An on-sale retailer may designate an area of the licensed premises as an area in which spirituous liquor or adult hemp beverages will not be sold or consumed for the purpose of allowing underage persons on the premises if the designated area is separated by a physical barrier and at no time will underage persons have access to the area in which spirituous liquor is or adult hemp beverages are sold or consumed. A licensee or an employee of a licensee may require a person who intends to enter a licensed premises or a portion of a licensed premises where persons under the legal drinking age are prohibited under this section to exhibit an instrument of identification that is acceptable under section 4-241 as a condition of entry or may use a biometric identity verification device to determine the person's age as a condition of entry. The director, or a municipality, may adopt rules to regulate the presence of underage persons on licensed premises provided the rules adopted by a municipality are more stringent than those adopted by the director. The rules adopted by the municipality shall be adopted by local ordinance and shall not interfere with the licensee's ability to comply with this paragraph. This paragraph does not apply:

(a) If the person under the legal drinking age is accompanied by a spouse, parent, grandparent or legal guardian of legal drinking age or is an on-duty employee of the licensee.

(b) If the owner, lessee or occupant of the premises is a club as defined in section 4-101, paragraph 8 12, subdivision (a) and the person under the legal drinking age is any of the following:

(i) An active duty military service member.

(ii) A veteran.

(iii) A member of the United States army national guard or the United States air national guard.

(iv) A member of the United States military reserve forces.

23. For an on-sale retailer or employee to conduct drinking contests, to sell or deliver to a person an unlimited number of spirituous liquor beverages or adult hemp beverages during any set period of time for a fixed price, to deliver more than fifty ounces of beer, ten milligrams of total tetrahydrocannabinol in adult hemp beverages, one liter of wine or four ounces of distilled spirits in any spirituous liquor drink to one person at one time for that person's consumption or to advertise any practice prohibited by this paragraph. This paragraph does not prohibit an on-sale retailer or employee from selling and delivering an opened, original container of distilled spirits if:

(a) Service or pouring of the spirituous liquor is provided by an employee of the on-sale retailer. A licensee shall not be charged for a violation of this paragraph if a customer, without the knowledge of the retailer, removes or tampers with a locking device on a bottle delivered to the customer for bottle service and the customer pours the customer's own drink from the bottle, if when the licensee becomes aware of the removal or tampering of the locking device the licensee immediately installs a functioning locking device on the bottle or removes the bottle and lock from bottle service.

(b) The employee of the on-sale retailer monitors consumption to ensure compliance with this paragraph. Locking devices may be used, but are not required.

24. For a licensee or employee to knowingly allow the unlawful possession, use, sale or offer for sale of narcotics, dangerous drugs or marijuana on the premises. For the purposes of this paragraph, "dangerous drug" has the same meaning prescribed in section 13-3401.

25. For a licensee or employee to knowingly allow prostitution or the solicitation of prostitution on the premises.

26. For a licensee or employee to knowingly allow unlawful gambling on the premises.

27. For a licensee or employee to knowingly allow trafficking or attempted trafficking in stolen property on the premises.

28. For a licensee or employee to fail or refuse to make the premises or records available for inspection and examination as provided in this title or to comply with a lawful subpoena issued under this title.

29. For any person other than a peace officer while on duty or off duty or a member of a sheriff's volunteer posse while on duty who has received firearms training that is approved by the Arizona peace officer standards and training board, a retired peace officer as defined in section 38-1113 or an honorably retired law enforcement officer who has been issued a certificate of firearms proficiency pursuant to section 13-3112, subsection T, the licensee or an employee of the licensee acting with the permission of the licensee to be in possession of a firearm while on the licensed premises of an on-sale retailer. This paragraph does not include a situation in which a person is on licensed premises for a limited time in order to seek emergency aid and such person does not buy, receive, consume or possess spirituous liquor. This paragraph does not apply to:

(a) Hotel or motel guest room accommodations.

(b) Exhibiting or displaying a firearm in conjunction with a meeting, show, class or similar event.

(c) A person with a permit issued pursuant to section 13-3112 who carries a concealed handgun on the licensed premises of any on-sale retailer that has not posted a notice pursuant to section 4-229.

30. For a licensee or employee to knowingly allow a person in possession of a firearm other than a peace officer while on duty or off duty or a member of a sheriff's volunteer posse while on duty who has received firearms training that is approved by the Arizona peace officer standards and training board, a retired peace officer as defined in section 38-1113 or an honorably retired law enforcement officer who has been issued a certificate of firearms proficiency pursuant to section 13-3112, subsection T, the licensee or an employee of the licensee acting with the permission of the licensee to remain on the licensed premises or to serve, sell or furnish spirituous liquor to a person in possession of a firearm while on the licensed premises of an on-sale retailer. It is a defense to action under this paragraph if the licensee or employee requested assistance of a peace officer to remove such person. This paragraph does not apply to:

(a) Hotel or motel guest room accommodations.

(b) Exhibiting or displaying a firearm in conjunction with a meeting, show, class or similar event.

(c) A person with a permit issued pursuant to section 13-3112 who carries a concealed handgun on the licensed premises of any on-sale retailer that has not posted a notice pursuant to section 4-229.

31. For any person in possession of a firearm while on the licensed premises of an on-sale retailer to consume spirituous liquor or adult hemp beverages. This paragraph does not prohibit the consumption of small amounts of spirituous liquor or adult hemp beverages by an undercover peace officer on assignment to investigate the licensed establishment.

32. For a licensee or employee to knowingly allow spirituous liquor or adult hemp beverages to be removed from the licensed premises, except in the original unbroken package. This paragraph does not apply to any of the following:

(a) A person who removes a bottle of wine that has been partially consumed in conjunction with a purchased meal from licensed premises if a cork is inserted flush with the top of the bottle or the bottle is otherwise securely closed.

(b) A person who is in licensed premises that have noncontiguous portions that are separated by a public or private walkway or driveway and who takes spirituous liquor or adult hemp beverages from one portion of the licensed premises across the public or private walkway or driveway directly to the other portion of the licensed premises.

(c) A licensee of a bar, beer and wine bar, liquor store, beer and wine store, microbrewery or restaurant that has a permit pursuant to section 4-205.02, subsection H that dispenses beer only in a clean container composed of a material approved by a national sanitation organization with a maximum capacity that does not exceed one gallon and not for consumption on the premises if:

(i) The licensee or the licensee's employee fills the container at the tap at the time of sale.

(ii) The container is sealed and displays a government warning label.

(d) A bar or liquor store licensee that prepares a mixed cocktail or a restaurant licensee that leases the privilege to sell mixed cocktails for consumption off the licensed premises pursuant to section 4-203.06 or holds a permit pursuant to section 4-203.07 and section 4-205.02, subsection K and that prepares a mixed cocktail and transfers it to a clean container composed of a material approved by a national sanitation organization with a maximum capacity that does not exceed thirty-two ounces and not for consumption on the premises if all of the following apply:

(i) The licensee or licensee's employee fills the container with the mixed cocktail on the licensed premises of the bar, liquor store or restaurant.

(ii) The container is tamperproof sealed by the licensee or the licensee's employee and displays a government warning label.

(iii) The container clearly displays the bar's, liquor store's or restaurant's logo or name.

(iv) For a restaurant licensee licensed pursuant to section 4-205.02, the sale of mixed cocktails for consumption off the licensed premises is accompanied by the sale of menu food items for consumption on or off the licensed premises.

33. For a person who is obviously intoxicated to buy or attempt to buy spirituous liquor or adult hemp beverages from a licensee or employee of a licensee or to consume spirituous liquor or adult hemp beverages on licensed premises.

34. For a person who is under twenty-one years of age to drive or be in physical control of a motor vehicle while there is any spirituous liquor or adult hemp beverages in the person's body.

35. For a person who is under twenty-one years of age to operate or be in physical control of a motorized watercraft that is underway while there is any spirituous liquor or adult hemp beverages in the person's body. For the purposes of this paragraph, "underway" has the same meaning prescribed in section 5-301.

36. For a licensee, manager, employee or controlling person to purposely induce a voter, by means of alcohol or adult hemp beverages, to vote or abstain from voting for or against a particular candidate or issue on an election day.

37. For a licensee to fail to report an occurrence of an act of violence to either the department or a law enforcement agency.

38. For a licensee to use a vending machine for the purpose of dispensing spirituous liquor or adult hemp beverages.

39. For a licensee to offer for sale a wine carrying a label including a reference to Arizona or any Arizona city, town or geographic location unless at least seventy-five percent by volume of the grapes used in making the wine were grown in Arizona.

40. For a retailer to knowingly allow a customer to bring spirituous liquor or adult hemp beverages onto the licensed premises, except that an on-sale retailer may allow a wine and food club to bring wine onto the premises for consumption by the club's members and guests of the club's members in conjunction with meals purchased at a meeting of the club that is conducted on the premises and that at least seven members attend. An on-sale retailer that allows wine and food clubs to bring wine onto its premises under this paragraph shall comply with all applicable provisions of this title and any rules adopted pursuant to this title to the same extent as if the on-sale retailer had sold the wine to the members of the club and their guests. For the purposes of this paragraph, "wine and food club" means an association that has more than twenty bona fide members paying at least $6 per year in dues and that has been in existence for at least one year.

41. For a person who is under twenty-one years of age to have in the person's body any spirituous liquor or adult hemp beverages. In a prosecution for a violation of this paragraph:

(a) Pursuant to section 4-249, it is a defense that the spirituous liquor was consumed in connection with the bona fide practice of a religious belief or as an integral part of a religious exercise and in a manner not dangerous to public health or safety.

(b) Pursuant to section 4-226, it is a defense that the spirituous liquor was consumed for a bona fide medicinal purpose and in a manner not dangerous to public health or safety.

42. For an employee of a licensee to accept any gratuity, compensation, remuneration or consideration of any kind to either:

(a) Allow a person who is under twenty-one years of age to enter any portion of the premises where that person is prohibited from entering pursuant to paragraph 22 of this section.

(b) Sell, furnish, dispose of or give spirituous liquor or adult hemp beverages to a person who is under twenty-one years of age.

43. For a person to purchase, offer for sale or use any device, machine or process that mixes spirituous liquor or adult hemp beverages with pure oxygen or another gas to produce a vaporized product for the purpose of consumption by inhalation or to allow patrons to use any item for the consumption of vaporized spirituous liquor or adult hemp beverages.

44. For a retail licensee or an employee of a retail licensee to sell spirituous liquor or adult hemp beverages to a person if the retail licensee or employee knows the person intends to resell the spirituous liquor or adult hemp beverages.

45. Except as authorized by paragraph 32, subdivision (c) of this section, for a person to reuse a bottle or other container authorized for use by the laws of the United States or any agency of the United States for the packaging of distilled spirits or for a person to increase the original contents or a portion of the original contents remaining in a liquor bottle or other authorized container by adding any substance.

46. For a direct shipment licensee, a farm winery licensee or an employee of those licensees to sell, dispose of, deliver or give spirituous liquor or adult hemp beverages to an individual purchaser between the hours of 2:00 a.m. and 6:00 a.m., except that a direct shipment licensee or a farm winery licensee may receive and process orders, accept payment, package, load or otherwise prepare wine for delivery at any time without complying with section 4-241, subsections A and K, if the actual deliveries to individual purchasers are made between the hours of 6:00 a.m. and 2:00 a.m. and in accordance with section 4-203.04 for direct shipment licensees and section 4-205.04 for farm winery licensees.

47. For a supplier to coerce or attempt to coerce a wholesaler to accept delivery of beer, adult hemp beverages or any other commodity that has not been ordered by the wholesaler or for which the order was canceled. A supplier may impose reasonable inventory requirements on a wholesaler if the requirements are made in good faith and are generally applied to other similarly situated wholesalers that have an agreement with the supplier. END_STATUTE

Sec. 45. Section 4-244.02, Arizona Revised Statutes, is amended to read:

START_STATUTE4-244.02. Unlawful importation of spirituous liquor or adult hemp beverages; exceptions

A. It is unlawful for any person, that is not a qualified licensee under this title, to import spirituous liquors or adult hemp beverages into this state from a foreign country unless:

1. Such person is the legal drinking age.

2. Such person has been physically within such foreign country immediately prior to such importation and such importation coincides with his return from such foreign country.

3. Except as provided in subsection B, the amount of spirituous liquor or adult hemp beverages imported does not exceed the amount permitted by federal law to be imported duty-free, in any period of thirty-one days, except that if the federal law prescribing such duty-free limitation is repealed or amended, then in no event shall the amount of duty-free importation into this state be more than one liter of spirituous liquor or forty-eight ounces of adult hemp beverages during such period.

B. To the extent permitted by federal law, a member of the Arizona national guard, the United States armed forces reserves or the armed forces of the United States may import more than one liter of spirituous liquor Or forty-eight ounces of adult hemp beverages for personal use into this state if the importation coincides with that person's return from a tour of duty in a foreign country. A person who imports more spirituous liquor or adult hemp beverages pursuant to this subsection than the amount permitted by federal law to be imported duty-free shall be responsible for the payment of any federal taxes due on the quantity of spirituous liquor or adult hemp beverages that exceeds the duty-free amount. The department may issue letters of exemption to allow military personnel to import spirituous liquor or adult hemp beverages pursuant to this subsection. END_STATUTE

Sec. 46. Section 4-244.05, Arizona Revised Statutes, is amended to read:

START_STATUTE4-244.05. Unlicensed business establishment or premises; unlawful consumption of spirituous liquor or adult hemp beverages; civil penalty; seizure and forfeiture of property

A. A person owning, operating, leasing, managing or controlling a business establishment or business premises which that are not properly licensed pursuant to this title and in which any of the following occur occurs shall not allow the consumption of spirituous liquor or adult hemp beverages in the establishment or on the premises:

1. Food or beverages are sold.

2. Entertainment is provided.

3. A membership fee or a cover charge for admission is charged.

4. A minimum purchase or rental requirement for goods or services is charged.

B. A person shall not consume spirituous liquor or adult hemp beverages in a business establishment or on business premises which that are not properly licensed pursuant to this title in which food or beverages are sold, entertainment is provided, a membership fee or a cover charge for admission is charged or a minimum purchase or rental requirement for goods or services is charged.

C. In addition to or in lieu of other fines or civil penalties imposed for a violation of this section or any other action taken by the board or director, the board or director may conduct a hearing subject to the requirements of section 4-210, subsection G to determine whether a person has violated subsection A of this section. If the board or director determines, after a hearing, that a person has violated subsection A of this section the board or director may impose a civil penalty of not less than two hundred nor $200 or more than five thousand dollars $5,000 for each offense. A civil penalty imposed pursuant to this section by the director may be appealed to the board.

D. In addition to any other remedies provided by law, any monies used or obtained in violation of this chapter may be seized by any peace officer if the peace officer has probable cause to believe that the money has been used or is intended to be used in violation of this section.

E. In addition to any other remedies provided by law, the records of an establishment that is in violation of this section may be seized by any peace officer if the peace officer has probable cause to believe that the establishment is operating without a valid license issued pursuant to this title.

F. In addition to any other remedies provided by law, any amount of alcohol or adult hemp beverages may be seized by any peace officer if the peace officer has probable cause to believe that the alcohol or adult hemp beverages is being used or is intended to be used in violation of this section.

G. In addition to any other remedies provided by law, the following property shall be forfeited pursuant to section 13-2314 or title 13, chapter 39:

1. All proceeds and other assets that are derived from a violation of this section.

2. Anything of value that is used or intended to be used to facilitate a violation of this section.

H. A person who obtains property through a violation of this section is deemed to be an involuntary trustee of that property. An involuntary trustee and any other person who obtains the property, except a bona fide purchaser who purchases the property for value without notice of or participation in the unlawful conduct, holds the property, including its proceeds and other assets, in constructive trust for the benefit of the persons entitled to remedies pursuant to section 13-2314 or title 13, chapter 39.

I. The board or director may adopt rules authorizing and prescribing limitations for the possession or consumption of spirituous liquor or adult hemp beverages at establishments or premises falling within the scope of subsections A and B of this section. Rules adopted pursuant to this subsection shall authorize the possession or consumption of spirituous liquor or adult hemp beverages only at establishments or premises which permit that allow the consumption or possession of minimal amounts of spirituous liquor or adult hemp beverages and which that meet both of the following criteria:

1. The possession or consumption of spirituous liquor or adult hemp beverages is permitted allowed only as an incidental convenience to the customers of the establishment or premises.

2. The possession or consumption of spirituous liquor or adult hemp beverages is permitted allowed only within the hours of lawful sale as prescribed in this title, and is limited to no not more than ten hours per day.

J. Any rules adopted pursuant to subsection I of this section shall prescribe:

1. The maximum permitted allowed occupancy of an establishment or premises.

2. The hours during which spirituous liquor or adult hemp beverages may be possessed or consumed.

3. The amount of spirituous liquor or adult hemp beverages that a person may possess or consume.

4. That the director, the director's agents and any peace officer empowered to enforce the provisions of this title, in enforcing the provisions of this title, may visit and inspect the establishment or premises during the business hours of the premises or establishment. The director may charge a fee for the inspection of unlicensed premises to review an application for exemption pursuant to this section.

K. Any rules adopted pursuant to subsection I of this section may prescribe separate classifications of establishments or premises at which spirituous liquor or adult hemp beverages may be possessed or consumed and may establish any other provisions relating to the possession or consumption of spirituous liquor or adult hemp beverages at establishments or premises falling within the scope of subsections A and B of this section which that are necessary to maintain the health and welfare of the community.

L. This section does not apply to establishments or premises that are not licensed pursuant to this title and on which occurs the consumption of spirituous liquor or adult hemp beverages if the establishment or premises are owned, operated, leased, managed or controlled by the United States, this state or a city or county of this state. END_STATUTE

Sec. 47. Title 4, chapter 2, article 3, Arizona Revised Statutes, is amended by adding section 4-245, to read:

START_STATUTE4-245. Adult hemp beverages; serving sizes; container; prohibitions

A. An adult hemp beverage containing a single serving of an adult hemp beverage per container shall be in an adult hemp beverage single-serving container. The container shall have an internal volume of at least two hundred milliliters or 6.76 fluid ounces and may not have a total tetrahydrocannabinol content of more than ten milligrams of total tetrahydrocannabinol per container.

B. An adult hemp beverage containing multiple servings of an adult hemp beverage per container shall be in an adult hemp beverages multiple-serving container. The multiple-serving container shall have an internal volume of at least three hundred seventy five milliliters or 12.68 fluid ounces and may not have a tetrahydrocannabinol content of more than thirty milligrams per liter or 0.887 milligrams per fluid ounces of the total volume of the container.

C. A PERSON may not PROCESS, DISTRIBUTE, SELL OR OFFER FOR SALE IN THIS STATE ANY ADULT HEMP BEVERAGEs PRODUCT WITHOUT A LICENSE issued pursuant to THIS TITLE.

D. A PERSON may not PROCESS, DISTRIBUTE, SELL OR OFFER FOR SALE IN THIS STATE ANY ADULT HEMP BEVERAGE PRODUCT IN POWDERED FORM OR AS A CONCENTRATED TINCTURE FOR MIXING WITH WATER OR OTHER LIQUID.

E. A PERSON may not PROCESS, DISTRIBUTE, SELL OR OFFER FOR SALE IN THIS STATE ANY SPIRITUOUS LIQUOR PRODUCT CONTAINING ANY ADULT HEMP BEVERAGE OR CANNABINOID. THE COMBINING OF SPIRITUOUS LIQUORS AND ADULT HEMP BEVERAGES OR CANNABINOIDS BY A LICENSEE OR AN EMPLOYEE OF A LICENSEE IS PROHIBITED.

F. A PRODUCER may not USE ANY DISTILLATE OR CONCENTRATE CONTAINING ANY DERIVATIVE OF A TETRAHYDROCANNABINOL COMPONENT THAT IS NOT HEMP-DERIVED TETRAHYDROCANNABINOL. END_STATUTE

Sec. 48. Heading change

The heading to title 4, chapter 2, article 4, Arizona Revised Statutes, is changed from "WARNING SIGNS" to "SIGNS".

Sec. 49. Section 4-250.01, Arizona Revised Statutes, is amended to read:

START_STATUTE4-250.01. Out-of-state person engaged in business as producer, exporter, importer, rectifier, retailer or wholesaler; violation; cease and desist order; civil penalty

A. An out-of-state person engaged in business in this state as a producer, exporter, importer, rectifier, retailer or wholesaler of spirituous liquor or adult hemp beverages without a license issued under this title shall comply with this title as if licensed by this state. An out-of-state person engaged in business in this state as a producer, exporter, importer, rectifier, retailer or wholesaler shall be deemed to have consented to the jurisdiction of the department, any other agency of this state, the courts of this state and all other related laws, rules or regulations. An out-of-state person engaged in business in this state as a producer, exporter, importer, rectifier, retailer or wholesaler of spirituous liquor or adult hemp beverages who violates this title is subject to a fine or a civil penalty and suspension or revocation of the right to do business in this state.

B. If the director has reasonable cause to believe that an out-of-state person engaged in business as a producer, exporter, importer, rectifier, retailer or wholesaler of spirituous liquor or adult hemp beverages is acting in violation of this title, the director may serve a cease and desist order requiring the person to cease and desist the violation.

C. If an out-of-state person who is engaged in business in this state as a producer, exporter, importer, rectifier, retailer or wholesaler of spirituous liquor or adult hemp beverages knowingly violates a cease and desist order issued by the director pursuant to subsection B of this section, the director may:

1. Impose a civil penalty of up to one hundred fifty thousand dollars $150,000 for each violation.

2. Notify the department of revenue of the violation for the purposes of collection of any transaction privilege tax or luxury privilege tax due.

3. Notify the applicable agency or regulatory body in the state in which the person is licensed of the violation.

4. Give notice of the violation to the producers, exporters, importers, rectifiers, retailers, wholesalers, common carriers and consumers connected to the transaction if the out-of-state person has shipped liquor or adult hemp beverages into the state in violation of this title. END_STATUTE

Sec. 50. Section 4-251, Arizona Revised Statutes, is amended to read:

START_STATUTE4-251. Spirituous liquor or adult hemp beverages in motor vehicles; prohibitions; violation; classification; exceptions; definitions

A. It is unlawful for any person to:

1. Consume spirituous liquor or adult hemp beverages while operating or while within the passenger compartment of a motor vehicle that is located on any public highway or right-of-way of a public highway in this state.

2. Possess an open container of spirituous liquor or adult hemp beverages within the passenger compartment of a motor vehicle that is located on any public highway or right-of-way of a public highway in this state.

B. A person who violates subsection A of this section is guilty of a class 2 misdemeanor.

C. This section does not apply to:

1. A passenger in any bus, limousine, taxi or transportation network company vehicle as defined in section 28-9551 while the vehicle is being used to provide transportation network services as defined in section 28-9551.

2. A passenger in the living quarters of a motor home as defined in section 28-4301.

D. For the purposes of this section:

1. "Motor vehicle":

(a) Means a self-propelled vehicle.

(b) Does not include a vehicle operated exclusively on rails or water.

2. "Open container" means any bottle, can, jar, container dispensed pursuant to section 4-244, paragraph 32, subdivision (c) or other receptacle that contains spirituous liquor or adult hemp beverages and that has been opened, has had its seal broken or the contents of which have been partially removed.

3. "Passenger compartment" means the area of a motor vehicle designed for the seating of the driver and other passengers of the vehicle. Passenger compartment includes an unlocked glove compartment and any unlocked portable devices within the immediate reach of the driver or any passengers. Passenger compartment does not include the trunk, a locked glove compartment or the area behind the last upright seat of a motor vehicle that is not equipped with a trunk.

4. "Public highway or right-of-way of a public highway" means the entire width between and immediately adjacent to the boundary lines of every way maintained by the federal government, this state or a county, city or town if any part of the way is generally open to the use of the public for purposes of vehicular travel. END_STATUTE

Sec. 51. Section 4-301, Arizona Revised Statutes, is amended to read:

START_STATUTE4-301. Liability limitation; social host

A person other than a licensee or an employee of a licensee acting during the employee's working hours or in connection with such employment is not liable in damages to any person who is injured, or to the survivors of any person killed, or for damage to property, which is alleged to have been caused in whole or in part by reason of the furnishing or serving of spirituous liquor or adult hemp beverages to a person of at least the legal drinking age. END_STATUTE

Sec. 52. Section 4-302, Arizona Revised Statutes, is amended to read:

START_STATUTE4-302. Notice of litigation

A. A person filing a claim for relief seeking damages from a licensee and alleging that a person was injured or damage occurred which was caused in whole or in part by reason of the furnishing or serving of spirituous liquor or adult hemp beverages by the licensee or an employee of the licensee to any person shall file a copy of the complaint with the department within ten days after filing the complaint.

B. A licensee who has been served with a complaint alleging the provisions of subsection A shall file a copy of the complaint with the department within ten days after the service.

C. A licensee or controlling person who files a petition in bankruptcy shall file notice of the petition with the department within ten days after the filing or entry and shall advise the department within ten days of a dismissal or discharge by any means.

D. A licensee or controlling person who files a bankruptcy dismissal or discharge shall file notice of the dismissal or discharge with the department within ten days after the filing. END_STATUTE

Sec. 53. Section 4-311, Arizona Revised Statutes, is amended to read:

START_STATUTE4-311. Liability for serving intoxicated person or minor; definition

A. A licensee is liable for property damage and personal injuries or is liable to a person who may bring an action for wrongful death pursuant to section 12-612, or both, if a court or jury finds all of the following:

1. The licensee sold spirituous liquor or adult hemp beverages either to a purchaser who was obviously intoxicated, or to a purchaser under the legal drinking age without requesting identification containing proof of age or with knowledge that the person was under the legal drinking age.

2. The purchaser consumed the spirituous liquor or adult hemp beverages sold by the licensee.

3. The consumption of spirituous liquor or adult hemp beverages was a proximate cause of the injury, death or property damage.

B. No licensee is chargeable with knowledge of previous acts by which a person becomes intoxicated at other locations unknown to the licensee unless the person was obviously intoxicated. If the licensee operates under a restaurant license, the finder of fact shall not consider any information obtained as a result of a restaurant audit conducted pursuant to section 4-213 unless the court finds the information relevant.

C. For the purposes of subsection A, paragraph 2 of this section, if it is found that an underage person purchased spirituous liquor or adult hemp beverages from a licensee and such underage person incurs or causes injuries or property damage as a result of the consumption of spirituous liquor or adult hemp beverages within a reasonable period of time following the sale of the spirituous liquor or adult hemp beverages, it shall create a rebuttable presumption that the underage person consumed the spirituous liquor or adult hemp beverages sold to such person by the licensee.

D. For the purposes of this section, "obviously intoxicated" means inebriated to such an extent that a person's physical faculties are substantially impaired and the impairment is shown by significantly uncoordinated physical action or significant physical dysfunction that would have been obvious to a reasonable person. END_STATUTE

Sec. 54. Section 4-312, Arizona Revised Statutes, is amended to read:

START_STATUTE4-312. Liability limitation

A. A licensee is not liable in damages to any consumer or purchaser of spirituous liquor or adult hemp beverages over the legal drinking age who is injured or whose property is damaged, or to survivors of such a person, if the injury or damage is alleged to have been caused in whole or in part by reason of the sale, furnishing or serving of spirituous liquor or adult hemp beverages to that person. A licensee is not liable in damages to any other adult person who is injured or whose property is damaged, or to the survivors of such a person, who was present with the person who consumed the spirituous liquor or adult hemp beverages at the time the spirituous liquor was or adult hemp beverages were consumed and who knew of the impaired condition of the person, if the injury or damage is alleged to have been caused in whole or in part by reason of the sale, furnishing or serving of spirituous liquor or adult hemp beverages.

B. Subject to the provisions of subsection A of this section and except as provided in section 4-311, a person, firm, corporation or licensee is not liable in damages to any person who is injured, or to the survivors of any person killed, or for damage to property which that is alleged to have been caused in whole or in part by reason of the sale, furnishing or serving of spirituous liquor or adult hemp beverages. END_STATUTE

Sec. 55. Section 36-136, Arizona Revised Statutes, is amended to read:

START_STATUTE36-136. Powers and duties of director; compensation of personnel; rules; definitions

A. The director shall:

1. Be the executive officer of the department of health services and the state registrar of vital statistics but shall not receive compensation for services as registrar.

2. Perform all duties necessary to carry out the functions and responsibilities of the department.

3. Prescribe the organization of the department. The director shall appoint or remove personnel as necessary for the efficient work of the department and shall prescribe the duties of all personnel. The director may abolish any office or position in the department that the director believes is unnecessary.

4. Administer and enforce the laws relating to health and sanitation and the rules of the department.

5. Provide for the examination of any premises if the director has reasonable cause to believe that on the premises there exists a violation of any health law or rule of this state.

6. Exercise general supervision over all matters relating to sanitation and health throughout this state. When in the opinion of the director it is necessary or advisable, a sanitary survey of the whole or of any part of this state shall be made. The director may enter, examine and survey any source and means of water supply, sewage disposal plant, sewerage system, prison, public or private place of detention, asylum, hospital, school, public building, private institution, factory, workshop, tenement, public washroom, public restroom, public toilet and toilet facility, public eating room and restaurant, dairy, milk plant or food manufacturing or processing plant, and any premises in which the director has reason to believe there exists a violation of any health law or rule of this state that the director has the duty to administer.

7. Prepare sanitary and public health rules.

8. Perform other duties prescribed by law.

B. If the director has reasonable cause to believe that there exists a violation of any health law or rule of this state, the director may inspect any person or property in transportation through this state, and any car, boat, train, trailer, airplane or other vehicle in which that person or property is transported, and may enforce detention or disinfection as reasonably necessary for the public health if there exists a violation of any health law or rule.

C. The director, after consultation with the department of administration, may take all necessary steps to enhance the highest and best use of the state hospital property, including contracting with third parties to provide services, entering into short-term lease agreements with third parties to occupy or renovate existing buildings and entering into long-term lease agreements to develop the land and buildings. The director shall deposit any monies collected from contracts and lease agreements entered into pursuant to this subsection in the Arizona state hospital charitable trust fund established by section 36-218. At least thirty days before issuing a request for proposals pursuant to this subsection, the department of health services shall hold a public hearing to receive community and provider input regarding the highest and best use of the state hospital property related to the request for proposals. The department shall report to the joint committee on capital review on the terms, conditions and purpose of any lease or sublease agreement entered into pursuant to this subsection relating to state hospital lands or buildings or the disposition of real property pursuant to this subsection, including state hospital lands or buildings, and the fiscal impact on the department and any revenues generated by the agreement. Any lease or sublease agreement entered into pursuant to this subsection relating to state hospital lands or buildings or the disposition of real property pursuant to this subsection, including state hospital lands or buildings, must be reviewed by the joint committee on capital review.

D. The director may deputize, in writing, any qualified officer or employee in the department to do or perform on the director's behalf any act the director is by law empowered to do or charged with the responsibility of doing.

E. The director may delegate to a local health department, county environmental department or public health services district any functions, powers or duties that the director believes can be competently, efficiently and properly performed by the local health department, county environmental department or public health services district if:

1. The director or superintendent of the local health department, environmental department or public health services district is willing to accept the delegation and agrees to perform or exercise the functions, powers and duties conferred in accordance with the standards of performance established by the director of the department of health services.

2. Monies appropriated or otherwise made available to the department for distribution to or division among counties or public health services districts for local health work may be allocated or reallocated in a manner designed to ensure the accomplishment of recognized local public health activities and delegated functions, powers and duties in accordance with applicable standards of performance. If in the director's opinion there is cause, the director may terminate all or a part of any delegation and may reallocate all or a part of any monies that may have been conditioned on the further performance of the functions, powers or duties conferred.

F. The compensation of all personnel shall be as determined pursuant to section 38-611.

G. The director may make and amend rules necessary for the proper administration and enforcement of the laws relating to the public health.

H. Notwithstanding subsection I, paragraph 1 of this section, the director may define and prescribe emergency measures for detecting, reporting, preventing and controlling communicable or infectious diseases or conditions if the director has reasonable cause to believe that a serious threat to public health and welfare exists. Emergency measures are effective for not longer than eighteen months.

I. The director, by rule, shall:

1. Define and prescribe reasonably necessary measures for detecting, reporting, preventing and controlling communicable and preventable diseases. The rules shall declare certain diseases that are reportable. The rules shall prescribe measures, including isolation or quarantine, that are reasonably required to prevent the occurrence of, or to seek early detection and alleviation of, disability, insofar as possible, from communicable or preventable diseases. The rules shall include reasonably necessary measures to control animal diseases that are transmittable to humans.

2. Define and prescribe reasonably necessary measures, in addition to those prescribed by law, regarding the preparation, embalming, cremation, interment, disinterment and transportation of dead human bodies and the conduct of funerals, relating to and restricted to communicable diseases and regarding the removal, transportation, cremation, interment or disinterment of any dead human body.

3. Define and prescribe reasonably necessary procedures that are not inconsistent with law in regard to the use and accessibility of vital records, delayed birth registration and the completion, change and amendment of vital records.

4. Except as relating to the beneficial use of wildlife meat by public institutions and charitable organizations pursuant to title 17, prescribe reasonably necessary measures to ensure that all food or drink, including meat and meat products and milk and milk products sold at the retail level, provided for human consumption is free from unwholesome, poisonous or other foreign substances and filth, insects or disease-causing organisms. The rules shall prescribe reasonably necessary measures governing the production, processing, labeling, storing, handling, serving and transportation of these products. The rules shall prescribe minimum standards for the sanitary facilities and conditions that shall be maintained in any warehouse, restaurant or other premises, except a meatpacking plant, slaughterhouse, wholesale meat processing plant, dairy product manufacturing plant or trade product manufacturing plant. The rules shall prescribe minimum standards for any truck or other vehicle in which food or drink is produced, processed, stored, handled, served or transported. The rules shall provide for the inspection and licensing of premises and vehicles so used, and for abatement as public nuisances of any premises or vehicles that do not comply with the rules and minimum standards. The rules shall provide an exemption relating to food or drink that is:

(a) Served at a noncommercial social event such as a potluck.

(b) Prepared at a cooking school that is conducted in an owner-occupied home.

(c) Not potentially hazardous and prepared in a kitchen of a private home for sale or distribution for noncommercial purposes.

(d) Prepared or served at an employee-conducted function that lasts less than four hours and is not regularly scheduled, such as an employee recognition, an employee fundraising or an employee social event.

(e) Offered at a child care facility and limited to commercially prepackaged food that is not potentially hazardous and whole fruits and vegetables that are washed and cut on-site for immediate consumption.

(f) Offered at locations that sell only commercially prepackaged food or drink that is not potentially hazardous.

(g) A cottage food product that is prepared in a kitchen of a private home for commercial purposes consistent with chapter 8, article 2 of this title.

(h) A whole fruit or vegetable grown in a public school garden that is washed and cut on-site for immediate consumption.

(i) Produce in a packing or holding facility that is subject to the United States food and drug administration produce safety rule (21 Code of Federal Regulations part 112) as administered by the Arizona department of agriculture pursuant to title 3, chapter 3, article 4.1. For the purposes of this subdivision, "holding", "packing" and "produce" have the same meanings prescribed in section 3-525.

(j) Spirituous liquor or adult hemp beverages produced on the premises by a producer or craft producer or manufacturer by an adult hemp beverages manufacturer licensed by the department of liquor licenses and control. This exemption includes both of the following:

(i) The area in which production and manufacturing of spirituous liquor or adult hemp beverages occurs, as defined in an active basic permit on file with the United States alcohol and tobacco tax and trade bureau.

(ii) The area licensed by the department of liquor licenses and control as a microbrewery, farm winery or craft distiller producer, craft producer or adult hemp beverages manufacturer that is open to the public and serves spirituous liquor or adult hemp beverages and commercially prepackaged food, crackers or pretzels for consumption on the premises. A producer of spirituous liquor or adult hemp beverages may not provide, allow or expose for common use any cup, glass or other receptacle used for drinking purposes. For the purposes of this item, "common use" means the use of a drinking receptacle for drinking purposes by or for more than one person without the receptacle being thoroughly cleansed and sanitized between consecutive uses by methods prescribed by or acceptable to the department.

(k) Spirituous liquor produced by a producer that is licensed by the department of liquor licenses and control or spirituous liquor imported and sold by wholesalers a wholesaler that is licensed by the department of liquor licenses and control. This exemption includes all commercially prepackaged spirituous liquor and all spirituous liquor poured at a licensed special event, festival or fair in this state.

(l) An adult hemp beverage or food or drinks containing adult hemp beverage products that are manufactured or sold on premises that are licensed pursuant to title 4.

5. Prescribe reasonably necessary measures to ensure that all meat and meat products for human consumption handled at the retail level are delivered in a manner and from sources approved by the Arizona department of agriculture and are free from unwholesome, poisonous or other foreign substances and filth, insects or disease-causing organisms. The rules shall prescribe standards for sanitary facilities to be used in identifying, storing, handling and selling all meat and meat products sold at the retail level.

6. Prescribe reasonably necessary measures regarding production, processing, labeling, handling, serving and transportation of bottled water to ensure that all bottled drinking water distributed for human consumption is free from unwholesome, poisonous, deleterious or other foreign substances and filth or disease-causing organisms. The rules shall prescribe minimum standards for the sanitary facilities and conditions that shall be maintained at any source of water, bottling plant and truck or vehicle in which bottled water is produced, processed, stored or transported and shall provide for inspection and certification of bottled drinking water sources, plants, processes and transportation and for abatement as a public nuisance of any water supply, label, premises, equipment, process or vehicle that does not comply with the minimum standards. The rules shall prescribe minimum standards for bacteriological, physical and chemical quality for bottled water and for submitting samples at intervals prescribed in the standards.

7. Define and prescribe reasonably necessary measures governing ice production, handling, storing and distribution to ensure that all ice sold or distributed for human consumption or for preserving or storing food for human consumption is free from unwholesome, poisonous, deleterious or other foreign substances and filth or disease-causing organisms. The rules shall prescribe minimum standards for the sanitary facilities and conditions and the quality of ice that shall be maintained at any ice plant, storage and truck or vehicle in which ice is produced, stored, handled or transported and shall provide for inspection and licensing of the premises and vehicles, and for abatement as public nuisances of ice, premises, equipment, processes or vehicles that do not comply with the minimum standards.

8. Define and prescribe reasonably necessary measures concerning sewage and excreta disposal, garbage and trash collection, storage and disposal, and water supply for recreational and summer camps, campgrounds, motels, tourist courts, trailer coach parks and hotels. The rules shall prescribe minimum standards for preparing food in community kitchens, adequacy of excreta disposal, garbage and trash collection, storage and disposal and water supply for recreational and summer camps, campgrounds, motels, tourist courts, trailer coach parks and hotels and shall provide for inspection of these premises and for abatement as public nuisances of any premises or facilities that do not comply with the rules. Primitive camp and picnic grounds offered by this state or a political subdivision of this state are exempt from rules adopted pursuant to this paragraph but are subject to approval by a county health department under sanitary regulations adopted pursuant to section 36-183.02. Rules adopted pursuant to this paragraph do not apply to two or fewer recreational vehicles as defined in section 33-2102 that are not park models or park trailers, that are parked on owner-occupied residential property for less than sixty days and for which no rent or other compensation is paid. For the purposes of this paragraph, "primitive camp and picnic grounds" means camp and picnic grounds that are remote in nature and without accessibility to public infrastructure such as water, electricity and sewer.

9. Define and prescribe reasonably necessary measures concerning the sewage and excreta disposal, garbage and trash collection, storage and disposal, water supply and food preparation of all public schools. The rules shall prescribe minimum standards for sanitary conditions that shall be maintained in any public school and shall provide for inspection of these premises and facilities and for abatement as public nuisances of any premises that do not comply with the minimum standards.

10. Prescribe reasonably necessary measures to prevent pollution of water used in public or semipublic swimming pools and bathing places and to prevent deleterious health conditions at these places. The rules shall prescribe minimum standards for sanitary conditions that shall be maintained at any public or semipublic swimming pool or bathing place and shall provide for inspection of these premises and for abatement as public nuisances of any premises and facilities that do not comply with the minimum standards. The rules shall be developed in cooperation with the director of the department of environmental quality and shall be consistent with the rules adopted by the director of the department of environmental quality pursuant to section 49-104, subsection B, paragraph 12.

11. Prescribe reasonably necessary measures to keep confidential information relating to diagnostic findings and treatment of patients, as well as information relating to contacts, suspects and associates of communicable disease patients. Confidential information may not be made available for political or commercial purposes.

12. Prescribe reasonably necessary measures regarding human immunodeficiency virus testing as a means to control the transmission of that virus, including the designation of anonymous test sites as dictated by current epidemiologic and scientific evidence.

13. Establish an online registry of food preparers that are authorized to prepare cottage food products for commercial purposes pursuant to paragraph 4 of this subsection and chapter 8, article 2 of this title. A registered food preparer shall renew the registration every three years and shall provide to the department updated registration information within thirty days after any change.

14. Prescribe an exclusion for fetal demise cases from the standardized survey known as "the hospital consumer assessment of healthcare providers and systems".

J. The rules adopted under the authority conferred by this section shall be observed throughout this state and shall be enforced by each local board of health or public health services district, but this section does not limit the right of any local board of health or county board of supervisors to adopt ordinances and rules as authorized by law within its jurisdiction if the ordinances and rules do not conflict with state law and are equal to or more restrictive than the rules of the director.

K. The powers and duties prescribed by this section do not apply in instances in which regulatory powers and duties relating to public health are vested by the legislature in any other state board, commission, agency or instrumentality, except that with regard to the regulation of meat and meat products, the department of health services and the Arizona department of agriculture within the area delegated to each shall adopt rules that are not in conflict.

L. The director, in establishing fees authorized by this section, shall comply with title 41, chapter 6. The department shall not set a fee at more than the department's cost of providing the service for which the fee is charged. State agencies are exempt from all fees imposed pursuant to this section.

M. After consultation with the state superintendent of public instruction, the director shall prescribe the criteria the department shall use in deciding whether or not to notify a local school district that a pupil in the district has tested positive for the human immunodeficiency virus antibody. The director shall prescribe the procedure by which the department shall notify a school district if, pursuant to these criteria, the department determines that notification is warranted in a particular situation. This procedure shall include a requirement that before notification the department shall determine to its satisfaction that the district has an appropriate policy relating to nondiscrimination of the infected pupil and confidentiality of test results and that proper educational counseling has been or will be provided to staff and pupils.

N. Until the department adopts exemptions by rule as required by subsection I, paragraph 4, subdivision (f) of this section, food and drink are exempt from the rules prescribed in subsection I of this section if offered at locations that sell only commercially prepackaged food or drink that is not potentially hazardous, without a limitation on its display area.

O. Until the department adopts exemptions by rule as required by subsection I, paragraph 4, subdivision (h) of this section, a whole fruit or vegetable grown in a public school garden that is washed and cut on-site for immediate consumption is exempt from the rules prescribed in subsection I of this section.

P. Until the department adopts an exclusion by rule as required by subsection I, paragraph 14 of this section, the standardized survey known as "the hospital consumer assessment of healthcare providers and systems" may not include patients who experience a fetal demise.

Q. Until the department adopts exemptions by rule as required by subsection I, paragraph 4, subdivision (j) of this section, spirituous liquor and commercially prepackaged food, crackers or pretzels that meet the requirements of subsection I, paragraph 4, subdivision (j) of this section are exempt from the rules prescribed in subsection I of this section.

R. For the purposes of this section:

1. "Cottage food product" has the same meaning prescribed in section 36-931.

2. "Fetal demise" means a fetal death that occurs or is confirmed in a licensed hospital. Fetal demise does not include an abortion as defined in section 36-2151. END_STATUTE

Sec. 56. Section 42-3001, Arizona Revised Statutes, is amended to read:

START_STATUTE42-3001. Definitions

In this chapter, unless the context otherwise requires:

1. "aDULT HEMP BEVERAGES" HAS THE SAME MEANING PRESCRIBED IN SECTION 4-101.

1. 2. "Affix" and "affixed" include imprinting tax meter stamps on packages and individual containers as authorized by the department.

2. 3. "Brand family" has the same meaning prescribed in section 44-7111.

3. 4. "Cavendish" means a tobacco product that is smoked from a pipe and that meets one of the following criteria:

(a) Is described as cavendish, as containing cavendish or as a cavendish blend on its packaging, labeling or promotional materials.

(b) Appears to have been processed or manufactured with an amount of flavorings and humectants that exceeds twenty percent of the weight of the tobacco contained in the product.

4. 5. "Cider" means vinous liquor that is made from the normal alcoholic fermentation of the juice of sound, ripe apples, pears or other pome fruit, including flavored, sparkling and carbonated cider and cider made from condensed apple, pear or other pome fruit must, and that contains more than one-half of one percent of alcohol by volume but not more than seven percent of alcohol by volume.

5. 6. "Cigar" means any roll of tobacco wrapped in leaf tobacco or in any substance containing tobacco other than any roll of tobacco that is a cigarette, as defined in paragraph 6 7, subdivision (b) of this section.

6. 7. "Cigarette" means either of the following:

(a) Any roll of tobacco wrapped in paper or any substance not containing tobacco.

(b) Any roll of tobacco wrapped in any substance containing tobacco that, because of its appearance, the type of tobacco used in the filler or its packaging and labeling, is likely to be offered to or purchased by a consumer as a cigarette described in subdivision (a) of this paragraph. This subdivision shall be interpreted consistently with the classification guidelines established by the federal alcohol and tobacco tax and trade bureau.

7. 8. "Consumer" means a person in this state that comes into possession of any luxury subject to the tax imposed by this chapter and that, on coming into possession of the luxury, is not a distributor intending to sell or distribute the luxury, a retailer or a wholesaler.

8. 9. "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.

9. 10. "Distributor" means any person that manufactures, produces, ships, transports or imports into this state or in any manner acquires or possesses for the purpose of making the first sale of the following:

(a) Cigarettes without Arizona tax stamps affixed as required by this article.

(b) Roll-your-own tobacco or other tobacco products on which the taxes have not been paid as required by this chapter.

10. 11. "Farm winery" has the same meaning prescribed in section 4-101.

11. 12. "First sale" means the initial sale or distribution in intrastate commerce or the initial use or consumption of cigarettes, roll-your-own tobacco or other tobacco products.

12. 13. "Luxury" means any article, object or device on which a tax is imposed under this chapter.

13. 14. "Malt liquor" means any liquid that contains more than one-half of one percent alcohol by volume and that is made by the process of fermentation and not distillation of hops or grains, but not including:

(a) Liquids made by the process of distillation of such substances.

(b) Medicines that are unsuitable for beverage purposes.

14. 15. "Master settlement agreement" has the same meaning prescribed in section 44-7101.

15. 16. "Microbrewery" has the same meaning prescribed in section 4-101.

16. 17. "Nonparticipating manufacturer" has the same meaning prescribed in section 44-7111.

17. 18. "Other tobacco products" means tobacco products other than cigarettes and roll-your-own tobacco.

18. 19. "Participating manufacturer" has the same meaning prescribed in section 44-7111.

19. 20. "Person" means any individual, firm, partnership, joint venture, association, corporation, municipal corporation, estate, trust, club, society or other group or combination acting as a unit, and the plural as well as the singular number.

20. 21. "Place of business":

(a) Means a building, facility site or location where an order is received or where tobacco products are sold, distributed or transferred. Place of business

(b) Does not include a vehicle.

22. "Ready-to-drink spirits product" means distilled spirits as defined in SECTION 4-101 that are mixed with another beverage that may contain flavoring or coloring materials and other ingredients, that do not exceed ten percent alcohol by volume, that are sealed in an original container of not more than sixteen ounces and that are sold in the manufacturer's original packaging.

21. 23. "Retailer" means any person that comes into possession of any luxury subject to the taxes imposed by this chapter for the purpose of selling it for consumption and not for resale.

22. 24. "Roll-your-own tobacco" means any tobacco that, because of its appearance, type, packaging or labeling, is suitable for use and likely to be offered to or purchased by consumers as tobacco for making cigarettes. This paragraph shall be interpreted consistently with the term as used in section 44-7101. This paragraph shall be interpreted consistently with the classification guidelines established by the federal alcohol and tobacco tax and trade bureau.

23. 25. "Smoking tobacco":

(a) Means any tobacco that, because of its appearance, type, packaging, labeling or promotion, is suitable for use and likely to be offered to or purchased by consumers as tobacco for making cigarettes or otherwise consumed by burning. Smoking tobacco

(b) Includes pipe tobacco and roll-your-own tobacco.

24. 26. "Spirituous liquor":

(a) Means any liquid that contains more than one-half of one percent alcohol by volume, that is produced by distillation of any fermented substance and that is used or prepared for use as a beverage. Spirituous liquor

(b) Does not include medicines that are unsuitable for beverage purposes.

25. 27. "Tobacco product manufacturer" has the same meaning prescribed in section 44-7101.

26. 28. "Tobacco products" means all luxuries included in section 42-3052, paragraphs 5 through 9.

27. 29. "Vehicle" means a device in, on or by which a person or property is or may be transported or drawn on the roads of this state regardless of the means by which it is propelled or whether it runs on a track.

28. 30. "Vinous liquor":

(a) Means any liquid that contains more than one-half of one percent alcohol by volume and that is made by the process of fermentation of grapes, berries, fruits, vegetables or other substances. But

(b) Does not include:

(a) (i) Liquids in which hops or grains are used in the process of fermentation.

(b) (ii) Liquids made by the process of distillation of hops or grains.

29. 31. "Wholesaler" means a person that sells any spirituous, vinous or malt liquor OR ADULT HEMP BEVERAGES taxed under this chapter to retail dealers or for the purposes of resale only. END_STATUTE

Sec. 57. Section 42-3051, Arizona Revised Statutes, is amended to read:

START_STATUTE42-3051. Levy of tax

In addition to all other taxes, there is levied and imposed and there shall be collected and deposited, pursuant to sections 35-146 and 35-147, in the manner provided by this chapter, taxes on all spirituous, vinous and malt liquors, ON ALL ADULT HEMP BEVERAGES and on all cigarettes, cigars, smoking tobacco, plug tobacco, snuff and other forms of tobacco, for use as may be prescribed by law. END_STATUTE

Sec. 58. Section 42-3052, Arizona Revised Statutes, is amended to read:

START_STATUTE42-3052. Classifications of luxuries; rates of tax

The taxes under this chapter are imposed at the following rates:

1. On each sealed container of spirituous liquor, at the rate of three dollars $3 per gallon and at a proportionate rate for any lesser or greater quantity than one gallon.

2. On each container of vinous liquor, except cider, of which the alcoholic content is not greater than twenty-four per cent percent by volume, at the rate of eighty-four cents $.84 per gallon and at a proportionate rate for any lesser or greater quantity than one gallon.

3. On each container of vinous liquor of which the alcoholic content is greater than twenty-four per cent percent by volume, containing eight ounces or less, twenty-five cents $.25, and for each eight ounces for containers containing more than eight ounces, twenty-five cents $.25.

4. On each gallon of malt liquor or cider, sixteen cents $.16, and at a proportionate rate for any lesser or greater quantity than one gallon.

5. On each cigarette, nine-tenths cent $.009.

6. On smoking tobacco, snuff, fine cut chewing tobacco, cut and granulated tobacco, shorts and refuse of fine cut chewing tobacco, and refuse, scraps, clippings, cuttings and sweepings of tobacco, excluding tobacco powder or tobacco products used exclusively for agricultural or horticultural purposes and unfit for human consumption, two cents $.02 per ounce or major fraction of an ounce.

7. On all cavendish, plug or twist tobacco, one-half cent $.005 per ounce or fractional part of an ounce.

8. On each twenty small cigars or fractional part weighing not more than three pounds per thousand, four cents $.04.

9. On cigars of all descriptions except those included in paragraph 8 of this section, made of tobacco or any tobacco substitute:

(a) If manufactured to retail at not more than five cents $.05 each, two cents $.02 on each three cigars.

(b) If manufactured to retail at more than five cents $.05 each, two cents $.02 on each cigar.

10. oN EACH SEALED CONTAINER OF ADULT HEMP BEVERAGEs, $1.50 PER GALLON AND A PROPORTIONATE RATE FOR ANY LESSER OR GREATER QUANTITY THAN ONE GALLON.

11. On each sealed container of a ready-to-drink spirits product, $1.50 per gallon AND A PROPORTIONATE RATE FOR ANY LESSER OR GREATER QUANTITY THAN ONE GALLON. END_STATUTE

Sec. 59. Section 42-3351, Arizona Revised Statutes, is amended to read:

START_STATUTE42-3351. Bonds required of liquor and adult hemp beverages wholesalers; exemption

A. Every wholesaler of spirituous liquors, vinous and liquors, malt liquors, ready-to-drink spirits products and adult hemp beverages shall file with the department, in such form as the department prescribes, a bond or bonds, duly executed by the wholesaler as principal, and with a corporation duly authorized to execute and write bonds within the state as surety, payable to the state, and conditioned upon on the payment of all taxes, penalties and other obligations of the wholesaler arising under this chapter.

B. The department shall fix the total amount of the bond or bonds required of the wholesaler and may increase or reduce the amount at any time. In fixing the total amount, the department shall require a bond or bonds equivalent in total amount to twice the wholesaler's estimated monthly tax, ascertained in such manner as the department deems proper. The total amount of the bond or bonds required of any wholesaler shall not be less than two thousand dollars $2,000.

C. A wholesaler is exempt from the requirements of this section if the wholesaler has made timely payment of the taxes imposed by this chapter for the twenty-four consecutive months immediately preceding the current month. END_STATUTE

Sec. 60. Section 42-3352, Arizona Revised Statutes, is amended to read:

START_STATUTE42-3352. Reports of distillers, producers and manufacturers

A. Every distiller or manufacturer of distilled spirits, and vinous and malt liquors and adult hemp beverages that sells any of those products to wholesalers within this state shall maintain in its records a copy of the invoice of the sale, showing in detail:

1. The kind of liquor or Adult hemp beverage sold.

2. The quantities of each.

3. The size of the container and the weight of the contents.

4. The alcoholic content if required by section 42-3052.

5. The name of the person, firm or corporation to whom sold.

B. A distiller, producer or manufacturer shall make the invoices required to be kept pursuant to subsection A of this section available to the department on request. END_STATUTE

Sec. 61. Section 42-3354, Arizona Revised Statutes, is amended to read:

START_STATUTE42-3354. Return and payment by spirituous or vinous liquor wholesalers

A. Every wholesaler of spirituous liquors selling spirituous liquors within the this state shall pay the tax under this chapter on all such liquor sold within the this state and add the amount of the tax to the sales price.

B. Every wholesaler of vinous liquors selling vinous liquors other than ciders as defined in section 42-3001 within this state shall pay the tax under this chapter on all such liquors sold within this state and add the amount of tax to the sales price.

c. every wholesaler of ready-to-drink spirits products selling ready-to-drink spirits products within this state shall pay the tax under this chapter on all such products sold within this state and add the amount of the tax to the sales price.

C. d. The wholesaler shall pay the tax to the department monthly on or before the twentieth day of the month next succeeding the month in which the tax accrues.

D. e. On or before the date prescribed by subsection C D of this section, the wholesaler shall prepare a sworn return for the month in which the tax accrues in the form prescribed by the department, showing:

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

2. The amount of vinous liquors other than ciders as defined in section 42-3001 sold in the this state during the month in which the tax accrues.

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

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

E. F. The wholesaler shall deliver the return, together with a remittance of the amount of the tax due, to the department.

F. G. Any taxpayer that fails to pay the tax within ten days from 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.

G. 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. 62. 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. A farm winery selling vinous liquor or adult hemp beverages 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 or adult hemp beverages 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 or adult hemp beverages sold at retail or to a retail licensee within this state and add the amount of the tax to the sales price.

B. A microbrewery selling malt liquor or adult hemp beverages 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 or adult hemp beverages that sells at retail pursuant to section 4-243.02 shall pay the tax under this chapter on all malt liquor or adult hemp beverages sold at retail or to a retail licensee within this state and add the amount of the tax to the sales price.

C. A craft distiller selling spirituous liquor, ready-to-drink spirits products or adult hemp beverages 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, ready-to-drink spirits products or adult hemp beverages that sells at retail pursuant to section 4-243.02 shall pay the tax under this chapter on all spirituous liquor, ready-to-drink spirits products or adult hemp beverages 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 annually on or before the twentieth day of the first month of the year succeeding the 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 year in which the tax accrues in the form prescribed by the department, showing:

1. The amount of liquors, or beer, ready-to-drink spirits products or adult hemp beverages sold in this state during the 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. 63. Title 42, chapter 3, article 8, Arizona Revised Statutes, is amended by adding section 42-3357, to read:

START_STATUTE42-3357. Return and payment by wholesalers of adult hemp beverages

A. Each wholesaler of ADULT HEMP BEVERAGES that purchases ADULT HEMP BEVERAGES for resale within this state shall pay the tax under this chapter on all PRODUCTS that are purchased and add the amount of the tax to the sales price.

B. The wholesaler shall pay the tax to the department monthly on or before the twentieth day of the month next succeeding the month in which the tax accrues.

C. On or before the date prescribed by subsection B of this section, the wholesaler shall prepare a sworn return for the month in which the tax accrues in the form prescribed by the department, showing:

1. The amount of ADULT HEMP BEVERAGES purchased during the month in which the tax accrues.

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

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

D. The taxpayer shall deliver the return, together with a remittance of the amount of the tax due, to the department.

E. 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.

F. For reporting periods beginning from and after December 31, 2019, or when the department has established an electronic filing program, whichever is later, a 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. 64. Existing licensee applications

A. Notwithstanding section 4-203, Arizona Revised Statutes, as amended by this act, a person holding a producer's license or craft producer's license pursuant to title 4, Arizona Revised Statutes, may apply to add an adult hemp beverages manufacturer license to manufacture and sell adult hemp beverages under that producer's or craft producer's license, and the department of liquor licenses and control shall grant the license on the submission of a completed application without a hearing.

B. Notwithstanding section 4-203, Arizona Revised Statutes, as amended by this act, a person holding a wholesaler's license pursuant to title 4, Arizona Revised Statutes, may apply to purchase and sell adult hemp beverages under that license, and the department of liquor licenses and control shall grant that privilege on the submission of a completed application without a hearing.

C. Notwithstanding section 4-203, Arizona Revised Statutes, as amended by this act, a person holding a liquor store, beer and wine store, bar, beer and wine bar, club, hotel-motel, restaurant, or government license pursuant to title 4, Arizona Revised Statutes, may apply to sell adult hemp beverages under that retail license, and the department of liquor licenses and control shall grant that privilege on the submission of a completed application without a hearing.

D. Notwithstanding section 4-203, Arizona Revised Statutes, as amended by this act, a person holding a registered alcohol delivery contractor permit pursuant to title 4, Arizona Revised Statutes, may apply to deliver adult hemp beverages under that permit, and the department of liquor licenses and control shall grant that privilege on the submission of a completed application without a hearing.

E. A license or permit holder desiring to carry adult hemp beverages shall apply to the director of the department of liquor licenses and control on a form prescribed and furnished by the director of the department of liquor licenses and control. The application for adult hemp beverages may be filed for an existing license or permit or may be submitted with a new license or permit application. The review of the application and the issuance of approval for a new license shall be conducted under the same procedures for the issuance of a spirituous liquor license prescribed in section 4-201, Arizona Revised Statutes, as amended by this act. After the application to carry adult hemp beverages has been issued for a license or permit, the adult hemp beverage designation shall be noted on the license or permit itself and in the records of the department of liquor licenses and control. The director of the department of liquor licenses and control may charge a fee for processing each new license or permit application as provided in this section.

F. A city or town may not charge any fee relating to the issuance or approval of adult hemp beverages license or permit applications.

Sec. 65. Initial applications; delayed repeal

A. Notwithstanding sections 4-216 and 4-225, Arizona Revised Statutes, as added by this act, before the adoption of rules, the department of liquor licenses and control may approve license applications of adult hemp beverages manufacturers and may issue licenses to such applicants that satisfy the requirements of title 4, Arizona Revised Statutes.

B. Notwithstanding sections 4-216 and 4-225, Arizona Revised Statutes, as added by this act, before the adoption of rules, the department of liquor licenses and control may approve permit applications of entities that satisfy the requirements of title 4, Arizona Revised Statutes, to serve as independent testing laboratories.

C. The director of the department of liquor licenses and control may charge a fee for processing each initial application as provided in this section.

D. A city or town may not charge any fee relating to the issuance or approval of adult hemp beverages license or permit applications.

E. This section is repealed from and after December 31, 2026.

Sec. 66. Grace period

The department of liquor licenses and control shall allow retailers and wholesalers ninety days after the effective date of this act to sell any adult hemp beverages products that were in the retailer's or wholesaler's inventory as of the effective date of this act. All sales must be in compliance with the requirements of section 4-244, Arizona Revised Statutes, as amended by this act, including the prohibition on sales to persons under the legal drinking age. From and after ninety days after the effective date of this act, all hemp beverage products that are not removed from the inventory of a retailer or wholesaler shall be subject to forfeiture and destruction and may not be purchased or sold in this state. The cost of seizure, forfeiture and destruction or disposal pursuant to this section shall be paid by the person or entity from whom the adult hemp beverages products are confiscated.

Sec. 67. Appropriation; department of liquor licenses and control; adult hemp beverages regulation; intent; exemption

A. The sum of $1,000,000 is appropriated from the liquor licenses fund established by section 4-120, Arizona Revised Statutes, in fiscal year 2025-2026 to the department of liquor licenses and control for adult hemp beverages regulation.

B. The legislature intends that the appropriation made in subsection A of this section be considered ongoing funding in future years.

C. The appropriation made in subsection A of this section is exempt from the provisions of section 35-190, Arizona Revised Statutes, relating to lapsing of appropriations.

Sec. 68. Severability

If a provision of this act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the act that can be given effect without the invalid provision or application, and to this end the provisions of this act are severable.

Sec. 69. Applicability

Sections 42-3001, 42-3051, 42-3052, 42-33351, 42-3352 and 42-3355, Arizona Revised Statutes, as amended by this act, and section 42-3357, Arizona Revised Statutes, as added by this act, apply to taxable periods beginning on or after the first day of the month following the general effective date.

Sec. 70. Applicability of existing rules

The existing rules of the department of liquor licenses and control applicable to the manufacture and sale of spirituous liquor shall apply equally to the manufacture and sale of adult hemp beverages unless an existing rule is deemed inapplicable by the department of liquor licenses and control.