A.R.S. § 4-402: Manufacturer license; fees; audit; violation; classification

(Eff. 1/1/28)

A. From and after December 31, 2027, a person may not manufacture alternative nicotine products that are for sale in this state without a license issued pursuant to this section, and all of the following requirements apply:

1. A manufacturer may sell alternative nicotine products only to a distributor that is licensed pursuant to section 4-401. A manufacturer shall verify that the distributor holds a valid license issued pursuant to section 4-401 and shall obtain proof of a valid license before selling alternative nicotine products to the distributor.

2. A manufacturer that is licensed pursuant to this section may sell alternative nicotine products to a retailer of alternative nicotine products in this state that holds a valid transaction privilege tax license.

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

4. All alternative nicotine products that are held or stored for sale or distribution in this state by or on behalf of a distributor or 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 manufacturer.

B. Each applicant for an alternative nicotine product manufacturer 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 and 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.

C. An applicant 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 manufacturing liability insurance coverage.

2. 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).

3. The applicant's product catalog of alternative nicotine products that the applicant intends to manufacture and that will be for sale in this state. The product catalog must include all of the following:

(a) The alternative nicotine product name, category, nicotine strength and flavors.

(b) A copy or image of the alternative nicotine product's packaging and warning label.

(c) A toxicology report for the alternative nicotine product, if requested by the department.

E. An applicant for a license issued pursuant to this section may provide to the department an updated product catalog pursuant to subsection D, paragraph 3 of this section while the applicant's application is pending approval. A licensee may submit an updated product catalog to the department at any time. Submitting an updated product catalog is supplementary to the requirements of subsection D of this section, does not render an application for a license that is issued pursuant to this section incomplete and does not affect the validity of a license or the eligibility of the applicant or licensee.

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

G. An applicant for a license that is issued pursuant to this section or for the renewal of a license that is issued pursuant to this section shall file with the application a notarized attestation that is signed under penalty of perjury that for each alternative nicotine product that is identified in the manufacturer's product catalog, both of the following apply:

1. The applicant or the licensee has submitted to the United States food and drug administration an application for a premarket submission or request for marketing authorization pursuant to 21 United States Code section 387j.

2. Any denial of an application for any product in the manufacturer's product catalog is pending administrative review by the United States food and drug administration or pending a final judgment by a court of competent jurisdiction pursuant to 21 United States Code section 387l.

H. 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.

I. 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, 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.

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

K. The director may establish a fee for a license issued or renewed pursuant to this section. A license 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.

L. A licensee shall pay to the department an annual fee for each stockkeeping unit of each alternative nicotine product that the licensee will manufacture and that is for sale in this state. The director may determine the annual stockkeeping unit fee that is required pursuant to this subsection.

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

N. A license to manufacture alternative nicotine products may not be leased or subleased.

O. The department may conduct an audit to ensure a manufacturer that is licensed pursuant to this section is in compliance with this section. The department may request a notarized attestation that the manufacturer's products that are sold in this state were imported in conformity with all United States customs and border requirements, whether the notarized attestation was provided by the manufacturer or another entity. The department may request that the manufacturer provide any additional documentation that the department deems relevant.

P. A person that manufactures 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, manufacturing or furnishing alternative nicotine products for a period of one year.

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

Q. Alternative nicotine products that are manufactured 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 the 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.

R. Notwithstanding any other law, all receipts derived from alternative nicotine products manufacturing 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.