alternative nicotine products; regulation.

HB4001 - 572R - H Ver

House Engrossed

alternative nicotine
products; regulation.

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HOUSE BILL 4001

AN
ACT

amending sections 4-101, 4-112,
4-118, 4-205.02 and 4-244, arizona revised statutes; amending
title 4, arizona revised statutes, by adding chapter 4; amending sections 13-3622
and 36-798.07, Arizona Revised Statutes; relating to nicotine products.

(TEXT OF BILL BEGINS ON NEXT PAGE)

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

Section 1.
Heading change

The title heading of title 4, Arizona
Revised Statutes, is changed from "ALCOHOLIC BEVERAGES" to
"ALCOHOLIC BEVERAGES AND ALTERNATIVE NICOTINE PRODUCTS".

Sec. 2. Section 4-101, Arizona Revised
Statutes, is amended to read:

START_STATUTE
4-101.

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. "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. "Alternative nicotine
product":

(
a
) Means any
noncombustible product that contains nicotine and that is intended for human
consumption, whether chewed, absorbed, dissolved, ingested
, inhaled or consumed by any other means.

(
b
) Does not
include tobacco products or any product regulated as a drug or device by the
United States food and drug administration under chapter v of the federal food,
drug, and cosmetic act.

3.

4.
"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.

5.
"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.

6.
"Board"
means the state liquor board.

6.

7.
"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
9
,
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.

8.
"Broken
package" means any container of spirituous liquor on which the United
States tax seal has been broken or removed or from which the cap, cork or seal
placed on the container by the manufacturer has been removed.

8.

9.
"Club"
includes any of the following organizations where the sale of spirituous liquor
for consumption on the premises is made only to members, spouses of members,
families of members, bona fide guests of members and guests at other events
authorized in this title:

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

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

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

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

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

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

9.

10.
"Company"
or "association", when used in reference to a corporation, includes
successors or assigns.

10.

11.
"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.

12.
"Controlling
person" means a person directly or indirectly possessing control of an
applicant or licensee.

12.

13.
"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.

14.
"Craft
producer" means a licensed farm winery, a licensed microbrewery or a
licensed craft distiller.

14.

15.
"Department"
means the department of liquor licenses and control.

15.

16.
"Director"
means the director of the department of liquor licenses and control.

16.

17.
"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.

18.
"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.

19.
"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.

20.
"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.

20.

21.
"Legal
drinking age" means twenty-one years of age or older.

21.

22.
"License"
means a license or an interim retail permit issued pursuant to this title.

22.

23.
"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.

24.
"License
fees" means fees collected for license issuance, license application,
license renewal, interim permit issuance and license transfer between persons
or locations.

24.

25.
"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.

26.
"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.

27.
"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.

28.
"Mixed
cocktail":

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

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

29. "Nicotine":

(
a
) MEANS The
chemical substance named 3-(1-Methyl-2-pyrrolidinyl) pyridine or
C(10)H(14)N(2).

(
b
) includes
any salt or complex of nicotine derived from any source.

28.

30.
"Off-sale
retailer" means any person that operates a bona fide regularly established
retail liquor store that sells spirituous liquors, wines and beer and any
established retail store that sells commodities other than spirituous liquors
and that is engaged in the sale of spirituous liquors only in the original
unbroken package, to be taken away from the premises of the retailer and to be
consumed off the premises.

29.

31.
"On-sale
retailer" means any person operating an establishment where spirituous
liquors are sold in the original container for consumption on or off the
premises or in individual portions for consumption on the premises.

30.

32.
"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.

31.

33.
"Person"
includes a partnership, limited liability company, association, company or
corporation, as well as a natural person.

32.

34.
"Premises"
or "licensed premises":

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

(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.

33.

35.
"Registered
alcohol delivery contractor":

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

(b) Does not include:

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

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

34.

36.
"Registered
mail" includes certified mail.

35.

37.
"Registered
retail agent" means any person who is authorized pursuant to section 4-222
to purchase spirituous liquors for and on behalf of the person and other retail
licensees.

36.

38.
"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.

39.
"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.

40.
"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.

41.
"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.

40.

42.
"Vehicle"
means any means of transportation by land, water or air, and includes
everything made use of in any way for such transportation.

41.

43.
"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.

44.
"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.

45.
"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.

46.
"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. 3. Section 4-112, Arizona Revised Statutes, is amended to read:

START_STATUTE
4-112.

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

and shall do the
following
:

1.
Adopting

adopt

rules:

(a)
For carrying

to carry
out
the provisions of
this title.

(b)
For the proper

to properly
conduct
of
the business to be
carried on under each specific type of spirituous liquor license.

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

(d)
For the issuance

To issue
and
revocation of

revoke

certificates of registration of retail agents, including provisions
governing the shipping, storage and delivery of spirituous liquors 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

employ
necessary personnel and
fixing

fix
their compensation pursuant to
section 38-611.

3.
Keeping

Keep
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

Provide

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

5.
Responding

Respond

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

Take
steps that are necessary to maintain effective
liaison with the department of public safety and all local law enforcement
agencies
in the enforcement of

to enforce
this
title
,
including the laws of this state against the
consumption of spirituous liquor by persons under the legal drinking age
or the sale or possession of alternative nicotine products by persons
under twenty-one years of age
.

7.
Providing

Provide

training to law enforcement agencies in
the proper
investigation

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

whose
sole responsibility
the investigation of

is investigating
compliance with this title
,
including
the investigation of

investigating
licensees alleged to have sold or distributed
spirituous liquor in any form to persons under the legal drinking age
or have sold or distributed alternative nicotine products to a person
who is under twenty-one years of 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

to enforce

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 handling and spirituous liquor 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
product at licensed retail premises.

5. Cause to be removed from the marketplace
spirituous liquor
or alternative nicotine products
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 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
or the sale or
possession of alternative nicotine products by a person who is under twenty-one
years of age
. 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. 4. Section 4-118, Arizona Revised
Statutes, is amended to read:

START_STATUTE
4-118.

Inspection of premises

The director, the director's agents and any peace officer
may
, in enforcing
the provisions of
this
title,
may
visit during the hours in which the premises
are occupied and inspect the premises of a licensee
or an
alternative nicotine products licensee
.
END_STATUTE

Sec. 5. Section 4-205.02, Arizona Revised Statutes, is amended to read:

START_STATUTE
4-205.02.

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

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

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

C. The holder of a restaurant license may sell and
serve spirituous liquors solely for consumption on the licensed premises.� For
the purpose of this subsection, "licensed premises" may include
rooms, areas or locations in which the restaurant normally sells or serves
spirituous liquors pursuant to regular operating procedures and practices and
that are contiguous to the restaurant or a noncontiguous patio pursuant to
section 4-101, paragraph
32

34
. For
the purposes of this subsection, a restaurant licensee must submit proof of
tenancy or permission from the landowner or lessor for all property to be
included in the licensed premises.

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

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

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

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

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

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

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

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

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

M. For the purposes of this section:

1. "Gross revenue":

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

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

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

Sec. 6. Section 4-244, Arizona Revised
Statutes, is amended to read:

START_STATUTE
4-244.

Unlawful acts; definition

It is unlawful:

1. For a person to buy for resale, sell or deal in
spirituous liquors 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 of a debtor.

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

3. For a distiller, vintner, brewer or wholesaler
knowingly to sell, dispose of or give spirituous liquor 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 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 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 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. 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, in unbroken packages, for the convenience of the
customer of the employer, if the employer sells primarily merchandise other
than spirituous liquor.

10. For a licensee to employ a person under eighteen
years of age to manufacture, sell or dispose of spirituous
liquors. 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, in unbroken
packages, for the convenience of the customer of the employer, if the employer
sells primarily merchandise other than spirituous liquor.

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. 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 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, 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 to or purchase spirituous liquor 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 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 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 to
customers may purchase for himself and consume spirituous liquor while
participating in a scheduled event at the club. An unpaid
participant in a food competition may purchase for himself and consume
spirituous liquor 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 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 delivery contractor to sell,
dispose of, deliver or give spirituous liquor 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 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 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 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 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 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 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 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 to, purchase liquor for or drink liquor with any
employee during the employee's working hours.

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

20. For a person to consume spirituous liquor 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 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 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
shall be forfeited to
the

this
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 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 will not be sold
or consumed
for the purpose of allowing

to
allow
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 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

9
, 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.

(c) To the area of the premises used primarily for
serving food during the hours when food is served.

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 during any set period of time for a fixed price,
to deliver more than fifty ounces of beer, 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. This paragraph does not prohibit the consumption of small
amounts of spirituous liquor by an undercover peace officer on assignment to
investigate the licensed establishment.

32. For a licensee or employee to knowingly allow
spirituous liquor 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 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 from a licensee or employee of a licensee
or to consume spirituous liquor 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 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 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, 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

to dispense
spirituous
liquor.

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 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. 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 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 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.

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

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 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 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.

48. From and after December 31, 2027,
For a retailer of alternative nicotine products to purchase alternative
nicotine products from an unlicensed distributor of alternative nicotine
products or an unlicensed manufacturer of alternative nicotine products.

END_STATUTE

Sec. 7. Title
4, Arizona Revised Statutes, is amended by adding chapter 4, to read:

CHAPTER 4

ALTERNATIVE NICOTINE PRODUCTS

ARTICLE 1. LICENSURE
AND SALE OF

ALTERNATIVE NICOTINE PRODUCTS

START_STATUTE
4-401.

Alternative nicotine products distributor license; fee;
violation; classification

A. From and after December 31, 2027,
a person may not distribute Alternative nicotine products for sale in this
state without a License issued pursuant to this section.� Alternative nicotine
Products offered for sale in this state shall only be provided by a manufacturer
that is licensed pursuant to section 4-402 and all of the following
requirements apply:

1. A distributor of alternative
nicotine products may purchase alternative nicotine products only from a
distributor that is licensed pursuant to this section or from a manufacturer
that is licensed pursuant to section 4-402. A distributor of
alternative nicotine products shall verify that the distributor or manufacturer
has a valid license issued pursuant to this section or section 4-402 and
shall obtain proof that the distributor or manufacturer has a valid license
before purchasing alternative nicotine products from the distributor or
manufacturer.

2. A distributor of alternative
nicotine products shall maintain Documentation at the distributor's facility
for each transaction that involves the sale, Purchase, transfer or receipt of
alternative nicotine products.

3. All alternative nicotine products
that are held or stored for sale or Distribution in this state by or on behalf
of a retailer shall be accessible To the department and other law enforcement
officers during normal business Hours without a judicial warrant or prior
written consent of the distributor.

4. Alternative nicotine products that
are sold or offered for sale in violation Of this section are deemed contraband
and subject to seizure and destruction Or disposal.

b. A person desiring a license to
distribute alternative nicotine products for sale in this state shall apply to
the director on a form prescribed by the director. The application must require
all of the following information:

1. The applicant's distribution
business address, telephone number, email address and, if the applicant is an
entity, the name of the senior officer.

2. Proof of liability insurance
coverage.

3. A copy of the registration form
provided by the United States bureau of alcohol, tobacco, firearms and
explosives as proof of the applicant's compliance with the prevent all
cigarette trafficking act of 2009 (p.l. 111-154; 124 stat. 1087; 15 United
States code section 376
a
).

c. The director may establish a fee
for a license issued pursuant to this section. A license that is
issued pursuant to this section is valid for two years.

d. A license to distribute
alternative nicotine products that are for sale in this state is not
transferable. A licensee shall report any change in ownership of the
business of the licensee, directly or indirectly, as defined by rule, to the
director within thirty days after the change in ownership.

e. A license to distribute
alternative nicotine products issued pursuant to this section may not be leased
or subleased.

f. A person that distributes
alternative nicotine products for sale in this state without a license as
required by this section is guilty of a class 5 felony and:

1. Shall pay a fine of at least
$10,000.

2. Is prohibited from selling, giving
or furnishing alternative nicotine products for a period of one year.

3. Is subject to any other punishment
deemed appropriate by the director.
END_STATUTE

START_STATUTE
4-402.

Alternative nicotine products manufacturer license; fee; audit;
violation; classification

A. From and after December 31, 2027,
A person may not manufacture alternative nicotine products
that are for sale in this state without a license issued pursuant to
this section and all of the following requirements apply:

1. A manufacturer may sell
alternative nicotine products only to a distributor that is licensed pursuant
to section 4-401. A manufacturer shall verify that the
distributor holds a valid license issued pursuant to section 4-401 and
shall obtain proof of a valid license before selling alternative nicotine
products to the distributor.

2. A manufacturer that is licensed
pursuant to this section may sell alternative nicotine products to a retailer
in this state that holds a valid transaction privilege tax license.

3. A manufacturer of alternative
nicotine products shall maintain Documentation at the manufacturer's facility
for each transaction that involves the sale, Purchase, transfer or receipt of
alternative nicotine products.

4. All alternative nicotine products
that are held or stored for sale or Distribution in this state by or on behalf
of a distributor or retailer shall be accessible To the department and other
law enforcement officers during normal business Hours without a judicial
warrant or prior written consent of the manufacturer.

5. Alternative nicotine products that
are sold or offered for sale in violation Of this section are deemed contraband
and subject to seizure and destruction Or disposal.

B. A person desiring a license to
manufacture alternative nicotine products
that are for
sale in this state shall apply to the director on a form furnished by the
director.� The applicant shall provide all of the following:

1. The applicant's manufacturing
business address, telephone number, email address and, if the applicant is an
entity, the name of the senior officer.

2. Proof of manufacturing liability
insurance coverage.

3. PROOF of the applicant's
compliance with the Prevent All Cigarette Trafficking act of 2009 (P.L. 111-154;
124 Stat. 1087; 15 united States Code section 376
a
).

4. The applicant's product catalog of
alternative nicotine products that the applicant intends to manufacture
and that will be for sale in this state. The product catalog shall
include all of the following:

(
a
) The
alternative product name, category, nicotine strength and flavors.

(
b
) A copy or
image of the nicotine product's packaging and warning label.

(
c
) A
toxicology report for the nicotine product, if requested by the department.

C. The director may establish a fee
for a license issued pursuant to this section. A license is valid
for two years.

D. A licensee shall pay to the
department an annual fee for each
stockkeeping unit of
each alternative nicotine product
that the licensee will
manufacture
and that are for sale in this
state. The director may determine the annual
stockkeeping
unit fee that is required pursuant to this subsection.

E. A license to manufacture
alternative nicotine products
that are for sale in this
state is not Transferable. The licensee shall report any change in
ownership of the Business of the licensee, directly or indirectly, as defined
by rule, to the director within thirty days after the change in ownership.

F. A license to manufacture
alternative nicotine products may not be leased or subleased.

G. The department may conduct an
audit to ensure a manufacturer that is licensed pursuant to this section is in
compliance with this section. The department may request a notarized
attestation that the manufacturer's products that are sold in this state were
imported in conformity with all United States customs and border requirements,
whether the notarized attestation was provided by the manufacturer or another
entity. The department may request that the manufacturer provide any
additional documentation the department deems relevant.

H. A person that manufactures
alternative nicotine products for sale in this state without a license as
required by this section is guilty of a class 5 felony and:

1. Shall pay a fine of at least
$10,000.

2. Is prohibited from selling, giving
or furnishing alternative nicotine products for a period of one year.

3. Is subject to any other punishment
deemed appropriate by the director.
END_STATUTE

START_STATUTE
4-403.

Selling, delivering or giving of alternative nicotine products to
underage persons; violations; classification

A. except as provided in section
36-798.07, A retailer or a retailer's employee may not sell alternative
nicotine products to a person who is under twenty-one years of age.

B. On the receipt of notice of a
violation of subsection A of this section, the director shall provide notice of
the alleged violation to the retailer who is alleged to have committed the
violation.� After a hearing, if a retailer is found to have committed a
violation of this section, the following PENALTIES apply:

1. the director shall order a
retailer that commits a first violation of this section to attend a
director-approved alternative nicotine products retailer educational course
that has been approved by the director and pay a civil penalty of at least $500
but not more than $750.

2. A retailer that commits a second
violation of this section at the same licensed location within twenty-four
months is guilty of a class 3 misdemeanor and:

(
a
) Shall pay a
fine of at least $2,000 but not more than $3,000.

(
b
) Shall
attend a director-approved alternative nicotine products retailer educational
course.

(
c
) Is subject
to any other punishment deemed appropriate by the director.

3. A retailer that commits a third violation
of this section at the same licensed location within twenty-four months
is guilty of a class 1 misdemeanor and:

(
a
) Shall pay a
civil penalty of at least $10,000.

(
b
) Shall
attend a director-approved alternative nicotine products retailer
educational course.

(
c
) Is
prohibited from selling, giving or furnishing alternative nicotine products for
a period of one hundred twenty days.

(
d
) is subject
to any other punishment deemed appropriate by the director.

4. A retailer that commits a fourth
or subsequent violation of this section at the same licensed location within
twenty-four months is guilty of a class 6 felony and:

(
a
) Shall pay a
fine of at least $10,000.

(
b
) Shall
attend a director-approved alternative nicotine products educational course.

(
c
) Is
prohibited from selling, giving or furnishing alternative nicotine products for
a period of one year.

(
d
) Is subject
to any other punishment deemed appropriate by the director.

5. A retailer that commits a fourth
or subsequent violation of this section at the same licensed location within
twelve months is guilty of a class 5 felony and:

(
a
) Shall pay a
fine of at least $10,000.

(
b
) Shall
attend a director-approved alternative nicotine product retailer
educational course.

(
c
) Is prohibited
from selling, giving or furnishing alternative nicotine products for a period
of one year.

(
d
) Is subject
to any other punishment deemed appropriate by the director.

C. If the director orders a retailer
to attend an alternative nicotine products retailer educational course, each
owner and person who serves in a managerial position and at least one person
who serves in a nonmanagerial position shall attend the course.

D. The department may coordinate WITH
appropriate law enforcement agencies to enforce this section.

E. A person who sells alternative
nicotine products in violation of this section is guilty of a class 5 felony
and:

1. Shall pay a fine of at least
$10,000.

2. Is prohibited from selling, giving
or furnishing alternative nicotine products for a period of one year.

3. Is subject to any other punishment
deemed appropriate by the director.
END_STATUTE

START_STATUTE
4-404.

Alternative nicotine products marketing

A. A licensee may not market,
advertise, sell or cause to be sold an alternative nicotine product in a
container that does any of the following:

1. Depicts a cartoon-like
fictional character that mimics a character primarily aimed at entertaining.

2. Imitates or mimics a trademark or
trade dress of a product that is or has been primarily marketed to minors.

3. Includes a symbol that is
primarily used to market products to minors.

4. Includes an image or THE name of a
celebrity.

5. Is in a product shape or design
that is meant to disguise the appearance of the alternative nicotine product,
including the shape or design or any of the following:

(
a
) A school or office supply.

(
b
) A smart phone, smart watch or smart phone or smart watch
case.

(
c
) Headphones
or ear buds.

(
d
) Any item of
clothing.

(
e
) A backpack.

(
f
) A cosmetic
or cosmetic container.

(
g
) A toy or
video game device.

(
h
) A food or
beverage product.

B. Alternative nicotine products sold
or offered for sale in violation Of this section are deemed contraband and
subject to seizure and destruction Or disposal.

END_STATUTE

START_STATUTE
4-405.

Sale of alternative nicotine products; identification
requirements

A. If a retailer or any other person
questions or has reason to question that the person purchasing, attempting to
purchase or otherwise procuring or attempting to procure an alternative
nicotine products is under twenty-one years of age, the retailer 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 twenty-one years
of age.

5. Scan the person's identification
using an electronic scanning device.

B. The following written instruments
constitute the only identification that is acceptable under subsection a of
this section:

1. An unexpired driver license issued
by this state. A driver license that is issued to a person who is
under twenty-one years of age does not constitute acceptable
identification thirty days after the person reaches 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 identification license that is issued to a person who is under
twenty-one years of age does not constitute acceptable identification
thirty days after the person reaches 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.
END_STATUTE

Sec. 8. Section 13-3622, Arizona Revised
Statutes, is amended to read:

START_STATUTE
13-3622.

Tobacco products or tobacco and shisha instruments and
paraphernalia; furnishing to underage persons; accepting, receiving or
illegally obtaining by underage person; classification; definitions

A. A person who knowingly sells, gives or furnishes
a tobacco product
, a vapor product
or any instrument or
paraphernalia that is solely designed for smoking or ingesting tobacco
products
or shisha, including a hookah or waterpipe, to a
person who is under twenty-one years of age is guilty of a petty offense.

B. Except as provided in section 36-798.07, a person
who is under twenty-one years of age and who buys, or has in the person's
possession or knowingly accepts or receives from any person, a tobacco product
, a vapor product
or any instrument or paraphernalia that is
solely designed for smoking or ingesting tobacco
products

or shisha, including a hookah or waterpipe, is guilty of a petty offense, and
if the offense involves any instrument or paraphernalia that is solely designed
for smoking or ingesting tobacco
products
or shisha,
shall pay a fine of at least $100 or perform at least thirty hours of community
restitution.

C. A person who is under twenty-one years of
age
and
who misrepresents the person's age to another
person by means of a written instrument of identification with the intent to
induce the other person to sell, give or furnish a tobacco product
, a vapor product
or any instrument or paraphernalia that is
solely designed for smoking or ingesting tobacco
products

or shisha, including a hookah or waterpipe, in violation of subsection A or B
of this section is guilty of a petty offense and, notwithstanding section 13-802,
shall pay a fine of not more than $500.

D. Notwithstanding sections 13-802
and 13-803, the court shall order a person who commits a violation of
this section or an enterprise that commits a first violation of this section to
attend a court-approved tobacco retailer educational course and pay a
fine of at least $500 but not more than $750.

E. Notwithstanding
subsection A of this section:

1. An
enterprise that commits a second violation of this section at the same location
within twenty-four months is guilty of a class 3 misdemeanor and:

(
a
) Shall pay a
fine of at least $2,000 but not more than $3,000.

(
b
) Shall
attend a court-approved tobacco retailer educational course.

(
c
) Is subject
to any other punishment deemed appropriate by the court.

2. An enterprise that commits a third
violation of this section at the same location within twenty-four months
is guilty of a class 1 misdemeanor and:

(
a
) Shall pay a
fine of at least $10,000.

(
b
) Shall
attend a court-approved tobacco retailer educational course.

(
c
) is subject
to any other punishment deemed appropriate by the court.

(
d
) Is
prohibited from selling, giving or furnishing tobacco products for a period of
one hundred twenty days.

3. An enterprise that commits a
fourth or subsequent violation of this section at the same location within
twenty-four months is guilty of a class 6 felony and:

(
a
) Shall pay a
fine of at least $10,000.

(
b
) Shall
attend a court-approved tobacco retailer educational course.

(
c
) Is subject
to any other punishment deemed appropriate by the court.

(
d
) Is
prohibited from selling, giving or furnishing tobacco products for a period of
one year.

4. An enterprise that commits a
fourth or subsequent violation of this section at the same location within
twelve months is guilty of a class 5 felony and:

(
a
) Shall pay a
fine of at least $10,000.

(
b
) Shall
attend a court-approved tobacco retailer educational course.

(
c
) Is subject
to any other punishment deemed appropriate by the court.

(
d
) Is
prohibited from selling, giving or furnishing tobacco products for a period of
one year.

F. If the court orders an enterprise
to attend a tobacco retailer educational course, each owner and person who
serve in managerial positions and at least one person who serves in a
nonmanagerial position shall attend the course.

D.
G.
This section does not apply to any of
the following:

1. Cigars, cigarettes
or cigarette papers, smoking or chewing tobacco or any instrument or
paraphernalia that is solely designed for smoking or ingesting tobacco
products
or shisha, including a hookah or waterpipe, if it is
used or intended to be used in connection with a bona fide practice of a
religious belief and as an integral part of a religious or ceremonial exercise.

2. Any instrument or paraphernalia that is solely
designed for smoking or ingesting tobacco
products
or
shisha, including a hookah or waterpipe, that is given to or possessed by a
person who is under twenty-one years of age if the instrument or
paraphernalia was a gift or souvenir and is not used or intended to be used by
the person who is under twenty-one years of age to smoke or ingest
tobacco
products
or shisha.

E.

H.
For
the purposes of this section:

1. "Shisha" includes any mixture of
tobacco leaf and honey, molasses or dried fruit or any other sweetener.

2. "Tobacco product" means any of the
following:

(a) Cigars.

(b) Cigarettes.

(c) Cigarette papers of any kind.

(d) Smoking tobacco of any kind.

(e) Chewing tobacco of any kind.

3. "Vapor product":

(a) Means a noncombustible tobacco-derived
product containing nicotine that employs a mechanical heating element, battery
or circuit, regardless of shape or size, that can be used to heat a liquid
nicotine solution contained in cartridges.

(b) Does not include any product that
is regulated by the United States food and drug administration under chapter V
of the federal food, drug, and cosmetic act.

END_STATUTE

Sec. 9. Section 36-798.07, Arizona Revised
Statutes, is amended to read:

START_STATUTE
36-798.07.

Possessing, accepting or receiving tobacco product, vapor
product, alternative nicotine product or tobacco or shisha instruments or
paraphernalia; active military personnel under twenty-one years of age;
definitions

A. A person who is at least eighteen years of age
may possess, accept, receive or use a tobacco product, a vapor product
, an alternative nicotine product
or any instrument or
paraphernalia that is solely designed for smoking or ingesting
a

tobacco
product
or shisha as defined in section
13-3622, including a hookah or waterpipe, only if all of the following apply:

1. The person is currently serving as a member of
the national guard, the United States armed forces reserves or the active
component of the United States armed forces.

2. The use or possession of the tobacco product,
the
vapor product
, the alternative nicotine
product
or any instrument or paraphernalia is allowed by the regulations
and policies of the United States department of defense or the branch of the
United States armed forces in which the person is serving.

3. The person holds a valid military identification
card that is issued by the United States department of defense or the branch of
the United States armed forces in which the person is serving.

B. This section does not apply to any person who is
either:

1. No longer serving as a member of the national
guard, the United States armed forces reserves or the active component of the
United States armed forces.

2. Under eighteen years of age.

C. For the purposes of this section:

1. "Alternative nicotine product"
has the same meaning prescribed in section 4-101.

2. "Tobacco product" has
the same meaning prescribed in section 13-3622.
END_STATUTE

Sec. 10.
Effective date; notice

A. Sections 4-401 and
4-402, Arizona Revised Statutes, as added by this act, become effective
on the earlier of the following:

1. From and after June 30,
2027 if the department of liquor licenses and control adopts rules to implement
this act and the state liquor board determines that the compliance time frames
are achievable.

2. From and after December
31, 2027.

B. The department of liquor
licenses and control shall notify the director of the Arizona legislative
council in writing on or before July 1, 2027 if the requirements of subsection
A, paragraph 1 of this section have been met.