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ARIZONA STATE SENATE
Fifty-Fifth Legislature, Second Regular Session
ready-to-drink spirits products; tax
Purpose
Establishes a luxury privilege tax classification for ready-to-drink spirits products (RTD products) and imposes a tax of $1 per gallon on each sealed container. Requires craft distillers, producers and wholesalers to pay the luxury privilege tax and add the amount of tax to the sales price. Outlines Arizona Department of Revenue (ADOR) administrative requirements for RTD product treatment.
Background
A luxury privilege tax is imposed on wholesalers of spirituous, vinous and malt liquors. The luxury privilege tax on spirituous liquor is levied and collected at a rate of $3.00 per gallon on each sealed container and at a proportionate rate for any lesser or greater quantity than one gallon. Luxury privilege tax collections are allocated to the state General Fund, Corrections Fund, Corrections Revolving Fund and the Drug Treatment and Education Fund in prescribed percentages (A.R.S. §§ 42-3051; 42-3052; and 42-3106).
A wholesaler must prepare a monthly tax return that includes the amount of spirituous and vinous liquors sold during the tax month. ADOR requires liquor wholesalers to file surety bonds conditioned on the payment of all taxes, penalties and other obligations of the wholesaler (A.R.S. §§ 42-3351 and 42-3354).
Distilled spirits include 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 (A.R.S. § 4-101).
The Joint Legislative Budget Committee fiscal note estimates a reduction to luxury tax revenues of $4.4 million in FY 2023. The reduction would be allocated as follows: 1) $3.8 million for the state General Fund; 2) $400,000 for the Corrections Fund; 3) $100,000 for the Drug Treatment and Education Fund; and 4) $100,000 from the Corrections Revolving Fund (JLBC fiscal note).
Provisions
2. Defines ready-to-drink spirits products as distilled spirits mixed with other beverages that may contain flavoring or coloring materials and other ingredients, that do not exceed 12 percent alcohol by volume, that are sealed in an original container of up to 24 ounces and are sold in the manufacturer's original packaging.
3. Includes RTD products in the definition of distilled spirits unless statutorily provided otherwise.
4. Applies the statutes governing ADOR bond requirements for wholesalers of spirituous, vinous and malt liquors to wholesalers of RTD products.
5. Requires a craft distiller selling RTD products at retail or to a retail licensee that are manufactured or produced on the premises to pay the required luxury privilege tax and add the amount of tax to the sales price.
6. Requires a wholesaler of RTD products selling the RTD products within Arizona to pay the required luxury privilege tax on the RTD products sold within the state and add the amount of tax to the sales price.
7. Requires a licensed producer of RTD products that are sold at retail at the producer's licensed premises to pay the required luxury privilege tax and add the amount of tax to the sales price.
8. Requires a wholesaler, each tax month, to include the amount of RTD products sold in Arizona during the month in which the tax accrues on the monthly luxury tax return.
9. Stipulates that if a beer and wine store license and a bar license are issued at the same premises, RTD products are conclusively presumed to be purchased under the beer and wine store license, for purposes of reporting liquor purchases.
10. Applies the classification of RTD products to taxable periods beginning on or after the first day of the month following the general effective date.
11. Makes technical and conforming changes.
12. Becomes effective on the general effective date.
House Action
COM 3/24/22 DPA 5-3-1-1
Prepared by Senate Research
March 25, 2022
MG/AN/slp