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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
REVISED
luxury tax; ready-to-drink spirits
Purpose
Defines ready-to-drink spirits products and imposes a luxury privilege tax on the product at a rate proportionate to $1.50 per gallon. Modifies the statutes governing spirituous liquor products by incorporating ready-to-drink spirits products.
Background
A luxury privilege tax is imposed on wholesalers of spirituous, vinous and malt liquors. The luxury privilege tax is levied and collected at a rate of $3.00 per gallon for spiritous liquor, $0.84 per gallon for vinous liquor of 24 percent alcohol or less and $0.16 per gallon for malt liquor or cider. 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. The Arizona Department of Revenue requires liquor wholesalers to file surety bonds conditioned on the payment of all taxes, penalties and other obligations of the wholesaler (A.R.S. § 42-3354).
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 for S.B. 1812 estimates an annual decrease to luxury tax revenues of $3.9 million beginning in FY 2027, with the revenue loss occurring as follows: 1) $1.6 million to the state General Fund; 2) $1.6 million to the Corrections Fund; 3) $0.5 million to the Drug Treatment and Education Fund; and 4) $0.2 million to the Corrections Revolving Fund (JLBC Fiscal Note).
Provisions
1. Defines ready-to-drink spirits products as distilled spirits mixed with other beverages that may contain flavoring or coloring materials and other ingredients, that does not exceed 10 percent alcohol by volume, that are sealed in an original container of up to 16 ounces and that are sold in the manufacturer's original packaging.
2. Establishes a luxury privilege tax classification for ready-to-drink spirits products and imposes a tax rate of $1.50 per gallon on each sealed container of a ready-to-drink spirits product and at a proportionate rate for any lesser or greater quantity that one gallon.
3. Requires a wholesaler of ready-to-drink spirits products within Arizona to pay the required luxury privilege tax on the products sold within Arizona and add the amount to the sales price.
4. Requires a craft distiller selling ready-to-drink spirits 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.
5. Requires a farm winery, microbrewery or craft distiller to include, in a prepared sworn return, the amount of ready-to-drink spirits products sold in Arizona during the year in which the tax accrues.
6. Applies the statutes governing the Arizona Department of Revenue (ADOR) bond requirements for wholesalers of spirituous, vinous and malt liquors to wholesalers of ready-to-drink spirits products.
7. Applies the classification of ready-to-drink spirits products to taxable periods beginning on or after the first day of the month following the general effective date.
8. Makes technical and conforming changes.
9. Becomes effective on the general effective date.
Revisions
· Updates the fiscal impact statement.
Prepared by Senate Research
February 24, 2026
MG/SJ/hk