A.R.S. § 4-401: Distributor license; fee; violation; classification

(Eff. 1/1/28)

A. From and after December 31, 2027, a person may not distribute alternative nicotine products for sale in this state without a license issued pursuant to this section. Alternative nicotine products offered for sale in this state shall only be provided by a manufacturer that is licensed pursuant to section 4-402, and all of the following requirements apply:

1. A distributor of alternative nicotine products may purchase alternative nicotine products only from a distributor that is licensed pursuant to this section or from a manufacturer that is licensed pursuant to section 4-402. A distributor of alternative nicotine products shall verify that the distributor or manufacturer has a valid license issued pursuant to this section or section 4-402 and shall obtain proof that the distributor or manufacturer has a valid license before purchasing alternative nicotine products from the distributor or manufacturer.

2. A distributor of alternative nicotine products shall maintain documentation for three years at the distributor's facility for each transaction that involves the sale, purchase, transfer or receipt of alternative nicotine products. A distributor of alternative nicotine products shall provide this documentation to the department on the request of the department.

3. All alternative nicotine products that are held or stored for sale or distribution in this state by or on behalf of a retailer of alternative nicotine products shall be accessible to the department and other law enforcement officers during normal business hours without a judicial warrant or prior written consent of the distributor.

B. Each applicant for an alternative nicotine product distributor license issued pursuant to this section, other than a corporate licensee, a limited liability company licensee or an out-of-state licensee, must be a citizen of the United States and a bona fide resident of this state or a legal resident alien who is a bona fide resident of this state. If the applicant is a partnership, each partner must be a citizen of the United States and a bona fide resident of this state or a legal resident alien who is a bona fide resident of this state, except for a limited partnership. If the applicant is a limited partnership, an individual general partner is required to meet the qualifications of an individual licensee, a corporate general partner is required to meet the qualifications of a corporate licensee and a limited partner is not required to be a citizen of the United States, a legal resident alien or a bona fide resident of this state. If the applicant is a corporation or limited liability company, the corporation or limited liability company must be a domestic corporation or a foreign corporation or a limited liability company that is qualified to do business in this state. The corporation or limited liability company shall file with the department a list of the corporation's officers and directors and any stockholders who own ten percent or more of the corporation or limited liability company.

C. An applicant or licensee shall hold a license that is issued pursuant to this section to a corporation, limited liability company, partnership or out-of-state license through an agent. The agent must be a natural person. Notice of a change of agent must be filed with the director within thirty days after a change of agent. For the purposes of this subsection, "agent" means a person who is designated by an applicant or licensee to receive communications from the department and to file and sign documents for filing with the department on behalf of the applicant or licensee.

D. An applicant shall file an application for a license that is issued pursuant to this section on a form prescribed by the director. An application that is filed pursuant to this subsection must require the following information:

1. Proof of liability insurance coverage.

2. A copy of the registration form provided by the United States bureau of alcohol, tobacco, firearms and explosives as proof of the applicant's compliance with the prevent all cigarette trafficking act of 2009 (P.L. 111-154; 124 Stat. 1087; 15 United States Code section 376a).

E. The department shall issue a license pursuant to this section to an applicant that meets all of the qualifications of this section one hundred five days after filing the application.

F. Each applicant shall designate a manager who is responsible for managing the premises owned by the applicant. The designated person may be the applicant. The same person may be designated as the manager for more than one premises owned by the same applicant or licensee. Notice of a change of a licensee's manager must be filed with the director within thirty days after a change.

G. A license may not be issued to any applicant who, within one year before submitting an application pursuant to this section, has had a license revoked. A license may not be issued to or renewed for any applicant or licensee who, within five years before submitting the application for a license or renewal of a license pursuant to this section, has been convicted of a felony or convicted of an offense in another state or jurisdiction that would be a felony in this state. The director shall require any applicant and any controlling person, other than a bank or licensed lending institution, to certify on a form that is provided by the department and that is notarized that within five years before submitting the application for a license or renewal of a license pursuant to this section, the applicant or controlling person has not been convicted of a felony in this state or an offense in another state or jurisdiction that would be a felony in this state.

H. An applicant or licensee that is denied a license or a license renewal by the department may appeal that decision to the board pursuant to section 4-210.02.

I. The director may establish a fee for a license issued or renewed pursuant to this section. A license that is issued pursuant to this section is valid for one year. A license issued pursuant to this section must be renewed annually in a manner prescribed by the director. A licensee that fails to renew a license on or before the renewal date shall pay a penalty that is determined by the director. The licensee shall pay the late renewal penalty with the licensee's license renewal fee.

J. A license to distribute alternative nicotine products that are for sale in this state is not transferable.

K. A license to distribute alternative nicotine products issued pursuant to this section may not be leased or subleased.

L. A person that distributes alternative nicotine products for sale in this state without a license as required by this section is guilty of a class 5 felony and:

1. Shall pay a fine of at least $10,000.

2. Is prohibited from selling, giving or furnishing alternative nicotine products for a period of one year.

3. Is subject to any other punishment deemed appropriate by the court.

M. Alternative nicotine products that are distributed for sale or offered for sale in violation of this section may be deemed contraband and seized as evidence in a criminal proceeding under this section. On adjudication of a criminal proceeding, the court shall order alternative nicotine products that are deemed contraband to be destroyed as a term of the disposition of the criminal proceeding.

N. Notwithstanding any other law, all receipts derived from alternative nicotine products distributor license applications are appropriated to the department. The department shall deposit monies received pursuant to this section in the liquor licenses fund established by section 4-120. The amount deposited in the liquor licenses fund pursuant to this section shall be without regard to the amount that is appropriated to the department by the legislature.