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• • Today’s Discussion DLLC update New liquor laws - omnibus bill (SB 1937) New liquor rules New online sampling event registration

Education Prevention Enforcement

Active Liquor Licenses TODAY: 11, 906 5 -YEARS AGO: 10, 928

License Series Growth 5 -years Ago Today Restaurants 3, 118 3, 354 Wineries 36 87 Microbreweries 31 69 Special Events 1, 362 2, 500 (est)

The Omnibus Bill Arizona S. B. 1397 Laws become effective July 24, 2014

A. R. S. § 4 -101 Definitions • “craft distiller” • Removed the word “domestic” from “farm winery” and “microbrewery” licenses

A. R. S. § 4 -112 Powers & Duties… • allows the Department of Liquor to continue to charge for fingerprint services

A. R. S. § 4 -201. 01 Extending Time Limits • allows the extension of time limits for good cause

A. R. S. § 4 -203 Licenses: issuance, transfer, reversion • allows the “replacement” of a transferable license at a location that was previously licensed • allows a restaurant license to replace a hotel/motel license

A. R. S. § 4 -203. 01 Interim permit: fee: rules • permits an interim permit to be issued during the replacement of a hotel/motel license with a restaurant license

A. R. S. § 4 -203. 02 Special event license

A. R. S. § 4 -203. 02 Special event license • requires local government approval when: – a special event is held at an unlicensed location or – at a location not fully within a licensed premises • does not require local government approval when a special event occurs fully within a licensed premise - illustration -

A. R. S. § 4 -203. 02(B) & (C) Special Events on licensed premises on part of a licensed premises event is held within a licensed premises event is partially on licensed premises & in area not licensed application filed with Dept. of Liquor application filed with local government after local government approval file with Dept. of Liquor

A. R. S. § 4 -203. 02 Special event license • limits unlicensed premises to 12 special events per calendar year and • allows an unlimited number of special events at locations controlled by the U. S. , Arizona or a city, town or county and • requires special events applications to be submitted to DLLC at least 10 days before the scheduled event - illustration -

A. R. S. § 4 -203. 02(D) Special event – unlicensed premises property under control of Government property not under control of Government no limit on number of licenses issued limit of 12 licenses per calendar year after local government approval, submit to Dept. of Liquor 10 days prior to the event

A. R. S. § 4 -203. 02 Special event license: rules • allows wine festival and craft distiller festival licenses to be stacked with special event licenses and • a wine festival location must be specifically diagramed • possession of liquor purchased at the wine or craft distiller fair/festival is permitted. (Despite A. R. S. § 4244. 13 & 19. ) - illustration -

A. R. S. § 4 -203. 02(D) Special event – unlicensed premises Craft Distillery Festival Wine Festival Special Event Premises Wine Festival

A. R. S. § 4 -203. 02 Special event license • a special event licensees may purchase liquor from: – a licensed wholesaler or – an off-premise licensed retailer, and • permits applicant to receive spirituous liquor from wholesaler, farm winery, or micro-brewery, or producer as a donation • the requirement that the billing invoice be in the name of the off-sale retailer is no longer required

A. R. S. § 4 -203. 02 Special event license What licenses can donate to a special event? License Type Series In-state Producer 01 Out-of-state Producer 02 Limited Out-of-state Producer 2 L Out-of-state Craft Distillery 2 D Out-of-state Microbrewery 2 M Out-of-state Farm Winery 2 W In-state Microbrewery 03 Wholesaler 04 In-state Farm Winery 13 In-state Craft Distillery 18

A. R. S. § 4 -203. 03 Wine festival/fair license: fee • a farm winery, in- and out-of-state, may be issued 50 wine festival licenses per calendar year • are allowed up to 150 calendar days per year per winery • $15 per day

A. R. S. § 4 -203. 04 Direct Shipment License • requires common carriers to keep records of liquor shipped to persons in the state • upon request, the shipper must provide the records to the Department of Liquor

A. R. S. § 4 -205. 02 Restaurant license • continues a fee for site inspections

Arizona Farm Wineries

A. R. S. § 4 -205. 04(A) & (B) Farm winery license • changes annual reporting to a “calendar” year, for farm wineries • requires a farm winery that produces more than 40, 000 gallons of wine per year to – apply for a producer license (series 1 or 2) and – surrender its farm winery license (series 13 or 2 W)

A. R. S. § 4 -205. 04(C) Farm winery license - defined • requires a farm winery: – to hold a winery permit issued by the TTB OR – produce and manufacturer wines from grapes grown on at least five producing acres of land owned or controlled by the applicant, AND – the land has been devoted to grow fruit for at least 3 consecutive calendar years

A. R. S. § 4 -205. 04 Two Farm Winery Categories Determined by annual production: • 200 – 40, 000 • less than 20, 000 gallons Each production limit has different privileges

A. R. S. § 4 -205. 04 200 – 40, 000 gallons per year May: • make sales & deliveries to wholesalers • serve wine produced on the premises for sampling • sell to consumers physically present • may sell another farm winery’s product not to exceed 20% of total sales

A. R. S. § 4 -205. 04 less than 20, 000 gallons per year May also: • make sales & deliveries to retailers (self distribute) • purchase & accept deliveries from retailers • deliver and accept orders by phone, mail, fax, catalogue or Internet (not to licensed retailers)

A. R. S. § 4 -205. 04(C) Farm winery license 200 – 40, 000 gallon privileges • farm winery may purchase and sell wine for consumption on and off the premises if • the consumer is physically present • the sale of wine produced by other wineries does not exceed 20% of total sales

A. R. S. § 4 -205. 04(C) Farm winery license - stacking • a farm winery may - no longer stack beer and wine bar (series 7) or beer and wine store (series 10) licenses - stack with a restaurant (series 12) license

Alternating Proprietorship

Alternating Proprietorships Tenant #1 Uses equipment to produce wine from January 1 – March 31 HOST a farm winery (series 13) licensee that owns the equipment & production location (licensed in-state, series 13) Tenant #2 Uses equipment to produce wine from April 1 – July 31 Tenant #3 Uses equipment to produce wine from August 1 – November 31 Tenants may share the cost of purchasing or renting equipment at a licensed farm winery. Each tenant has a farm winery (series 13 or 2 W) license and sells the finished wine product at their license location.

A. R. S. § 4 -205. 04(D) Farm winery license Alternating Proprietorship • permits “alternating proprietorships” if approved by TTB and • defines “alternating proprietorships”

Custom Crush

Farm winery license Custom Crush CLIENT a farm winery (series 13) licensee PRODUCER a farm winery (series 13) licensee that owns the equipment needed for others to make wine using their private label. CLIENT a farm winery (series 13) licensee

A. R. S. § 4 -205. 04(E) Farm winery license Custom Crush • Permits “custom crush” arrangements if – approved by TTB – requires a farm winery license – requires annual production reporting to the Department of Liquor (custom crush only)

Remote Tasting Rooms

A. R. S. § 4 -205. 04(F) Farm winery license Remote Tasting Room • allows farm wineries to operate up to two remote tasting and retail premises if:

A. R. S. § 4 -205. 04(F) Farm winery license Remote Tasting Room • wine is produced or manufactured by the winery or other farm wineries – may sell to customers physically present • but no more than 20% of the total sales by volume for wine not produced or manufactured by the farm winery – this is a retail location, no in-bond wine – must follow the 300 foot law

A. R. S. § 4 -205. 04(F) Farm winery license Remote Tasting Room • The farm winery is: - obtains local governing body approval first - responsible for the premises - does not sublease the premises - has a qualified agent who is a natural person - meets licensing qualifications A. R. S. § 4 -203(A)

A. R. S. § 4 -205. 04(G) Farm winery license With Craft Distiller License • permits a farm winery to hold a craft distiller license – the craft distiller may only produce 1, 000 gallons in a calendar year from fruit processed at the winery – the farm winery may provide sampling and sales of distilled spirits on the same premises as the wine sampling and retail sales (on-sale and offsale)

A. R. S. § 4 -205. 04(L) Farm winery license - fees • permits a fee for • alternating proprietorships • custom crush arrangements • remote tasting rooms

A. R. S. § 4 -205. 05 Dispose of liquor - auction • permits disposal of seized liquor by public auction • authorizes a qualified person to recycle liquor

A. R. S. § 4 -205. 08 Microbrewery license • permits self-distribution of beer up to 93, 000 gallons annually (This means 93, 000 gallons per year per microbrewery, not per retailer. )

Craft Distillery License Series 18 License

A. R. S. § 4 -205. 10 Craft Distiller license • permits issuance of a craft distiller’s license which – may not be transferred – may not hold a producer’s license – limits production to 20, 000 gallons of distilled spirituous per calendar year

A. R. S. § 4 -205. 10 Craft Distiller license • requires – annual reporting – when production exceeds 20, 000 gallons, the licensee must apply for a producer’s license and surrender the craft distiller’s license

A. R. S. § 4 -205. 10(C)(1) - (3) Craft Distiller license – sales & delivery • sales and deliveries are subject to the following: – to wholesalers – consumption on premise and may charge for samples – off premise sales to consumers physically present

A. R. S. § 4 -205. 10(C)(4) Craft Distiller license – sales & delivery • sales and deliveries are subject to the following: – sale of product from other craft distillers may not exceed 20% of the total sales – make deliveries of distilled spirits to retail licensed premises not to exceed 1, 189 gallons

A. R. S. § 4 -205. 10(C)(4) Craft Distiller license – stacking • may hold either one bar (6) or restaurant (12) license on or adjacent to the licensed craft distiller’s premises

A. R. S. § 4 -205. 10(C)(6) & (7) Craft Distiller license - authorizes on and off sale retailers to purchase spirituous liquor from a craft distiller licensee; and - authorizes sales to-go and delivery if ordered by phone, mail, fax, catalog, internet or other means.

A. R. S. § 4 -205. 10(D)(1) Craft Distiller – remote tasting room allows one remote tasting and retail premises, if: 1. sales are limited to liquor produced by the craft distiller or another licensed craft distillery 2. liquor in the original container is sold to consumers physically present (on- or offpremises) • liquor manufactured by other craft distillers doesn’t exceed 20% of total sales; and

A. R. S. § 4 -205. 10(D)(2) Craft Distiller – remote tasting room • The Craft distiller licensee: – Obtains approval of the premises from the local governing body before submitting an application to the Department of Liquor; – is responsible for premises; – does not sublease the premises; – has an agent who is a natural person and meeting licensure qualifications; and – meets the qualifications for licensure A. R. S. § 4 -203(A)

A. R. S. § 4 -205. 10(E) Craft Distiller – delivery requirements • z craft distiller is liable for violations of liquor laws and • is subject to the delivery requirements of A. R. S. § 4 -203. J and • the act of an employee selling or delivering is an act of the licensee for purposes of A. R. S. § 4 -210. A. 9.

A. R. S. § 4 -205. 10(J) Craft Distiller – stacking • may be stacked with a farm winery license (A. R. S. § 4 -205. 04).

A. R. S. § 4 -205. 11 Craft Distiller Fair/Festival • authorizes – 25 craft distillery festival licenses each calendar year – for a total of 75 calendar days, per craft distillery and – sampling and sales for off and on premise consumption, – $15 per day

A. R. S. § 4 -205. 11 Craft Distiller Fair/Festival • sample on the fair premises and sell for on or off premise consumption with permission of state or county fair organizers. • exempts craft distillery festival licenses from A. R. S. § 4 -201 posting, protest, hearing, etc. requirements.

A. R. S. § 4 -206. 01(B) Reissued reverted licenses • allows the reissuance of lottery licenses that have been reverted or revoked after July 1, 2014.

A. R. S. § 4 -207 Transferrable license changes • eliminates the fence requirement for a golf course within 300 horizontal feet of a school or church. • clarifies that a person-to-person transfer previously issued within 300 horizontal feet is permitted. • permits the “replacement of a transferable license” with the same series.

A. R. S. § 4 -210 Grounds for Revocation • to suspend revoke or refuse to renew a license, as follows: – added “any person” in addition to customer. – serious act of violence includes riot, brawl or disturbance were a serious injury causes death or critical injury and such injuries would be obvious to a reasonable person. – licensee fails to report a serious act of violence defined similar to subparagraph 14.

A. R. S. § 4 -222 Registration of Retail Agents; fees • requires delivery to a retail agent to be at the retail agent’s licensed premise or other authorized location

A. R. S. § 4 -226 Exemptions • liquor that contains marijuana is not allowed for medicinal purposes • allows beer produced for personal or family use that is not for sale to be removed from the premises and exhibited at organized affairs, exhibits or competitions such as home brewers’ contests and judging

A. R. S. § 4 -227. 01 Channel Pricing • authorizes wholesalers use of channel pricing to sell its product to on sale licensees at a different price that it sells its product to off sale licensees and • discounts must be based upon volume, • delivered within 24 hours and • made equally available to each retailer in the retailers’ channel.

A. R. S. § 4 -227. 01 Channel Pricing • defines “product” to mean – a singular brand of liquor in a designated size or – a mix of brands and containers sold on a combined basis

A. R. S. § 4 -227. 01 Co-ops Registered Retail Agent Qualified Retail Cooperatives • holds a bar, beer and wine bar, liquor store, beer and wine store, club, hotel‑motel or restaurant license • similarly licensed retailers (on -sale with on-sale, off-sale with off-sale) • Pays for all product • PRICES ESTABLISHED BY THE QUANTITY • At least 2 retail licenses • Spirituous liquor in a designated size container or a mix of brands and containers when sold on a combined basis established by the wholesaler THAT is offered on quantity discount terms established by the wholesaler

A. R. S. § 4 -227. 01 Co-ops • All members get a copy of co-op permit • Product not available for return • Provide a copy of the original invoice to all members • Charge the price to members that the wholesaler charged them

Wholesaler Co-op Location (only place Wholesaler can deliver) Retail locations Retail Co-op Bar #1 Bar #2 Bar #3

A. R. S. § 4 -229 Handguns • deletes the requirement that a person have a concealed carry permit to carry a concealed handgun on licensed premises.

A. R. S. § 4 -241(K) Selling to underage • Amended to include as acceptable IDs: – the District of Columbia (Washington D. C. ), – any territory of the U. S. if the license has a picture and the person’s date of birth. – A driver’s license issued “under age 21” is no longer acceptable 30 days after the person turns 21 years of age. Applies to any driver license or ID card, not just Arizona.

A. R. S. § 4 -241(K) Acceptable IDs • Limits as a valid ID unexpired non-operating license to 30 day after the person turns 21 years of age • Allows an unexpired armed forces ID card that includes picture and date of birth • Deletes border crossing identification and Mexican voter ID • adds valid unexpired resident alien card to acceptable ID

Courtesy of Arizona Business Council for Alcohol Education.

A. R. S. § 4 -243 Commercial Coercion & Bribery • requires 10 day notice to be given to the Department of Liquor by the producer or wholesale prior to a sampling event • sampling to 72 oz. of beer and 2 oz. of distilled spirituous person, per day for consumption off premises (not wine) • limits the wholesaler or producer to 12 sampling events in any calendar year per approved off-sale retail location

A. R. S. § 4 -243 Commercial Coercion & Bribery • holds a retailer responsible for “requesting” OR “receiving” something of value

A. R. S. § 4 -244 Growlers • allows a growler to be made of any material approved by the National Sanitation Organization (ceramic, metal, plastic, etc. )

A. R. S. § 42 -3356 Farm Winery Qualifications & Stacking • grandfathers farm wineries that are licensed presently but do not qualify under the new statutory requirements to continue to operate until January 1, 2019

A. R. S. § 42 -3356 Farm Winery Qualifications & Stacking • allows series 13 s that are currently stacked with series 7 and 10 licenses to continue at that location

Rules A. A. C. Title 19 Rules became effective July 7, 2014

A. A. C. R 19 -1 -302 Knowledge of Liquor Law • Licensee’s responsibility • Any employee who serves, sells, or furnishes spirituous liquor to a retail customer

A. A. C. R 19 -1 -110 Sign Limitations • do not exceed $400 • may not be utilitarian – no information about retailer or location – no directional or business information

A. A. C. R 19 -1 -210 (A)(1) Example of “bears conspicuous and substantial advertising about the product”.

Utilitarian

Cannot include the NAME of the Retailer

Cannot include directional information

Does not include information bout the retailers business

Example of signage that bears conspicuous and substantial advertising about the product.

Example of signage with NO utilitarian except to advertising or information content.

R 19 -1 -320. Practices Permitted by a Producer or Wholesaler

A. A. C. R 19 -1 -320 Practices Permitted by Producer or Wholesaler • Special event participation – once application submitted for approval • sponsorship may include sign and advertising packages • no items of value left with licensee after event • all event monies go to the licensee

A. A. C. R 19 -1 -320 Practices Permitted by Producer or Wholesaler • Providing items to customers – given directly to the customer • if under $5, unlimited number • if over $5, limited to $100 per day

A. A. C. R 19 -1 -320 Practices Permitted by Producer or Wholesaler • Sponsoring a Sporting event – permanent occupancy over 1, 000 – primarily used as live sporting event – sponsorship means signs and advertising – Nationally recognized sporting event • Sponsoring a Golf Tournament – benefits unlicensed organization – all monies paid to unlicensed organization

Restaurant has the NFL package for customers to view occupancy of restaurant and patio is 1000 people?

Sports Bar has a permanent occupancy of 500 Temporary extension brings total occupancy to 1005

A. A. C. R 19 -1 -320 Practices Permitted by Producer or Wholesaler • Sponsoring a Concert – permanent occupancy over 1, 000 – primary use as concert or live sporting event venue – sponsorship includes sign and advertising packages – no items of value left with retailer after concert

Live Concert Definition A live event with pre-sold tickets for a musical, vocal, theatrical, or comedic performance at the licensed premises or a live musical, vocal, theatrical, or comedic performance at the licensed premises that is not open to the public.

Restaurant used 365 days a year with occupancy of 300 Concert Venue used once a week with occupancy of 701 Even though the entire establishment is licensed under the same license it isn’t primarily used as a concert venue

A. A. C. R 19 -1 -320 Practices Permitted by Producer or Wholesaler • Participating in a trade show or convention – must be a trade association – must have 5 or more licensees with no common ownership in the association – sampling, advertising, and event sponsorship allowed – If signs are used, must be removed the following day

A. A. C. R 19 -1 -320 Practices Permitted by Producer or Wholesaler • Participation in educational seminar – must be a licensed premises – content substantial about liquor – cannot pay lodging or transportation – cannot pay retailer’s expenses – may provide meal and snacks or nominal value

A. A. C. R 19 -1 -320 Practices Permitted by Producer or Wholesaler • Furnish printed menu – fair market value within limit under 4 -243 – no utilitarian value – conspicuously bears name of product, producer or wholesaler

A. A. C. R 19 -1 -320 Practices Permitted by Producer or Wholesaler • Coupons – for locations with off-sale privileges – cannot be retailer-specific or offered to only one retailer – number of coupons match inventory of qualifying product

A. A. C. R 19 -1 -320 Practices Permitted by Producer or Wholesaler • Entertaining a retailer – meals, beverages, event tickets, and ground transportation • must accompany retailer • cost is deductible under IRS code

Practices Permitted by a Wholesaler

A. A. C. R 19 -1 -321 Practices Permitted by a Wholesaler • Providing stocking services – cannot touch product of another wholesaler – only in point-of-sale and cold box where consumer may purchase product – may move from designated delivery to storage areas – can rotate, clean and prepare product in point-of-sale area

A. A. C. R 19 -1 -321 Practices Permitted by a Wholesaler • Providing reset services – cannot disturb product of another wholesaler – only in point-of-sale and cold box where consumer may purchase product – two-working days notice from retailer – cannot be done more than once per year if it involves substantial reconfiguration

A. A. C. R 19 -1 -321 Practices Permitted by a Wholesaler • Accepting returned product – if business closes for at least 30 -days wholesaler may exchange beer and malt beverage • check DLLC website to confirm inactive status of license • restocking fees are allowed • With permission from the director – return of beer and malt beverage product may be refunded • no obvious over-ordering • no indication of consignment

A. A. C. R 19 -1 -321 Practices Permitted by a Wholesaler • Providing shelves, bins or racks – can only be loaned – value no more than $300 – bears substantial advertising regarding liquor which is permanently inscribed or affixed – only product on shelf is the product that is advertised on the shelf (unless cross-promotion) – cannot be temperature controlled

Sampling Events

Off-Sale Locations Series 9 and 10 Even the locations with Permanent Sampling • • • Producer or Wholesaler brings the product 12 samplings per Wholesaler every year at each qualifying location 12 samplings per Producer every year at each qualifying location Must notify DLLC 10 days prior to event Only one Wholesaler or Producer each day Limited to 3 oz beer, 1 1/2 oz wine or 1 oz distilled person per day Limited to 3 hours Product must come from Wholesaler Designate area and secure it No benefits for retailer

Talk to Store Go on-line request sampling 10 days prior Take approval letter to sampling event If approved for day and location then print off approval form Keep records of samplings for 2 years Cannot be done at locations under 5000 sq ft unless 75% is designated for spirituous liquor

Sample area Liquor area Grocery Store

9 and 10 vs. 9 S and 10 S 9 and 10 • Product comes from Wholesaler • Can only have 12 per Wholesaler and Producer each calendar year • Wholesaler or Producer must request and receive permission from DLLC 10 days early 9 S and 10 S • Product comes from store stock • Can have sampling anytime they want from their stock • Producer / Wholesaler can be present • Can still have 12 free from Producers and Wholesalers

Store with 9 or 10 with a 7 “stacked” Sampling for 9 Sampling for 7 • Product comes from Wholesaler • DLLC notified 10 days prior • Limited to 3 oz beer, 1 1/2 oz wine or 1 oz distilled person per day • DLLC notified • Consumer present • Conducted by Wholesaler or Producer • 12 oz beer, 6 oz wine or 2 oz spirits (per person per brand) • No benefits to retailer

Beer and Wine Bar Grocery Store with Series 9 or 10 Liquor area

Craig Miller Office: (602) 542 -9041 Cell: (928) 200 -1889 Jeffrey. miller@azliquor. gov www. azliquor. gov D. L. L. C. - Title 4 Training

Online Sampling Requests What licenses can sponsor a sampling event at a retail location? License Type Series In-state Producer 01 Out-of-state Producer 02 Limited Out-of-state Producer 2 L Out-of-state Craft Distillery 2 D Out-of-state Microbrewery 2 M Out-of-state Farm Winery 2 W In-state Microbrewery 03 In-state Farm Winery 13 In-state Craft Distillery 18

Producer/Wholesaler Authorization Code Producer/Wholesaler (Sponsor) Lic #1 Lic #2 Authorization Code Lic #3

Retail Location Authorization Codes Location #1 Location #2 Location #3 • has it’s own authorization code • may allow 1 wholesaler/ producer sponsored sampling event per day

Producer/Wholesaler Authorization Code www. azliquor. gov/sampling/Add. Sponsor. Contact. cfm

Retail Location Authorization Codes www. azliquor. gov/sampling/Add. Location. Contact. cfm

Link To Online Sampling Sign-on link www. azliquor. gov

Post At Event

Is Online Sampling Being Used?