SB1367 - 572R

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

Section 1. Section 13-3622, Arizona Revised Statutes, is amended to read:

START_STATUTE13-3622. Tobacco product, vapor product and tobacco and shisha instruments or paraphernalia; furnishing to underage persons; acceptance, receipt 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, nicotine or shisha, including a hookah or waterpipe, to a person who is under twenty-one years of age is guilty of a petty offense and, notwithstanding section 13-802, shall pay a fine of at least $2,500.

B. 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, nicotine or shisha, including a hookah or waterpipe, to a person who is under twenty-one years of age is guilty of a class 1 misdemeanor.

B. C. 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, nicotine 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, nicotine or shisha, shall pay a fine of at least $100 or perform at least thirty hours of community restitution.

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

E. A person or business that is eligible to participate in a state or local diversion or education program in lieu of the penalties prescribed in this section may participate in the diversion or education program not more than once per person or per business location.

D. F. 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, nicotine 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, nicotine 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, nicotine or shisha.

E. G. 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.

(d) Smoking tobacco of any kind.

(e) Chewing tobacco of any kind.

(f) A product containing nicotine or a nicotine analog, unless the product is a vapor product or is regulated by the United States food and drug administration pursuant to chapter V of the federal food, drug, and cosmetic act.

3. "Vapor product":

(a) Means a noncombustible tobacco-derived product containing that contains nicotine or a nicotine analog and 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. 2. Heading change

The article heading of title 35, chapter 6, article 14, Arizona Revised Statutes, is changed from "TOBACCO SALES" to "TOBACCO PRODUCT AND VAPOR PRODUCT SALES".

Sec. 3. Section 36-798, Arizona Revised Statutes, is amended to read:

START_STATUTE36-798. Definitions

A. In this article, unless the context otherwise requires:

1. "Bar" means that portion of any premises licensed under section 4-209, subsection B, paragraph 6, 7, 11, 12 or 14 that is primarily used for the selling, consumption consuming or serving of alcoholic beverages and that is not primarily used for the consumption of consuming food on the premises.

2. "Beedies" or "bidis" means a product containing tobacco that is wrapped in temburni leaf (diospyros melanoxylon) or tendu leaf (diospyros exculpra), or any other product that is offered to, or purchased by, consumers as beedies or bidis.

3. "Cigar" means a roll of tobacco or any lawful substitute for tobacco that is wrapped in tobacco.

4. "Cigarette" means a roll of tobacco or any lawful substitute for tobacco that is wrapped in paper or in any substance other than tobacco.

5. "Minor" means a person who is under eighteen years of age.

5. "Nicotine analog" means a substance that has a chemical structure that is substantially similar to the chemical structure of nicotine or that has, purports to have or is represented to have an effect on the central nervous system that is similar to or greater than the effect of nicotine on the central nervous system.

6. "Retail tobacco vendor" means a person who or entity that possesses tobacco or tobacco products, vapor products or shisha for the purpose of selling them to the consumer for consumption and not for resale.

7. "Smokeless tobacco" includes shredded tobacco, snuff, cavendish and plug, twist and other tobacco products that are intended for oral use but not for smoking.

8. "Smoking tobacco" includes any tobacco or tobacco product, other than cigarettes and cigars, that is intended to be smoked.

9. "Tobacco products" includes cigarettes, cigarette papers, cigars, smokeless tobacco, and smoking tobacco and any product that contains nicotine or a nicotine analog, unless the product is a vapor product or is regulated by the United States food and drug administration pursuant to chapter V of the federal food, drug, and cosmetic act.

10. "Vapor product":

(a) Means a noncombustible product that contains nicotine and that employs a mechanical heating element, battery or circuit, regardless of shape or size, that can be used to heat a solution containing nicotine or a nicotine analog.

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

10. 11. "Vending machine" means any mechanical, electrical or electronic device that, on insertion of money, tokens or any other form of payment, automatically dispenses tobacco products.

B. Factors relevant to determining whether a substance is a nicotine analog pursuant to subsection A, PARAGRAPH 5 of this section include the marketing, advertising and labeling of the substance and whether the substance has been manufactured, formulated, sold, distributed or marketed with the intent to avoid the provisions of this article or any other section of law governing nicotine analogs. END_STATUTE

Sec. 4. Section 36-798.01, Arizona Revised Statutes, is amended to read:

START_STATUTE36-798.01. Selling or giving beedies or bidis; underage persons; violation; classification; fine

A. It is unlawful for a retail tobacco vendor to sell, furnish, give or provide beedies or bidis to a person who is under twenty-one years of age in this state.

B. Any person who violates this section is guilty of a class 3 misdemeanor and, notwithstanding section 13-802, shall pay a fine of at least $2,500. END_STATUTE

Sec. 5. Section 36-798.02, Arizona Revised Statutes, is amended to read:

START_STATUTE36-798.02. Sales of tobacco, tobacco products and vapor products; vending machine signage; violation; classification

A. A person shall not sell tobacco products through a vending machine unless the vending machine is located in either:

A. Except as provided in subsection B of this section, it is unlawful to sell or distribute tobacco, tobacco products or vapor products either:

1. At a retail establishment in this state by any means other than vendor-assisted sales where the customer has no direct access to the product except through the assistance of the seller.

2. From self-service displays or vending machines.

B. Subsection A of this section does not apply to:

1. Retail establishments if persons who are under twenty-one years of age are not allowed in the establishment and such prohibition is posted clearly on all entrances.

2. Sales allowed under sections 36-798.06 and 36-798.07.

1. 3. A bar.

2. 4. An employee lounge area that is not open to the public and the business in which the lounge area is located does not employ minors persons who are under twenty-one years of age.

B. C. A sign measuring at least eighty square inches shall be obviously affixed to the front of each vending machine. The sign shall state in block letters that it is illegal for a person who is under twenty-one years of age to purchase cigarettes, or tobacco products or vapor products and, on conviction, a fine of up to $300 $500 may be imposed.

C. D. This article does not invalidate an ordinance of or prohibit the adoption of an ordinance by a county, city or town to further restrict the location of vending machines or specify different wording for the vending machine signs as required by subsection B C of this section.

D. E. A person who violates this section is guilty of a petty offense and, notwithstanding section 13-802, shall pay a fine of at least $2,500. END_STATUTE

Sec. 6. Section 36-798.03, Arizona Revised Statutes, is amended to read:

START_STATUTE36-798.03. Tobacco products and vapor products prohibition at schools and school-related areas; exception; violation; classification

A. Tobacco products and vapor products are prohibited on school grounds, inside school buildings, in school parking lots or playing fields, in school buses or vehicles or at off-campus school sponsored events. For purposes of this subsection, "school" means any public, charter or private school where children attend classes in kindergarten programs or grades one through twelve.

B. Subsection A of this section does not apply to an adult who employs tobacco products or vapor products as a necessary component of a school sanctioned tobacco prevention or cessation program established pursuant to section 15-712.

C. A person who violates this section is guilty of a petty offense. END_STATUTE

Sec. 7. Section 36-798.05, Arizona Revised Statutes, is amended to read:

START_STATUTE36-798.05. Unsolicited delivery of tobacco products; violation; classification; civil penalties; definitions

A. It is unlawful for a person to deliver or cause to be delivered to any residence in this state any tobacco products unsolicited by at least one adult person who is at least twenty-one years of age and who resides at that address.

B. A person who knowingly violates subsection A of this section is guilty of a class 2 misdemeanor.

C. A person who violates subsection A of this section is subject to a civil penalty in an amount of not to exceed five thousand dollars more than $5,000 for each violation. Each delivery of a tobacco product shall constitute constitutes a separate violation.

D. The attorney general may bring an action to recover civil penalties and, as determined by the court, taxable costs, such other fees and expenses reasonably incurred and reasonable attorney fees, in the name of the state for a violation of this section. All civil penalties recovered shall be deposited, pursuant to sections 35-146 and 35-147, in the state general fund and all other monies recovered shall be deposited, pursuant to sections 35-146 and 35-147, in the antitrust enforcement revolving fund established by section 41-191.02.

E. In for the purposes of this section, unless the context otherwise requires:

1. "Knowingly" has the same meaning prescribed in section 13-105.

2. "Person" means an individual, partnership, firm, association, corporation, limited liability company, limited liability partnership, joint venture, or other entity, other than an individual or entity engaged in the delivery of items for hire. END_STATUTE

Sec. 8. Section 36-798.06, Arizona Revised Statutes, is amended to read:

START_STATUTE36-798.06. Delivery sales prohibited; common carriers; penalties; forfeiture; unlawful practice; exceptions; violation; classification; definitions

A. A person shall not do either of the following:

1. Cause a tobacco product or vapor product to be ordered or purchased by anyone other than a licensed person or a retailer who orders or purchases from a licensed person, including by ordering or purchasing a tobacco product or vapor product.

2. Knowingly provide substantial assistance to a person who violates this section.

B. A common carrier shall not knowingly transport a tobacco product or vapor product for a person who is in violation of this section.

C. Each order or purchase of a tobacco product or vapor product in violation of subsection A, paragraph 1 of this section constitutes a separate violation under this section.

D. In addition to any other penalty, a person who violates this section is subject to all of the following:

1. A civil penalty in an amount not to exceed $5,000 for each violation.

2. An injunction to restrain a threatened or actual violation of this section.

3. Recovery by this state for:

(a) The costs of any investigation related to a violation of this section.

(b) The cost of expert witness fees in any action related to a violation of this section.

(d) Reasonable attorney fees.

4. All state tobacco taxes due under title 42, chapter 3, except as prohibited under section 42-3402, and all transaction privilege or use taxes due under title 42, chapter 5, including any penalties and interest.

E. All tobacco products or vapor products that are seized for a violation of this section shall be forfeited to the state and destroyed pursuant to section 42-1124.

F. A violation of this section is an unlawful practice under section 44-1522 and is in addition to all other causes of action, remedies and penalties that are available to this state. The attorney general may investigate and take appropriate action pursuant to title 44, chapter 10, article 7.

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

1. The shipment of a tobacco product or vapor product to a foreign trade zone that is established under 19 United States Code sections 81a through 81u and title 44, chapter 18 and that is located in this state if the tobacco product or vapor product is from outside of this country, was ordered by a distributor in another state and is not distributed in this state.

2. A government employee who is acting in the course of the employee's official duties.

3. The shipment of a tobacco product or vapor product to a university that is acquiring the tobacco product or vapor product to use to conduct basic and applied research, if the tobacco product or vapor product is exempt from federal excise tax under 26 United States Code section 5704(a).

H. A person who violates this section is guilty of a class 6 felony.

I. For the purposes of this section:

1. "Licensed person" means a person who is required to be licensed under section 42-3401.

2. "Order or purchase" means any of the following:

(a) By mail or delivery service.

(b) Through the internet or a computer network.

(d) Through any other electronic method.

3. "Person" means an individual, partnership, firm, association, corporation, limited liability company or partnership, joint venture or other entity.

4. "Retailer" has the same meaning prescribed in section 42-5001.

5. "Tobacco product":

(a) Means:

(i) All luxuries included in section 42-3052, paragraphs 5, 6 and 7. Tobacco product

(ii) A product containing nicotine or a nicotine analog, unless the product is a vapor product or is regulated by the United States food and drug administration pursuant to chapter V of the federal food, drug, and cosmetic act.

(b) Does not include pipe tobacco or cigars. END_STATUTE

Sec. 9. Title 36, chapter 6, article 14, Arizona Revised Statutes, is amended by adding sections 36-798.08 and 36-798.09, to read:

START_STATUTE36-798.08. Retailers; signage; identification confirmation; violation; classification; fine

A. A retailer may not sell, offer to sell, furnish or give a tobacco product or vapor product unless the retailer prominently displays a sign that reads as follows:

It is illegal for a person under twenty-one years of age to purchase cigarettes, tobacco products or vapor products and, on conviction, a fine of up to $500 may be imposed.

B. If a person reasonably appears to be under thirty years of age, a retailer may not sell, offer to sell, furnish or give a tobacco product or vapor product to the person without first examining the person's government-issued photographic identification to establish that the person is at least twenty-one years of age.

C. A retailer may not sell, offer to sell, furnish or give a tobacco product or vapor product except in the manufacturer's original packaging and may not open packaging and sell a portion of the tobacco product or vapor product contained in the packaging.

D. A person who violates subsection B or C of this section is guilty of a petty offense and, notwithstanding section 13-802, shall pay a fine of at least $500.END_STATUTE

START_STATUTE36-798.09. Sale of vapor products; restrictions; violation; fine

A. A person may not sell in this state a vapor product that is accompanied by, uses or has advertising, labeling, packaging, trade dress, trademarks or branding or a design of the product that:

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

2. Includes an image of a celebrity or a character in a comic book, movie, television show or video game, or a mythical creature.

3. Imitates or mimics trademarks or trade dress of products that are or have been primarily marketed to minors.

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

5. Imitates, mimics or replicates the design of a product that is not a vapor product, including any of the following:

(a) School supplies commonly used by minors, including an eraser, highlighter, pen, pencil or backpack.

(b) A smartphone, smartwatch, smartphone case or smartwatch case, headphones, ear buds or an external battery used to charge such devices.

(d) A toy.

6. Has entertainment features, such as the ability to play games or play music or other audio or to display photos or videos or any other similar electronic entertainment features.

B. A person who violates subsection a of this section is guilty of a petty offense and, notwithstanding section 13-802, shall pay a fine of at least $500. END_STATUTE

Sec. 10. Section 42-3001, Arizona Revised Statutes, is amended to read:

START_STATUTE42-3001. Definitions

In this chapter, unless the context otherwise requires:

1. "Affix" and "affixed" include imprinting tax meter stamps on packages and individual containers as authorized by the department.

2. "Brand family" has the same meaning prescribed in section 44-7111.

3. "Cavendish" means a tobacco product that is smoked from a pipe and that meets one of the following criteria:

(a) Is described as cavendish, as containing cavendish or as a cavendish blend on its packaging, labeling or promotional materials.

(b) Appears to have been processed or manufactured with an amount of flavorings and humectants that exceeds twenty percent of the weight of the tobacco contained in the product.

4. "Cider" means vinous liquor that is made from the normal alcoholic fermentation of the juice of sound, ripe apples, pears or other pome fruit, including flavored, sparkling and carbonated cider and cider made from condensed apple, pear or other pome fruit must, and that contains more than one-half of one percent of alcohol by volume but not more than seven percent of alcohol by volume.

5. "Cigar" means any roll of tobacco wrapped in leaf tobacco or in any substance containing tobacco other than any roll of tobacco that is a cigarette, as defined in paragraph 6, subdivision (b) of this section.

6. "Cigarette" means either of the following:

(a) Any roll of tobacco wrapped in paper or any substance not containing tobacco.

(b) Any roll of tobacco wrapped in any substance containing tobacco that, because of its appearance, the type of tobacco used in the filler or its packaging and labeling, is likely to be offered to or purchased by a consumer as a cigarette described in subdivision (a) of this paragraph. This subdivision shall be interpreted consistently with the classification guidelines established by the federal alcohol and tobacco tax and trade bureau.

7. "Consumer" means a person in this state that comes into possession of any luxury subject to the tax imposed by this chapter and that, on coming into possession of the luxury, is not a distributor intending to sell or distribute the luxury, a retailer or a wholesaler.

8. "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.

9. "Distributor" means any person that manufactures, produces, ships, transports or imports into this state or in any manner acquires or possesses for the purpose of making the first sale of the following:

(a) Cigarettes without Arizona tax stamps affixed as required by this article.

(b) Roll-your-own tobacco or other tobacco products on which the taxes have not been paid as required by this chapter.

(d) Other products that contain nicotine or a nicotine analog, unless the product is regulated by the united states food and drug administration under chapter v of the federal food, drug, and cosmetic act.

10. "Farm winery" has the same meaning prescribed in section 4-101.

11. "First sale" means the initial sale or distribution in intrastate commerce or the initial use or consumption of cigarettes, roll-your-own tobacco or other tobacco products.

12. "Luxury" means any article, object or device on which a tax is imposed under this chapter.

13. "Malt liquor" means any liquid that contains more than one-half of one percent alcohol by volume and that is made by the process of fermentation and not distillation of hops or grains, but not including:

(a) Liquids made by the process of distillation of such substances.

(b) Medicines that are unsuitable for beverage purposes.

14. "Master settlement agreement" has the same meaning prescribed in section 44-7101.

15. "Microbrewery" has the same meaning prescribed in section 4-101.

16. "Nonparticipating manufacturer" has the same meaning prescribed in section 44-7111.

17. "Other tobacco products" means tobacco products other than cigarettes and roll-your-own tobacco.

18. "Participating manufacturer" has the same meaning prescribed in section 44-7111.

19. "Person" means any individual, firm, partnership, joint venture, association, corporation, municipal corporation, estate, trust, club, society or other group or combination acting as a unit, and the plural as well as the singular number.

20. "Place of business":

(a) Means a building, facility site or location where an order is received or where tobacco products are sold, distributed or transferred. Place of business

(b) Does not include a vehicle.

21. "Retailer" means any person that comes into possession of any luxury subject to the taxes imposed by this chapter for the purpose of selling it for consumption and not for resale.

22. "Roll-your-own tobacco" means any tobacco that, because of its appearance, type, packaging or labeling, is suitable for use and likely to be offered to or purchased by consumers as tobacco for making cigarettes. This paragraph shall be interpreted consistently with the term as used in section 44-7101. This paragraph shall be interpreted consistently with the classification guidelines established by the federal alcohol and tobacco tax and trade bureau.

23. "Smoking tobacco":

(a) Means any tobacco that, because of its appearance, type, packaging, labeling or promotion, is suitable for use and likely to be offered to or purchased by consumers as tobacco for making cigarettes or otherwise consumed by burning. Smoking tobacco

(b) Includes pipe tobacco and roll-your-own tobacco.

24. "Spirituous liquor":

(a) Means any liquid that contains more than one-half of one percent alcohol by volume, that is produced by distillation of any fermented substance and that is used or prepared for use as a beverage. Spirituous liquor

(b) Does not include medicines that are unsuitable for beverage purposes.

25. "Tobacco product manufacturer" has the same meaning prescribed in section 44-7101.

26. "Tobacco products" means both of the following:

(a) All luxuries included in section 42-3052, paragraphs 5 through 9.

(b) Any other product that contains nicotine or a nicotine analog, unless the product is a vapor product or is regulated by the united states food and drug administration under chapter v of the federal food, drug, and cosmetic act.

27. "vapor product" has the same meaning prescribed in section 36-798.

28. "vapor product manufacturer" means a person or entity that manufactures, fabricates, assembles, processes or labels a finished vapor product for sale in this state.

27. 29. "Vehicle" means a device in, on or by which a person or property is or may be transported or drawn on the roads of this state regardless of the means by which it is propelled or whether it runs on a track.

28. 30. "Vinous liquor":

(a) Means any liquid that contains more than one-half of one percent alcohol by volume and that is made by the process of fermentation of grapes, berries, fruits, vegetables or other substances. But

(b) Does not include:

(a) (i) Liquids in which hops or grains are used in the process of fermentation.

(b) (ii) Liquids made by the process of distillation of hops or grains.

29. 31. "Wholesaler" means a person that sells any spirituous, vinous or malt liquor taxed under this chapter to retail dealers or for the purposes of resale only. END_STATUTE

Sec. 11. Heading change

The article heading of title 42, chapter 3, article 10, Arizona Revised Statutes, is changed from "DISTRIBUTORS AND RETAILERS OF TOBACCO PRODUCTS" to "DISTRIBUTORS, RETAILERS AND MANUFACTURERS OF TOBACCO PRODUCTS AND VAPOR PRODUCTS".

Sec. 12. Section 42-3401, Arizona Revised Statutes, is amended to read:

START_STATUTE42-3401. Tobacco distributor licenses; application; conditions; revocations and cancellations

A. Every person acquiring or possessing for the purpose of making the initial sale or distribution in this state of any tobacco products on which a tax is imposed by this chapter, any tobacco products on which a tax is not imposed by this chapter or vapor products shall obtain from the department a license to sell tobacco products. The application for the license shall be in the form provided by the department and shall be accompanied by a fee of $25 for each place of business listed in the application. The form shall state that the identity of the applicant will be posted to the department's website for public inspection. The application for a license shall include the applicant's name and address, the applicant's principal place of business, all other places of business where the applicant's business is conducted for the purpose of making the initial sale or distribution of tobacco products or vapor products in this state, including any location that maintains an inventory of tobacco products or vapor products, and any other information required by the department. The applicant's principal place of business and other business locations may not include a residential location or post office box address, except as allowed under subsection D, paragraph 2, subdivision (c) of this section. If the applicant is a firm, partnership, limited liability company, limited liability partnership or association, the applicant shall list the name and address of each of the applicant's members. If the applicant is a corporation, the application shall list the name and address of the applicant's officers and any person who directly or indirectly owns an aggregate amount of ten percent or more of the ownership interest in the corporation. If a licensee is a corporation, firm, partnership, limited liability company, limited liability partnership or association, the licensee under this subsection shall notify the department in writing within thirty days after any change in membership, legal entity status or ownership of more than fifty percent of the total ownership interest in a single transaction. If a licensee changes its business location, the licensee under this subsection shall notify the department within thirty days after a change in location. If the licensee is making a change in its business location by adding or replacing one or more additional places of business that are not currently listed on its application, the licensee must remit a fee of $25 for each additional place of business.

B. For the purposes of subsection A of this section, an applicant with a controlling interest in more than one business engaged in activities as a distributor shall apply for a single license encompassing all such businesses and list each place of business in its application. For the purposes of this subsection, "controlling interest" means direct or indirect ownership of at least eighty percent of the voting shares of a corporation or of the interests in a company, business or person other than a corporation.

C. The department shall issue a license authorizing the applicant to acquire or possess tobacco products and vapor products in this state on the condition that the applicant complies with this chapter and the rules of the department. The license:

1. Shall be nontransferable. A licensee may not transfer its license to a new owner when selling its business, and any court-appointed trustee, receiver or other person shall obtain a license in its own name in cases of liquidation, insolvency or bankruptcy or pursuant to a court order if the business remains in operation as a distributor of tobacco products or vapor products. In cases of liquidation, insolvency or bankruptcy or pursuant to a court order, the department will not consider a business as remaining in operation under this paragraph if the court-appointed trustee, receiver or other person winds up the business within sixty days after the order is issued. A licensee shall apply for a new license if it changes its legal entity status or otherwise changes the legal structure of its business.

2. Shall be valid for one year unless earlier canceled or revoked by the department.

3. Shall be displayed in a conspicuous place at the licensee's place of business. If the licensee operates from more than one place of business, the licensee must display a copy of its license in a conspicuous place at each location.

D. As a condition of licensure under this section, an applicant agrees to the following conditions:

1. A person may not hold or store any tobacco products or vapor products, whether within or outside of this state, for sale or distribution in this state by or on behalf of a distributor at any place other than a location that has been disclosed to the department pursuant to subsection A of this section. This paragraph does not include a person holding or storing tobacco products or vapor products by or on behalf of the distributor when the tobacco products or vapor products are in transit to a distributor or retailer as part of a lawful sale.

2. All tobacco products or vapor products held or stored, whether within or outside of this state, for sale or distribution in this state by or on behalf of a distributor:

(a) Shall be accessible to the department during normal business hours without a judicial warrant or prior written consent of the distributor.

(b) May not be held or stored in a vehicle, except as allowed under section 42-3403, subsection B.

(c) May not be held or stored at a residential location, unless the sole luxury for sale or distribution by or on behalf of the distributor is taxed as a cigar under section 42-3052, paragraph 8 or 9 and the product weight of the cigars is not more than five hundred pounds. If the product is held or stored at a residential location, as a condition of licensure, the distributor shall provide written consent and allow access to the department to inspect the stock of luxuries and all books, papers, invoices, records and electronically stored data showing sales, receipts and purchases of luxuries. The distributor shall submit the written consent to the department with the license application or on demand of the department.

3. Tobacco products or vapor products may be sold, transferred or distributed to a retailer located on an Indian reservation in this state only if the retailer is registered with, and has a registration identification number issued by, the department.

E. A person who is convicted of an offense described in section 42-1127, subsection E is permanently ineligible to hold a license issued under this section.

F. The department may not issue or renew a license to an applicant and may revoke a license issued under subsection C of this section if any of the following applies:

1. The applicant or licensee owes $1,000 or more in delinquent taxes imposed on tobacco products under this chapter that are not under protest or subject to a payment agreement.

2. The department has revoked any license held by the applicant or licensee within the previous two years.

3. The applicant or licensee has been convicted of a crime that relates to stolen or counterfeit cigarettes.

4. The applicant or licensee has imported cigarettes into the United States for sale or distribution in violation of 19 United States Code section 1681a.

5. The applicant or licensee has imported cigarettes into the United States for sale or distribution without fully complying with the federal cigarette labeling and advertising act (P.L. 89-92; 79 Stat. 282; 15 United States Code section 1331).

6. The applicant or licensee is in violation of section 13-3711 or section 36-798.06, subsection A.

7. Pursuant to section 44-7111, section 6(a), the applicant or licensee is in violation of section 44-7111, section 3(c).

8. The civil rights of the applicant or licensee have been suspended under section 13-904. An applicant or licensee whose civil rights have been suspended is ineligible to hold a license for a period of five years following the restoration of the applicant's or licensee's civil rights.

G. In addition to any other civil or criminal penalty and except as otherwise provided in this section, the department may deny the issuance or renewal of or revoke a license issued under subsection C of this section if the person violates any requirement under this title more than two times within a three-year period or fails to otherwise maintain the conditions of licensure in this section.

H. The department shall publish on its website the names of each person who is issued a license under subsection C of this section, including any trade names or business names used by the licensee. The department shall update the published names at least once each month.

I. A person may not apply for or hold a distributor's license if that person does not engage in the activities described in subsection A of this section. In addition to any other applicable penalty, the department may cancel the license of any licensee that fails to incur any tax liability under this chapter for twelve consecutive months.

J. Any revocation, cancellation or denial of a license issued under this section by the department must comply with section 41-1092.11, subsection B.

K. Notwithstanding any other law, for the purposes of subsection F, paragraphs 1 and 2 of this section, section 42-1127, subsection C and section 42-3461, subsection B, if a distributor has listed in its application more than one place of business, any revocation, cancellation, denial or nonrenewal of the distributor's license shall apply only with effect to remove the place of business or business location at which the activity occurred from the distributor's license. If such a removal occurs, the distributor shall be is subject to restrictions that the department prescribes by rule. END_STATUTE

Sec. 13. Section 42-3403, Arizona Revised Statutes, is amended to read:

START_STATUTE42-3403. Tobacco product and vapor product retailers; vehicle as place of business prohibited; exceptions

A. A retailer may sell any tobacco product or vapor product that is not otherwise prohibited by federal or state law from sale for resale, but a retailer may not acquire or possess unstamped cigarettes, or other tobacco products or cigarettes on which taxes levied under this chapter have not been paid, unless the retailer holds a valid license issued under section 42-3401.

B. A person may not use a vehicle as a place of business for selling, transferring or otherwise distributing tobacco products or vapor products. This subsection does not prohibit the lawful delivery of other tobacco products or vapor products by a person who holds a valid license issued under section 42-3401, or by that person's representative, using a vehicle that is owned, operated or contracted by that person or that person's representative. That person or that person's representative is expressly allowed to use such a vehicle to carry and store tax-paid other tobacco products in the normal course of performing the person's or the person's representative's duties, including for the purpose of selling other tobacco products to, and performing similar lawful transactions with, retailers and distributors. If a vehicle is used by a licensed distributor to carry and store tax-paid other tobacco products, as a condition of licensure, the distributor shall provide written consent and allow access to the department to inspect the stock of luxuries and all books, papers, invoices, records and electronically stored data showing sales, receipts and purchases of luxuries. The distributor shall submit the written consent to the department with the license application or on demand of the department.

C. This section does not prohibit business activities that are allowed under sections 42-3454 and 42-3502 for both taxed and untaxed tobacco products. END_STATUTE

Sec. 14. Section 42-3404, Arizona Revised Statutes, is amended to read:

START_STATUTE42-3404. Exemptions and exclusions of certain tobacco products from tobacco taxes

A. The taxes imposed by this chapter do not apply to:

1. Tobacco products that are sold to the United States army, air force, navy, marine corps or coast guard exchanges and commissaries and navy or coast guard ships' stores.

2. Tobacco products that are sold to the United States department of veterans affairs.

3. Tobacco products that are non-tax-paid under subtitle E, chapter 52 of the internal revenue code and that are under internal revenue bond or customs control.

4. Tobacco products that are sold or transferred to a law enforcement agency for use in a criminal investigation if the sale or transfer is authorized by the department. A law enforcement agency authorized by the department to receive or purchase tobacco products is not required to:

(a) Be licensed as a distributor.

(b) Collect or remit the tax imposed by this chapter with respect to authorized distributions.

5. Tobacco products that are sold by a distributor licensed under section 42-3401 to a common carrier engaged in foreign passenger service or to a retailer that sells tobacco products on the facilities of the carrier that are dedicated to foreign passenger service.

6. Federally tax free tobacco products that are sold or given for delivery directly from the manufacturer under internal revenue bond to a veterans' home of this state or a hospital or domiciliary facility of the United States department of veterans affairs for gratuitous issue to veterans receiving hospitalization or domiciliary care. The taxes are not imposed with respect to the use or consumption of the tobacco products by the institution, veteran patients or domiciliaries.

7. Tobacco products that are sold by a manufacturer to a distributor licensed under section 42-3401.

8. Tobacco products that are manufactured outside the United States and that are sold by an importer to a distributor licensed under section 42-3401.

9. A product containing nicotine or a nicotine analog or a vapor product.

B. Subsection A, paragraphs 1 and 2 of this section do not apply after the first day of the first calendar month beginning more than sixty days after existing federal law is amended to permit state taxation of cigarettes sold by or through federal military installations.

C. Sales of tobacco products by a licensed distributor to an instrumentality of the United States government must be supported by a separate sales invoice and a properly completed federal exemption certificate. Each sales invoice must be numbered, be dated and show the name of the seller, the name of the purchaser and the destination.

D. This section does not affect the imposition of transaction privilege and use taxes pursuant to chapter 5 of this title to any transactions described in subsection A of this section if the transaction is otherwise subject to transaction privilege tax or use tax.

E. The exemptions and exclusions provided in subsection A of this section do not affect the taxability under this chapter of tobacco products that are sold, given or transferred to a person in this state subsequent to the transactions described in subsection A of this section. END_STATUTE

Sec. 15. Section 42-3405, Arizona Revised Statutes, is amended to read:

START_STATUTE42-3405. Tobacco and vapor product manufacturers, importers, distributors and retailers; recordkeeping and invoicing requirements; retention period

A. Except for retail transactions with consumers, each manufacturer, importer and distributor of tobacco products and each vapor product manufacturer, importer and distributor shall maintain copies of invoices or equivalent documentation for each facility and for each transaction that involves the sale, purchase, transfer, consignment or receipt of tobacco products and vapor products within this state. The invoices or equivalent documentation for each transaction shall be in the form and manner prescribed by the department and shall indicate the name and address of the other party and the quantity by brand style of the tobacco products or vapor products involved in the transaction.

B. A distributor of tobacco products or vapor products shall issue an invoice or equivalent documentation for each transaction that involves the sale, purchase or consignment of tobacco products or vapor products to a retailer. The invoice or equivalent documentation must include the license number of the distributor, which the retailer may use to ascertain whether the license is current and valid.

C. Any retailer of tobacco products or vapor products shall retain all invoices or equivalent documentation received under subsection B of this section.

D. Records required under this section shall be preserved on the premises described in the relevant license in a manner as to ensure accessibility for inspection at reasonable hours by authorized personnel of the department. With the department's permission, persons with multiple places of business may retain centralized records, but shall transmit duplicates of the invoices or the equivalent documentation to each place of business within three business days after a request by the department.

E. The records required by this section shall be retained for a period of four years after the date of the transaction.

F. On request, the department and the United States secretary of the treasury or secretary's designee shall have access to records required under this section and reports required under section 42-3462. The department at its sole discretion may share the records and reports required by this chapter with other law enforcement officials of federal and state governments under conditions that assume the confidentiality of taxpayer information contained in the records and reports. END_STATUTE

Sec. 16. Title 42, chapter 3, article 10, Arizona Revised Statutes, is amended by adding sections 42-3407, 42-3408 and 42-3409, to read:

START_STATUTE42-3407. Vapor product manufacturer license; rules; fees; certification; application; bond; product list; civil penalties; violation; classification

A. From and after January 31, 2027, a vapor product manufacturer may not offer for sale or sell vapor products, whether directly or through an importer, distributor or retailer or a similar intermediary or intermediaries, without a valid vapor product manufacturer license.

B. The department shall adopt rules to administer this section and establish fees for an initial vapor product manufacturer license and the renewal of the license. The department shall deposit, pursuant to sections 35-146 and 35-147, the fees collected pursuant to this section in the tobacco retail licensing fund established by section 42-3409.

C. A vapor product manufacturer license is valid for one year, unless the DEPARTMENT the department's designee suspends or revokes the license, and must be renewed annually. A vapor product manufacturer license may not be renewed if the vapor product manufacturer is liable for any outstanding penalties pursuant to this section. The department may receive and review vapor product manufacturer license applications electronically.

D. Each applicant for a vapor product manufacturer license shall file a certification as provided in this section as a condition precedent to obtain a license. Without filing such certification, the vapor product manufacturer may not be issued a vapor product manufacturer license and may not sell its vapor products in this state or to a consumer in this state, whether directly or through a distributor or retailer or a similar intermediary or intermediaries.

E. A certification filed under this section shall be made under penalty of perjury on a form and in a manner prescribed by the department. The certification must include the following:

1. The name and address of the applicant or, if the applicant is a firm, partnership, limited liability company or association, the name and address of each of its members or, if the applicant is a corporation, the name and address of each of its officers and the address of its principal place of business.

2. The address of the principal place of business of the applicant that is seeking a license.

3. Either of the following:

(a) A copy of the prevent all cigarette trafficking act of 2009 registration form, or an equivalent successor form, designated by the bureau of alcohol, tobacco, firearms and explosives of the United States DEPARTMENT of justice as submitted by the applicant to the bureau of alcohol, tobacco, firearms and explosives and an attestation that the applicant is in compliance with, and will continue to comply with, all applicable requirements of 15 United States Code sections 375 and 376.

(b) a statement explaining why the prevent all cigarette trafficking act of 2009 is not applicable to the applicant and the applicant's products.

4. An attestation that the applicant will comply with all applicable laws of this state and all applicable laws of the jurisdiction that encompasses the applicant's principal place of business.

5. A list of each type or model of the applicant's vapor product that is sold or offered for sale in this state, including for each vapor product the vapor product name, vapor product category, volume of nicotine by weight and total volume.

6. An attestation that the applicant's vapor products fully comply with the requirements of the United States customs and border protection, including accurate entry summary forms, or equivalent successor forms, and that the applicant is not in violation of 18 United States Code section 541, 542 or 545. The department may request that the applicant provide additional relevant documents, including copies of other United States customs and border protection forms, commercial invoices, cargo release results reports and airway bills or bills of lading.

7. For an applicant with a principal place of business located outside of the United States, a declaration, in a form prescribed by the department, from each of the applicant's importers into the United States of any of the applicant's brands to be sold or offered for sale in this state, that the importer accepts joint and several liability with the applicant for all liability imposed in accordance with this section, including any fees, costs, attorney fees and penalties imposed under this chapter.

8. Records reflecting the youth-access prevention policies the applicant has implemented with respect to distributors and retailers that sell the applicant's vapor products in this state.

9. Any other information as the department may require for the purpose of administering this chapter.

F. A vapor product manufacturer may not cause to be sold or offer for sale at retail in this state or to a consumer in this state any type or model of vapor product that is not included in the vapor product list provided with the vapor product manufacturer's certification without first filing an amended certification on a form and in a manner prescribed by the department.

G. Each vapor product manufacturer that obtains a license under this section shall submit to the department:

1. Within thirty days of any changes to the vapor product manufacturer's vapor product list submitted with the certification required by this section, a notice of the changes.

2. Every six months, an attestation that confirms the information submitted in the vapor product manufacturer's license application remains accurate. The department may request that the vapor product manufacturer provide additional relevant documents related to the attestation.

H. Submission of an application or certification that contains false information is a violation of title 44, chapter 10, article 7 and is subject to remedies available under title 44, chapter 10, article 7. The department may notify appropriate federal and state agencies regarding false information submitted on an application or certification form.

I. Any nonresident or foreign vapor product manufacturer that has not registered to do business in this state as a foreign corporation or business entity, as a condition precedent to receiving a vapor product manufacturer license, shall appoint and continually engage without interruption the services of an agent in this state to act as agent for the service of process on whom all process, and any action or proceeding against the vapor product manufacturer concerning or arising out of the enforcement of this section or provisions relating to the sale of the vapor product manufacturer's products in this state, may be served in any manner authorized by law. Service on the agent constitutes legal and valid service of process on the vapor product manufacturer. The vapor product manufacturer shall provide the name, address, telephone number and proof of the appointment and availability of the agent to the department. The vapor product manufacturer shall notify the department at least thirty calendar days before terminating the authority of an agent and provide proof to the satisfaction of the department of a new agent's appointment at least five calendar days before terminating the existing agent appointment. If an agent terminates an appointment, the vapor product manufacturer shall notify the department of the termination within five calendar days and include proof to the satisfaction of the department of a new agent's appointment.

J. Any nonresident or foreign vapor product manufacturer that has not registered to do business in this state as a foreign corporation or business entity, as a condition precedent to receiving a vapor product manufacturer license, shall submit to the department a surety bond or other cash security payable to this state in the amount of $25,000. The bond shall be posted by a corporate surety located within the United States. The bond shall be conditioned on the performance by the vapor product manufacturer of the requirements prescribed by this section. A surety on a vapor product manufacturer's bond is liable for up to the amount of the bond, and this state may execute on the surety bond for the payment of fees and penalties imposed on the vapor product manufacturer under this section and for the costs of seizure and destruction of vapor product sold or offered for sale in violation of this section. If this state executes on the surety bond, the department may require the vapor product manufacturer to provide an additional bond before retaining the vapor product manufacturer or the vapor product manufacturer's vapor products on the lists on department's website. A surety on a bond furnished by a vapor product manufacturer as provided in this section shall be released and discharged from liability to this state, accruing on the bond after sixty days from the date on which the surety provides a written request to be released and discharged to the department. This subsection does not relieve, release or discharge the surety from liability already accrued or that will accrue before the sixty-day period expires. The department, on receiving any such request, shall notify the vapor product manufacturer that furnished the bond. Unless the vapor product manufacturer, on or before the sixty-day period expires, files with the department a new bond, with the surety approved by and acceptable to the department, the department shall cancel the vapor product manufacturer's vapor product manufacturer license.

K. a vapor product manufacturer license is nontransferable. If a vapor product manufacturer ceases to do business by reason of discontinuation, sale or transfer of the vapor product manufacturer's business, the vapor product manufacturer shall notify the department in writing at the time the discontinuance, sale or transfer takes effect.

L. Vapor products offered for sale in violation of this section, including offering for sale vapor products manufactured by a business that does not hold a valid vapor product manufacturer license, are subject to seizure. All vapor products that are seized as a violation of this section are forfeited to this state and shall be destroyed consistent with section 42-1124.

M. A vapor product manufacturer shall have established sufficient contact with this state for the exercise of personal jurisdiction over the vapor product manufacturer in any matter or issue arising under this section or related to the sale of vapor products.

N. The department shall maintain and make publicly available on the department's official website lists of both of the following:

1. All vapor product manufacturers that are licensed pursuant to this section.

2. all vapor products included in the vapor product lists submitted by vapor product manufacturers that are licensed pursuant to this section.

O. From and after January 31, 2027, vapor products that are not included on the a licensed vapor product manufacturer's vapor product list may not be sold or offered for retail sale to a consumer in this state, either directly or through an importer, distributor or retailer or a similar intermediary or intermediaries.

P. A retailer shall purchase vapor products only from a distributor or licensed vapor product manufacturer that is licensed pursuant to this section.

Q. a Distributor shall purchase vapor products only from a vapor product manufacturer that is licensed pursuant to this section.

R. Any business operating as a vapor product manufacturer without a vapor product manufacturer license:

1. For a first violation, shall pay a civil penalty of $2,500.

2. For a second violation within a thirty-six month period, shall pay a civil penalty of $5,000 and is guilty of a class 2 misdemeanor.

3. For a third or subsequent violation within a thirty-six month period, shall pay a civil penalty of $10,000, is guilty of a class 1 misdemeanor and is ineligible to be licensed as a vapor product manufacturer for a period of thirty-six months after the date of a third violation.

4. In addition, a business is ineligible to receive or renew a vapor product manufacturer license for a period of thirty-six months after the date of a third violation.

S. A vapor product manufacturer that is licensed under this section and that violates this section:

1. For a first violation, shall pay a civil penalty of $2,500.

2. For a second violation within a thirty-six month period, shall pay a civil penalty of $5,000, is guilty of a class 2 misdemeanor and the vapor product manufacturer license shall be suspended for thirty days.

3. For a third or subsequent violation within a thirty-six month period, shall pay a civil penalty of $10,000 and is guilty of a class 1 misdemeanor, and the vapor product manufacturer license shall be revoked. A vapor product manufacturer license revoked pursuant to this paragraph is ineligible to receive or renew a vapor product manufacturer license for a period of thirty-six months after the date of the third violation.

T. Civil penalties collected pursuant to subsections R and S of this section shall be deposited, pursuant to sections 35-146 and 35-147, in the tobacco retail licensing fund established by section 42-3409. END_STATUTE

START_STATUTE42-3408. Delegation of authority; compliance reporting

A. The department may:

1. Delegate the enforcement and compliance inspections required under this article to any county or law enforcement agency that accepts this delegation.

2. Collaborate with and use the findings of other state agencies to carry out the obligations of this article and to ensure that the complaints received by other agencies or a delegated licensing authority are forwarded to the department for timely investigation and action.

B. A delegated licensing authority or any law enforcement agency or other local entity conducting compliance checks to assess retail tobacco vendor compliance with the legal age for sales of tobacco products and vapor products shall report the compliance check results to the department. END_STATUTE

START_STATUTE42-3409. Tobacco retail licensing fund

The tobacco retail licensing fund is established consisting of licensing fees and civil penalties collected pursuant to section 42-3407. The department shall administer the fund. monies in the fund are subject to legislative appropriation. Monies in the fund shall be used for the enforcement of title 36, chapter 6, article 14 and section 42-3407. END_STATUTE

Sec. 17. Effective date

This act is effective from and after November 30, 2026.

Sec. 18. Severability

If a provision of this act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the act that can be given effect without the invalid provision or application, and to this end the provisions of this act are severable.