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ARIZONA HOUSE OF REPRESENTATIVESFifty-seventh Legislature First Regular Session |
Senate: RAGE 6-1-0-0 | 3rd Read 23-6-1-0 |
SB 1556: adult hemp beverages; policies; procedures
Sponsor: Senator Shope, LD 16
Committee on Commerce
Overview
Establishes requirements for the manufacture, distribution and sale of adult hemp beverages, including licensure with the Arizona Department of Liquor Licenses and Control (DLLC).
History
DLLC regulates the manufacture, distribution and sale of liquor in Arizona through the issuance of a series of licenses and investigating licensee compliance with liquor laws. Certain liquor licenses have on-sale retail privileges allowing a customer to purchase and consume liquor on the licensed premises.
In 2018, the Legislature established a state agricultural pilot program, and authorized industrial hemp production, processing, manufacturing, distribution and commerce conducted by licensed growers, harvesters, transporters and processors. The legislation established licensing and regulation requirements of industrial hemp and the Industrial Hemp Trust Fund (Laws 2018, Ch. 287).
On December 20, 2018, the federal Agriculture Improvement Act of 2018 (2018 Farm Bill) was enacted and federally authorized the production of hemp and removed hemp and hemp seeds from the U.S. Drug Enforcement Administration's (DEA's) schedule of Controlled Substances. Under the 2018 Farm Bill, the U.S. Department of Agriculture must issue regulations and guidance to implement various hemp production programs and to create a consistent regulatory framework and federal oversight around the production of hemp (2018 Farm Act).
Provisions
Adult Hemp Beverage Manufacturer License
1. Requires an adult hemp beverages manufacturer license for the manufacturing of industrial hemp into adult hemp beverage products and offering those products for sale in Arizona. (Sec. 30)
2. Allows DLLC Director to issue an adult hemp beverages manufacturer license to any person, including a licensed producer or craft producer, who has demonstrated or demonstrates the capability to meet statutory requirements. (Sec. 30)
3. Allows a licensed producer or craft producer to elect to apply for an adult hemp beverages manufacturer license under the producer’s current license or apply for a new license through another legal entity under common ownership. (Sec. 30)
4. Exempts a currently licensed producer or craft producer from a new demonstration of qualifications, capability and reliability for licensure in accordance with statute if the right to also manufacture adult hemp beverages is applied for under a current license. (Sec. 30)
5. Requires each location that engages in the manufacturing of adult hemp beverage products to obtain a separate license. (Sec. 30)
6. Prohibits a licensee from transferring the license from person to person or from location to location. (Sec. 30)
7. Requires an applicant, at the time of filing the application for an adult hemp beverages manufacturer license, to accompany the application with the fee for adding to a current license or obtaining a new license. (Sec. 30)
8. Allows DLLC Director to determine the amount of the adult hemp beverages manufacturer license application fee. (Sec. 30)
9. Requires a person who holds an adult hemp beverages manufacturer license to report annually at the end of each calendar year, at the time and manner as DLLC Director prescribes, the amount of adult hemp beverages manufactured by the license during the calendar year. (Sec. 30)
10. Outlines permissible actions of a licensed adult hemp beverage manufacturer. (Sec. 30)
11. Prohibits an adult hemp beverages manufacturer, except as expressly authorized by statute, from holding any retail liquor license or selling directly to a retailer or consumer. (Sec. 30)
12. Allows an adult hemp beverages manufacturer license to be stacked on the same or contiguous premises with a producer or craft producer license held under common ownership. (Sec. 30)
13. Requires DLLC Director, by July 1, 2026, to adopt rules to carry out the licensing of adult hemp beverages manufacturers. (Sec. 30)
DLLC Licensing
14. Requires a person desiring to manufacture, produce, sell or deal in adult hemp beverages to be licensed by DLLC. (Sec. 6)
15. Requires DLLC Director to issue an adult hemp beverages manufacturer license only after satisfactory showing of the capability, qualifications and reliability of the applicant. (Sec. 8)
16. Allows new owners of a transferred spirituous liquor license that includes licensing for adult hemp beverages to elect to remove adult hemp beverages from the transferred licensed by notifying DLLC. (Sec. 8)
17. Allows DLLC to establish licensing fees for an adult hemp beverage manufacturer's license issued to an in-state or out-of-state manufacturer. (Sec. 24)
18. Allows DLLC to establish a fee for a permit issued to an independent testing laboratory. (Sec. 24)
Adult Hemp Beverages
19. Exempts, from industrial hemp licensing requirements, an adult hemp beverages manufacturer that is not engaged as a grower, harvester, transporter or processor of industrial hemp. (Sec. 1)
20. Defines adult help beverage as any beverage that contains less than 30 milligrams per liter by volume of total tetrahydrocannabinol, that is derived from industrial hemp and that is intended for human consumption. (Sec. 3)
21. Defines pertinent terms. (Sec. 3)
22. Excludes, from the definition of mixed cocktail, an adult help beverage. (Sec. 3)
Farm Wineries, Microbreweries and Craft Distillers
23. Limits the total quantity of adult hemp beverages sold to 20,000 gallons in a calendar year for a farm winery, microbrewery and craft distiller licensee. (Sec. 13, 16, 17)
24. Prohibits the annual total quantity of adult hemp beverages manufactured by a farm winery, microbrewery or craft distiller licensee from being aggregated with the total quantity of wine, beer or distilled spirits produced. (Sec. 13, 16, 17)
25. Authorizes a farm winery, microbrewery and craft distiller licensee to sell, serve, deliver and sample adult hemp beverages, under the same privileges and limitations prescribed for the wine, beer or distilled spirits produced. (Sec. 13, 16, 17)
26. Reduces the requirement amount of beer to be produced for a microbrewery license to not less than 1,000 gallons in a calendar year. (Sec. 16)
Adult Hemp Beverages Testing, Labeling, Sampling
27. Requires adult hemp beverages tested before distribution to a wholesaler to determine the potency and amounts of pesticides, microbials, residual solvents and heavy metals. (Sec. 36)
28. Prohibits adult hemp beverage products from being distributed or sold in Arizona if the product:
a) has not been tested;
b) contains more than the maximum allowable amount of total tetrahydrocannabinol; or
c) contains more than the prescribed amounts of pesticides, microbials, residual solvents and heavy metals. (Sec. 36)
29. Asserts an adult hemp beverages product cannot have a variance of more than 10% below or above the maximum total tetrahydrocannabinol limit. (Sec. 36)
30. Instructs DLLC, by July 1, 2026, to adopt rules specifying pass and fail action levels and variance levels that are allowed for potency, safety and toxicity with respect to required testing. (Sec. 36)
31. Specifies all adult hemp beverages offered for sale or distribution in Arizona must contain only naturally occurring cannabinoids. (Sec. 36)
32. Instructs a producer or adult hemp beverages manufacturer to contract with an approved independent testing laboratory to provide the required testing and certificate of analysis.
33. Requires an independent testing laboratory that provides testing to use high-performance liquid chromatography for any separation and measurement that is required in the testing. (Sec. 36)
34. Outlines requirements for an independent testing laboratory that performs testing of adult hemp beverages. (Sec. 36)
35. Specifies each adult hemp beverage must undergo testing and be accompanied by a validly issued certificate of analysis that demonstrates specified factors. (Sec. 36)
36. Requires all adult hemp beverages to have an expiration date on the label that conforms with applicable law and is not more than two years after the date of publication of the product’s certificate of analysis. (Sec. 36)
37. Specifies requirements for DLLC relating to posting a registry of approved independent testing laboratories and developing a permit application for which independent testing laboratories are approved. (Sec. 36)
38. Provides information that a label of an adult hemp beverage offered for distribution and sale must contain and information that all adult hemp beverage packaging must include. (Sec. 36)
39. Limits the sampling of adult hemp beverages products at an on-sale retail establishment to 6 ounces of the adult hemp beverages products per person, per brand.
40. Limits the sampling of adult hemp beverages products at an off-sale retail establishment to:
a) 2 ounces of adult hemp beverages products per person, per day for consumption on-premise; and
b) up to 12 ounces of adult hemp beverages products per person, per day for consumption off-premise. (Sec. 42)
41. Prohibits an on-sale retailer to deliver more than 10 milligrams of total tetrahydrocannabinol in adult hemp beverages to one person at one time for that person's consumption. (Sec. 46)
42. Limits the amount of adult hemp beverages that may be imported to 48 ounces, unless as prescribed by federal law or if the importee is a member of the armed services returning from a tour of duty. (Sec. 47)
Adult Hemp Beverages Serving Sizes
43. Requires adult hemp beverages containing a single serving of an adult hemp beverage per container to be in an adult hemp beverages single-serving container that has an internal volume of at least 200 milliliters or 6.76 fluid ounces. (Sec. 49)
44. Prohibits the single-serving container from having a total tetrahydrocannabinol content of:
a) more than 10 milligrams of total tetrahydrocannabinol per container for sale in off-premises licensed retail establishments; or
b) more than 5 milligrams of total tetrahydrocannabinol per container for sale in on-premises licensed retail establishments. (Sec. 49)
45. Requires adult hemp beverages containing multiple services of an adult hemp beverage per container to be in an adult hemp beverages multiple-serving container that has an internal volume of at least 375 milliliters or 12.68 fluid ounces. (Sec. 49)
46. Prohibits the multi-serving container from having a tetrahydrocannabinol content of more than 30 milligrams per liter or 0.887 milligrams per fluid ounces of the total volume of the container. (Sec. 49)
47. Prohibits a person from processing, distributing, selling or offering for sale in Arizona any:
a) adult hemp beverages products without a license;
b) adult hemp beverages products in powdered form or as a concentrated tincture for mixing with water or other liquids; or
c) spirituous liquor containing any adult hemp beverages or cannabinoid. (Sec. 49)
48. Prohibits a licensee or an employee of a licensee from combining spirituous liquor and adult hemp beverages or cannabinoids. (Sec. 49)
49. Prohibits a producer from using any distillate or concentrate containing any derivative of a tetrahydrocannabinol component that is not hemp-derived tetrahydrocannabinol. (Sec. 49)
Taxation
50. Provides a definition of ready-to-drink spirits product the purposes of taxation. (Sec. 58)
51. Includes adult hemp beverages to the luxury tax classification. (Sec. 59)
52. Imposes a tax rate of $1.50 per gallon on each sealed container of adult hemp beverages and at a proportionate rate for any lesser or greater quantity than one gallon. (Sec. 60)
53. Imposes a tax rate of $1.50 per gallon on each sealed container of a ready-to-drink spirits product and at a proportionate rate for any lesser or greater quantity that one gallon. (Sec. 60)
54. Applies the statutes governing the Arizona Department of Revenue (ADOR) bond requirements for wholesalers of spirituous, vinous and malt liquors to wholesalers of ready-to-drink spirits products and adult hemp beverages. (Sec. 61)
55. Requires a manufacturer of adult hemp beverages that sells products to wholesalers within Arizona to maintain in its records a copy of the invoice of the sale. (Sec. 62)
56. Instructs a wholesaler of ready-to-drink spirits products within Arizona to pay the required luxury privilege tax on the products sold within Arizona and add the amount to the sales price. (Sec. 63)
57. Requires a craft producer selling adult hemp beverages, or a craft distiller selling ready-to-drink spirits, at retail or to a retail licensee that are manufactured on the premises to pay the required luxury privilege tax and add the amount of tax to the sales price. (Sec. 64)
58. Requires each wholesaler that purchases adult hemp beverages for resale within Arizona to pay the required luxury privilege tax on all products that are purchased and add the amount of tax to the sales price. (Sec. 65)
59. Instructs the wholesaler to pay the tax to ADOR monthly by the 20th day of the month next succeeding the month in which the tax accrues. (Sec. 65)
60. Requires the wholesaler to prepare a sworn return as prescribed for the month in which the tax accrues. (Sec. 65)
61. Provides requirements for a taxpayer relating to remittance and reporting of the tax due. (Sec. 65)
62. Applies the classifications of ready-to-drink spirits products and adult hemp beverages to taxable periods beginning on or after the first day of the month following the effective date. (Sec. 71)
Appropriation
63. Appropriates $1,000,000 from the liquor licenses fund, in FY 2026, to DLLC for adult hemp beverages regulation. (Sc. 69)
64. Considers the appropriation as ongoing funding for future years. (Sec. 69)
65. Exempts the appropriation from lapsing. (Sec 69)
Miscellaneous
66. Applies various statutory provisions relating to spirituous liquor to adult hemp beverages, including:
a) DLLC authority to adopt rules governing adult hemp beverages; (Sec. 4)
b) prohibition relating to interest in business; (Sec. 5)
c) licensing requirements; (Sec. 6, 8)
d) licensee qualifications; (Sec. 7)
e) off-sale privileges; (Sec. 8)
f) packaging, transporting and delivering requirements; (Sec. 8)
g) requirements relating to a personal representative; (Sec. 9)
h) disposal requirements; (Sec. 14)
i) hotel or motel minibar requirements; (Sec. 15)
j) registration requirements relating to delivery contractor; (Sec. 18)
k) license premises restrictions; (Sec. 20)
l) multiple licensees with joint premises restrictions; (Sec. 21)
m) extension of premises requirements; (Sec. 22)
n) application as to location requirements; (Sec. 21)
o) licensing fees; (Sec. 24)
p) license Revocation and suspension and injunctions; (Sec. 25, 26)
q) restaurant audit requirements; (Sec 27)
r) authority of cities and towns to tax adult hemp beverages transactions. (Sec. 33)
s) qualified retail cooperatives (Sec. 38)
t) requirements relating to selling or giving liquor to underage persons. (Sec. 40)
u) restrictions relating to the sale of liquor on credit. (Sec. 41)
v) prohibitions relating to commercial coercion or bribery. (Sec. 42)
w) prohibitions relating to purchasing from other than primary source of supply. (Sec. 43)
x) restrictions relating to on-sale retail licensees. (Sec. 45)
y) unlawful actions. (Sec. 46)
z) unlawful importations. (Sec. 47)
aa) seizure and forfeiture. (Sec. 48)
bb) prohibitions relating to motor vehicles. (Sec. 51)
cc) statutes relating to civil liability. (Sec. 53, 54, 55, 56)
67. Authorizes the sale and service of adult hemp beverages to:
a) a club licensee; (Sec. 10)
b) a hotel-motel licensee; (Sec. 11)
c) a restaurant licensee; (Sec. 12)
d) a farm winery licensee; (Sec. 13)
e) microbrewery licensee; (Sec. 16)
f) craft distiller licensee; (Sec. 17)
g) bar, beer and wine bar, liquor store licensee; (Sec. 19)
68. Repeals the federal food safety preemption statute relating to the production and storage spaces of licensed producers, craft distillers, brewers and farm wineries. (Sec. 35)
69. Exempts the extraction of cannabinoids from industrial hemp, the product of which is an extract used to manufacture an adult hemp beverages product from Spirituous Liquor statutes. (Sec. 38)
70. Exempts adult hemp beverages that are under the governance of DLLC from the Department of Health Services relating to standards for sanitary food or drinks. (Sec. 57)
71. Contains language relating to existing licensee applications. (Sec. 66)
72. Contains language relating to allowing DLLC to approve license and permit applications before the adoption of rules. (Sec. 67)
73. Contains language relating to a 90-day grace period for selling adult hemp beverages. (Sec. 68)
74. Contains a severability clause. (Sec. 70)
75. Contains a legislative intent clause. (Sec. 73)
76. Makes technical and conforming changes. (various sections)
77.
78.
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80. SB 1556
81. Initials PB Page 0 Commerce
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