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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
liquor; policies; producers
Purpose
Makes various changes related to the liquor regulatory statutes.
Background
The Department of Liquor Licenses and Control (DLLC), which consists of the State Liquor Board and the Office of the Director of DLLC, regulates the manufacture, distribution and sale of liquor in Arizona through the issuance of a series of licenses and investigating licensee compliance with liquor laws. A separate license is required for each specific type of business and is issued only after a satisfactory showing of the capability, qualifications and reliability of the applicant and that the public convenience requires and that the best interest of the community will be substantially served by the issuance (A.R.S. §§ 4-111 and 4-203).
A luxury privilege tax is imposed on wholesalers of spirituous, vinous and malt liquors as follows: 1) on each sealed container of spirituous liquor, at a rate of $3.00 per gallon and at a proportionate rate for any lesser or greater quantity than one gallon; 2) on each container of vinous liquor, except cider, of which the alcoholic content is no greater than 24 percent by volume, at a rate of 84 cents per gallon and at a proportionate rate for any lesser or greater quantity than one gallon; 3) on each container of vinous liquor of which the alcoholic content is greater than 24 percent by volume, containing eight ounces or less, 24 cents, and for each eight ounces for containers containing more than eight ounces, 25 cents; and 4) on each gallon of malt liquor or cider, 16 cents, 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; 42-3102; and 42-3106).
Federal regulation defines nonbeverage product as medicines, medicinal preparations, food products, flavors, flavoring extracts and perfumes that are unfit for beverage use and are made with taxpaid distilled spirits. These regulations allow manufacturers to claim a drawback refund on taxes paid on spirits used in products deemed unfit for beverage purposes (27 C.F.R. part 17).
If the modification to the definitions under the luxury privilege tax statutes changes revenues, there may be a fiscal impact to the state General Fund.
Provisions
Liquor Regulatory Statutes
1. Replaces references of manufacture with produce.
2. Allows the Director of DLLC to issue an interim permit to an applicant for a license of the same series, or for a replacement of a hotel-motel license with a restaurant license, at the same premises, regardless of whether the license has been used in the past three years.
3. Adds that a license for a premises that was expired, terminated, canceled or in nonuse at the premises meets the conditions for issuance of an interim permit.
4. Clarifies that a licensed farm winery may offer wine for sale from grapes or other fruits grown within a federally recognized viticultural area that is located in Arizona.
5. Allows, rather than requires, incorporated cities and towns to:
a) levy a tax on the privilege of engaging or continuing in the business of selling spirituous liquor at retail within their corporate limits; or
b) impose a permit tax or fee.
6. Repeals the requirement for licensed producers, craft distillers, brewers and farm wineries to be subject to U.S. Food and Drug Administration food safety rules for their production and storage areas.
7. Excludes, from the requirements of the liquor regulatory statutes, a nonbeverage product as defined in federal regulations and that are qualified by the U.S. Alcohol and Tobacco Tax and Trade Bureau as nonbeverage products.
Liquor Regulatory Definitions
9. Adds, to the definition of distilled spirits, beverages that contain more than one-half of one percent of alcohol by volume and that are produced by the distillation of rectification of fermented material.
10. Removes, from the definition of distilled spirits and spiritous liquor, bitters containing alcohol and fruits preserved in ardent spirits.
11. Adds cider to the definition of spirituous liquor.
12. Excludes, from the definition of spirituous liquor, nonbeverage products as defined by federal regulations and that are qualified by the U.S. Alcohol and Tobacco Tax and Trade Bureau as nonbeverage products.
13. Adds, to the definition of veteran, a person wo has served in the U.S. Space Force who has received a discharge other than dishonorable.
Luxury Privilege Tax Definitions
14. Redefines malt liquor as any beverage that is obtained by the alcoholic fermentation, infusion or decoction of barley malt, hops, rice, bran or other grain, glucose, sugar or molasses, or any combination of them, and may include, as adjuncts in fermentation, honey, fruit, fruit juice, fruit concentrate, herbs, species and other food materials.
15. Includes, in the definition of malt liquor, beer that is aged in an empty wooden barrel previously used to contain wine or distilled spirits and as such is not considered a dilution or mixture of any other spirituous liquor.
16. Redefines cider as any beverage that is made from the normal alcoholic fermentation of the juice of sound and ripe apples, pears or other pome fruit and that contains more than one-half of one percent of alcohol by volume and less than eight and one-half percent of alcohol.
17. Redefines spirituous liquor as alcohol, brandy, whiskey, rum, tequila, mescal, gin, wine, porter, ale, beer, cider, any malt liquor or malt beverage, absinthe, a compound or mixture of any of them or of any of them with any vegetable or other substance, alcohol bitters, any liquid mixture or preparation, whether patented or otherwise, which produces intoxication and beverages containing more than one-half of one per cent of alcohol by volume.
18. Excludes, from the definition of spiritous liquor, nonbeverage products as defined in federal regulations and that are qualified by the U.S. Alcohol and Tobacco Tax and Trade Bureau as nonbeverage products.
19. Redefines vinous liquor as the product obtained by the fermentation of grapes, other agricultural products that contains natural or added sugar or cider or any such alcoholic beverage fortified with grape brandy and that contains no more than 24 percent of alcohol by volume.
20. Excludes cider from the definition of vinous liquor.
21. Defines beer as any beverage obtained by the alcoholic fermentation, infusion or decoction of barley, malt, hobs, rice, bran or other grain, glucose, sugar or molasses, or any combination of them, and may include as adjuncts in fermentation, honey fruit, fruit juice, fruit concentrate, herbs, spices and other food materials.
22. Includes, in the definition of beer, beer aged in an empty wooden barrel previously used to contain wine or distilled spirits and as such is not considered a dilution or mixture of any other spiritous liquor.
Miscellaneous
23. Makes technical and conforming changes.
24. Becomes effective on the general effective date.
Prepared by Senate Research
February 9, 2026
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