HB2753 - 551R

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

Section 1. Section 4-205.08, Arizona Revised Statutes, is amended to read:

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

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

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

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

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

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

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

4. Serve beer produced or manufactured on the premises for the purpose of sampling the beer.

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

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

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

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

2. The microbrewery shall not produce or manufacture more than six million two hundred thousand gallons of beer in a calendar year.

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

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

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

(b) Any other retail licensee in a cumulative amount not to exceed ninety-three thousand gallons in total for all licensed retailers in any calendar year.

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

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

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

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

G. A microbrewery that is otherwise engaged as a distiller, vintner, brewer, rectifier, blender or other producer of spirituous liquor in any jurisdiction is prohibited from holding any retail license that is located remotely from a microbrewery.

H. A microbrewery that sells or delivers beer pursuant to this section shall:

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

2. File all returns or reports required by law.

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

J. a microbrewery licensee may hold a craft distiller license issued pursuant to section 4-205.10. the microbrewery and craft distiller licensee is subject to all other requirements of this section and section 4-205.10. the microbrewery may provide sampling and sales of the distilled spirits pursuant to section 4-205.10, subsection c, paragraphs 2 and 3 on the same premises as the beer sampling and retail sales.

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

Sec. 2. Section 4-205.10, Arizona Revised Statutes, is amended to read:

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

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

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

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

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

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

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

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

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

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

5. A licensed craft distiller that produces not more than one thousand one hundred eighty-nine gallons of distilled spirits in a calendar year may make sales and deliveries of distilled spirits that the licensed craft distiller produces to on-sale and off-sale retailers.

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

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

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

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

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

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

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

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

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

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

2. The craft distiller licensee:

(a) Remains responsible for the premises.

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

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

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

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

E. A craft distiller licensee may hold Either of the following:

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

2. a microbrewery license issued pursuant to 4-205.08. the craft distiller and microbrewery licensee is subject to all other requirements of this section and section 4-205.08. the craft distiller may provide sampling and retail sales of beer pursuant to section 4-205.08 on the same premises as the distilled spirits sampling and retail sales.

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

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

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

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

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

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

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

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

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

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

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

Sec. 3. Title 4, chapter 2, article 2, Arizona Revised Statutes, is amended by adding section 4-225, to read:

START_STATUTE4-225. Food safety; federal law; preemption

A. Subject to subsection B of this section, licensed producers, craft distillers, brewers and farm wineries are subject to the rules and exemptions prescribed by the United States food and drug administration pursuant to 21 code of federal regulations part 112 relating to food safety.

B. This section applies only to production and storage spaces as defined in section 4-205.10. Production and storage spaces are not subject to non-federal food safety guidelines adopted by local governing boards. END_STATUTE