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ARIZONA STATE SENATE
Fifty-Fifth Legislature, First Regular Session
AMENDED
spirituous liquor; delivery; off-sale permits
Purpose
Allows a bar or liquor store to sell mixed cocktails for off-premises consumption and allows a restaurant liquor licensee to apply for a permit to sell mixed cocktails for off-premises consumption (to-go cocktails permit) according to prescribed requirements. Allows a bar to lease the licensee's associated off-sale privileges and establishes registration of an alcohol delivery contractor for liquor delivery on behalf of a bar or restaurant. Contains requirements for enactment and becomes effective on signature of the Governor (Proposition 108).
Background
The Department of Liquor License and Control (DLLC) issues licenses to regulate the production, distribution and sale of alcoholic beverages through the State Liquor Board (Board) and the Office of the DLLC Director (Director). A bar license is a retailer’s license to sell spirituous liquors primarily by individual portions to be consumed on the premises and in the original container for consumption on or off the premises. The off-sale use, by total retail spirituous liquor sales, may not exceed 30 percent of the sales price of on-sale spirituous liquor the licensee sells at that location (A.R.S. §§ 4-206.01 and 4-209).
A restaurant license may be issued to a restaurant that is regularly open for the serving of food to guests for compensation, has suitable kitchen facilities connected with the restaurant for keeping, cooking and preparing foods required for ordinary meals, and derives at least 40 percent of its gross revenue from the sale of food. A restaurant licensee may sell spirituous liquor for only consumption on the licensed premises, unless the licensee applies and is issued a permit to sell beer in containers with a one-gallon maximum capacity according to outlined requirements (growler permit). Sales under the growler permit may not exceed 10 percent of total liquor sales (A.R.S. §§ 4-205.02 and 4-209).
A retail liquor licensee with off-sale privileges may take orders through the internet or by telephone, mail, fax, catalog or other means for the sale and delivery of spirituous liquor off of the licensed premises to a person in Arizona. The licensee may maintain a delivery service and may contract with an independent contractor or a common carrier for delivery of spirituous liquor. An employee of a licensee or other authorized person must verify the age of the person accepting the delivery through the display of an identification document and receive the person's signature. A licensee must label containers of spirituous liquor for delivery with the words, "contains alcohol, signature of person who is twenty-one years of age or older is required for delivery." The licensee is responsible for any violations of the requirements for the sale and delivery of spirituous liquor (A.R.S. § 4-203).
This is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
To-Go Cocktails and Off-Sale Consumption Privileges
1. Authorizes a bar to lease the off-sale privileges associated with the bar license to a restaurant licensee.
2. Exempts a bar or liquor store from the prohibition on allowing spirituous liquor to be removed from the licensed premises except in the original, unbroken package if:
a) the bar prepares a mixed cocktail and the licensee or licensee's employee fills the container on the licensed premises; and
b) the container meets prescribed requirements.
3. Directs a bar and liquor store, through December 31, 2025, to make a permit available for lease to a restaurant licensee through the DLLC for the privilege of selling mixed cocktails for off-premises consumption as follows:
a) the restaurant must prepare the mixed cocktail and the licensee or licensee's employee must fill the container on the licensed premises;
b) the container must meet prescribed requirements; and
c) the sale must be accompanied by the sale of food for consumption on or off the licensed premises.
4. Requires all violations and liability for liquor service under the leased privilege or permit during the lease term to be attributed only the leasing restaurant licensee.
5. Requires the Director, beginning January 1, 2026, to make to-go cocktail permits available for a restaurant licensee to purchase from the DLLC equal in number to the total number of bar and liquor store licensees.
6. Requires a container used for to-go cocktails to:
a) be a clean container composed of a material approved by a national sanitation organization;
b) be sealed by the licensee or licensee's employee;
c) have a maximum capacity of up to 32 ounces; and
d) display a government warning label and the restaurant's logo or name.
7. Allows, on a form prescribed and provided by the Director:
a) a restaurant licensee to apply to lease off-sale privileges from a bar licensee; and
b) a restaurant licensee or applicant to apply to lease a permit to allow the sale of mixed cocktails for off-premises consumption.
8. Requires the Director, upon approval of an application by a restaurant licensee, to randomly select a bar or liquor store license for the lease to the restaurant of the licensee's privileges or permit.
9. Specifies that the lease period for a to-go cocktails permit or the lease of off-sale privileges is for a period of one year and is renewable for successive, one-year terms.
10. Allows a bar or liquor store lessor to sell to-go mixed cocktails and spirituous liquor as authorized by the license during the term of an off-sale privileges or to-go cocktails permit lease.
11. Directs the DLLC to establish a process to facilitate lease conveyance and to govern the lease including the lease content, a standard form of lease and responsibilities of the lessor and lessee.
12. Allows the Director to:
a) deny approval of a lease based on the proposed location of the lease or on the restaurant establishment's history; and
b) immediately suspend a lease for any violation by a restaurant licensee of Alcoholic Beverages statutes or related rules.
13. Allows the Director to issue a to-go cocktails permit or allow an applicant to bid on a to-go cocktails permit only after determining that the public convenience requires and that the best interest of the community will be substantially served by issuing the permit;
14. Requires a restaurant licensee to pay all lease payments in full, in advance.
15. Exempts a restaurant with a to-go cocktails permit from the prohibition on allowing spirituous liquor to be removed from the licensed premises except in the original, unbroken package.
16. Requires all to-go cocktails permit holders and their employees, managers and managing agents to complete alcohol training approved by the Director.
17. Requires an issued to-go cocktails permit to be noted on the license and in DLLC records.
Auction
18. Directs the Director, beginning January 1, 2022, to make to-go cocktails permits available for purchase through an auction by restaurant licensees equal in number to the total number of bar and liquor store licenses as determined by December 1, 2021.
19. Requires a DLLC representative to:
a) attend at the time and place fixed for the auction sale, including through the internet; and
b) first announce information the representative deems sufficient to begin the bidding process and then call for bids.
20. Requires DLLC to publish the current number of bids and the bid amounts during the auction.
21. Limits the auction period to a maximum of seven days.
22. Directs DLLC to prepare a written report of the sale of to-go cocktails at the auction and, by May 31, 2022, determine the average auction price.
23. Requires DLLC, beginning June 1, 2022, to make available, for purchase by restaurant licensees, one to-go cocktails permit for each additional bar or liquor store license issued by the Director due to county population increases.
24. Authorizes the Director to issue a new to-go cocktails permit for every revoked or reverted to-go cocktails permit.
25. Requires a person issued a to-go cocktails permit by the Director beginning June 1, 2022, to pay an issuance fee equal to the average auction price as determined by the DLLC.
26. Requires the Director to determine applicant priority by random selection if more than one restaurant licensee or applicant applies for the available licenses after June 1, 2022.
27. Limits the number of times a person may enter the random selection to the number of restaurant licenses held or applied for and deems a partnership, limited liability company, association, company or corporation as the same person if it is owned, managed or controlled by the same controlling person.
28. Directs DLLC to deposit monies for to-go cocktails permits from auction sales and sales conducted by the Director into the Liquor License Compensation Fund (Fund) or, upon repeal of the Fund, in the Driving Under the Influence Abatement Fund.
29. Allows the Directors to waive the issuance of new to-go cocktails permits for one year if there has been no request for a new to-go cocktails permit.
30. Specifies that a restaurant applicant or licensee must complete the Director-prescribed form and be approved by the Director before bidding on a to-go cocktails permit.
Liquor License Compensation Fund
31. Establishes the Fund consisting of monies deposited from sales of to-cocktails permits by auction or by the Director.
32. Directs the Director to administer the Fund to compensate an eligible bar or liquor store licensee.
33. Deems bar and liquor store licensees to be eligible for Fund compensation if the license was issued on or before March 20, 2021.
34. Directs the DLLC, beginning January 1, 2022, to determine the number of eligible bar and liquor store licensees in Arizona.
35. Requires the Director, within 90 days of any deposit in the Liquor License Compensation Fund, to disburse all monies deposited in the Fund in equal amounts to eligible bar and liquor store licensees.
36. Specifies that Fund monies are continuously appropriated.
37. Repeals the Liquor License Compensation Fund upon the earlier of the following conditions:
a) when the bar and liquor store license fair market values are equal to 115% of the fair market values calculated for 2020; or
b) when three consecutive years have passed without the issuance of any new to-go cocktails permits.
38. Requires the Director to notify the Arizona Legislative Council Director of the date the conditions are met for the repeal of the Liquor License Compensation Fund.
Orders for Delivery
39. Authorizes a bar to take orders for the sale and delivery of mixed cocktails off the licensed premises.
40. Allows a restaurant to take orders for the sale and delivery off the licensed premises of:
a) mixed cocktails with the sale of food for consumption or off the licensed premises, if the restaurant holds a mixed cocktails permit; or
b) beer, if the restaurant holds a beer growler permit.
41. Allows a liquor licensee to maintain a delivery service and contract with one or more registered alcohol deliver contractors for spirituous liquor delivery if the liquor is:
a) packaged and sealed by the bar or restaurant licensee or the licensee's employee;
b) loaded for delivery at the bar or restaurant premises; and
c) delivered in Arizona.
42. Specifies that the licensee is responsible for any violation of Alcoholic Beverages statutes or related rules committed in connection with sale and delivery.
43. Requires the bar or restaurant licensee to inform the purchaser at the time the order is placed that:
a) state law requires a spirituous liquor purchaser to be at least 21 years old; and
b) the person accepting delivery must comply with statutory age identification requirements.
44. Directs the restaurant or bar licensee to collect payment from the purchaser for the full price of the liquor before the product leaves the licensed premises.
45. Specifies that spirituous liquor sold by a bar or restaurant licensee for off-premises consumption must be sealed and applies the spirituous liquor labeling requirement to containers of mixed cocktails for delivery.
46. Directs the Director to adopt rules setting operational limits for spirituous liquor delivery for bars and restaurants.
47. Prescribes the following methods for a bar or restaurant licensee to take orders for the sale and delivery of spirituous liquor:
a) telephone, mail, fax or catalog;
b) through the internet; or
c) any other means.
48. Requires delivery to be made by a person who is at least 21 years old and is:
a) a licensee's employee; or
b) a registered alcohol delivery contractor's employee or authorized independent contractor.
49. Specifies that delivery must be made to a customer who:
a) is at least 21 years old; and
b) displays an identification at the time of delivery that meets statutory requirements.
50. Specifies that placing a spirituous liquor order from a bar or restaurant and paying for the order is not a sale until delivery has been made.
51. Prohibits a bar or restaurant licensee or employee, registered alcohol delivery contractor or independent contractor from selling, disposing of, delivering or giving spirituous liquor to an individual purchaser between 2 a.m. and 6 a.m.
Alcohol Delivery Contractor Registration
52. Authorizes the Director to register any person in Arizona as an alcohol delivery contractor for the purpose of delivering spirituous liquor from a bar or restaurant licensee to a consumer in Arizona.
53. Allows a registered alcohol delivery contractor to:
a) deliver spirituous liquor to a consumer in Arizona on behalf of a bar or restaurant if the registered alcohol delivery contractor complies with statutory Alcoholic Beverages Regulations and Prohibitions; and
b) contract with independent contractors for liquor delivery to a consumer on behalf of a bar or restaurant.
54. Allows DLLC to require new registered alcohol delivery contractors to complete an approved alcohol training course and subjects a registered alcohol delivery contractor to the Director's authority to examine a licensee's books, records and papers.
55. Authorizes DLLC, in addition to all other actions authorized for violations, to limit a contractor's right to deliver for up to one year after and requires the alcohol delivery contractor to register with DLLC to resume delivery.
56. Deems, as a penalty that is appealable to the Board, a limitation of an alcohol delivery contractor's right to deliver.
57. Directs DLLC to maintain a list of registered alcohol delivery contractors that are not in penalty status.
58. Requires a registered alcohol delivery contractor to apply on a Director-prescribed form and directs the Director to require an applicant to provide:
a) the controlling person's identification; and
b) any background information deemed necessary to identify the person and demonstrate proof of the person's authority to conduct business in Arizona, including copies of required state or local business licenses or permits.
59. Allows the Director to refuse to register a person as an alcohol delivery contractor for good cause.
60. Prohibits the Director from registering, as an alcohol deliver contractor, a person who has been convicted of a felony in Arizona or any other state within the five years immediately preceding application.
Application Administration and Fees
61. Requires the Director to set the fee for to-go cocktail permit lease payments.
62. Allows the Director to establish and charge:
a) a to-go cocktails permit application processing fee and a renewal fee; and
b) an alcohol delivery contractor registration and renewal fee to be used for administrative and enforcement costs associated with alcohol delivery contractors.
63. Directs the DLLC to use all monies received from a to-go cocktails permit application fees and a alcohol delivery contractor registrations, including the annual registration renewal fees, for administrative costs associated with the permit or license and enforcement of statutory regulations and prohibitions.
64. Specifies that to-go cocktails permit application fees are charged in addition to the amount charged for auction sales and sales conducted by the Director.
Miscellaneous
65. Adds, to monies contained in the Driving Under the Influence Abatement Fund, monies collected from the sales of to-go cocktail permits by auction or by the Director after the repeal of the Liquor License Compensation Fund.
66. Defines registered alcohol delivery contractor as a person who delivers spirituous liquor to a consumer on behalf of a bar or restaurant.
67. Defines mixed cocktail as any drink containing one or more spirituous liquors that:
a) when combined with at least one other ingredient, except water, contains more than 0.5 percent alcohol by volume; and
b) are combined at the licensed premises.
68. Contains a severability clause.
69. Requires for enactment the affirmative vote of at least two-thirds of the members of each house of the Legislature (Proposition 108).
70. Makes technical and conforming changes.
71. Becomes effective on signature of the Governor.
Amendments Adopted by Committee
2. Extends, to liquor stores, the to-go cocktails exemption from the prohibition on allowing spirituous liquor to be removed from the licensed premises except in the original, unbroken package.
3. Directs a bar and liquor store, through December 31, 2025, to make a permit available for lease to a restaurant licensee through the DLLC for the privilege of selling mixed cocktails for off-premises consumption according to prescribed requirements.
4. Directs the Director, beginning January 1, 2022, to make to-go cocktails permits available for purchase through an auction by restaurant licensees equal in number to the total number of bar and liquor store licenses as determined by December 1, 2021.
5. Requires DLLC, beginning June 1, 2022, to make available, for purchase by restaurant licensees, one to-go cocktails permit for each additional bar or liquor store license issued by the Director due to county population increases.
6. Prescribes administration for the lease by a restaurant licensee of a bar's off-sale privileges or a bar's or liquor store's to-go cocktail permit and for the DLLC to conduct auctions for the sale of to-go cocktail permits.
7. Establishes the Fund consisting of monies deposited from sales of to-cocktails permits by auction or by the Director for the purposes of compensating eligible bar or liquor store licensees.
8. Repeals the Fund when prescribed conditions are met and, upon repeal of the Fund, requires the Director to deposit monies collected from to-go cocktail permit sales in the Driving Under the Influence Abatement Fund.
9. Replaces the establishment of a third-party facilitator license with a registered alcohol delivery contractor for liquor delivery on behalf of a bar or restaurant and prescribes requirements governing an alcohol delivery contractor.
10. Removes the authorization for a bar or restaurant licensee to take orders for the sale and delivery of spirituous liquor through a third party facilitator.
11. Removes the prohibition on the Director treating a violation by a third party facilitator as a violation by the bar or restaurant.
12. Adds, to the criteria for a licensee to maintain a liquor delivery service or contract with a registered alcohol delivery contractor, a requirement for the liquor to be packaged and sealed by the bar or restaurant licensee or the licensee's employee.
13. Removes the exception for a violation attributable to a licensed third-party facilitator from the requirement that the licensee be held responsible for statute and rule violations.
14. Removes the authority of a third-party facilitator to collect payment for spirituous liquor.
15. Requires restaurant permit holders, rather than permit applicants, and designated related persons to complete alcohol training.
16. Prohibits a bar or restaurant licensee or employee, registered alcohol delivery contractor or independent contractor from selling, disposing of, delivering or giving spirituous liquor to an individual purchaser between 2 a.m. and 6 a.m.
17. Adds a severability clause and a Proposition 108 clause.
18. Makes conforming changes.
House Action Senate Action
COM 2/9/21 DPA 7-3-0-0 COM 3/24/21 DPA 8-0-1
3rd Read 3/3/21 34-26-0
Prepared by Senate Research
April 5, 2021
LB/kja