ARIZONA STATE SENATE
Forty-seventh Legislature, Second Regular Session
FACT SHEET FOR H.B. 2500
domestic farm wineries; direct shipment
Purpose
Makes changes to the domestic farm winery license.
Background
The Arizona Department of Liquor Licenses and Control (ADLLC) regulates domestic farm wineries. The domestic farm winery license (series 13) is available to wineries that produce between 250 and 75,000 gallons of wine annually from grapes, of which 75 percent are grown in Arizona. A person seeking a domestic farm winery license must apply to the ADLLC and pay the $200 application fee. A domestic farm winery may sell wine produced and manufactured at the winery in the original container for consumption on or off of the premises and can make sales and deliveries of wine to persons licensed to sell wine. Domestic farm wineries are required to annually report the amount of wine that was produced during the year to the ADLLC. As of July 2005, there are 16 licensed domestic farm wineries.
A luxury tax is imposed on the sale of wine. The luxury tax is $.84 per gallon of most wines and $.25 per eight ounces on high alcohol content wines. Domestic farm wineries are required to pay the luxury tax on all sales of wine at retail or to a retail licensee.
Over the last few years, the wine industry has questioned whether state laws can treat an in-state winery different from an out-of-state winery. In 2005, the United States Supreme Court struck down Michigan’s and New York’s laws because they discriminated against interstate commerce in violation of the Commerce Clause of the Constitution of the United States. In Granholm v. Heald, 125 S. Ct. 1885 (2005), the Court held that this discrimination was not authorized by the Twenty-first Amendment of the Constitution of the United States, which repealed prohibition but gave the states extensive authority to regulate alcohol.
There is no anticipated fiscal impact to the state General Fund associated with this measure.
Provisions
1. Allows a domestic farm winery to deliver wine produced or manufactured on the licensed premises in the original container for consumption on or off of the premises.
2. States a domestic farm winery may sell and deliver wine produced or manufactured on the licensed premises for consumption on or off of the premises and may make sales and deliveries of wine to persons licensed to sell wine if:
a) the purchaser of wine provides verification of legal age to purchase alcohol or verification of the purchaser’s license to sell wine.
b) the shipping container in which the wine is shipped marked to require the signature on delivery of an adult who is of legal age to purchase alcohol and delivery confirmation.
c) the domestic farm winery ships to a residential or business address.
3. Allows a domestic farm winery to serve wine produced or manufactured on a licensed premises for the purpose of sampling wine.
4. Reduces the maximum amount a winery can produce annually to qualify as a domestic farm winery from 75,000 to 50,000 gallons of wine.
5. Removes the requirement that a domestic farm winery’s wine production be from grapes of which at least 75 percent are grown in Arizona.
6. Allows a domestic farm winery to purchase and sell wine produced by another domestic farm winery.
7. States an application for a domestic farm winery constitutes the applicant’s consent to the jurisdiction of Arizona and its agencies and courts concerning enforcement of the domestic farm winery laws and other related laws, including tax laws.
8. Requires a domestic farm winery to pay all luxury taxes and all transaction privilege or use taxes as required by law and to file all required returns and reports.
9. States a delivery of wine by a domestic farm winery to an authorized destination in Arizona is a transaction deemed to have occurred in Arizona.
10. Defines a “domestic farm winery” as a winery in the United States or in a territory or possession of the United States that meets the domestic farm winery requirements.
11. Makes technical and conforming changes.
12. Prescribes legislative intent.
13. Becomes effective on the general effective date.
House Action
NRA 2/20/06 DPA 8-2-0-0
3rd Read 3/23/06 44-11-5-0
Prepared by Senate Research
March 27, 2006
BP/jas