Restaurants Await Ducey Signature To Allow Leasing Of Liquor Licenses For To Go Sales And Delivery Privileges

By Terri Jo Neff

A bill which would allow restaurants whose liquor licenses prohibit off-premises or to-go sales of booze to lease a portion of another type of liquor license that allows for such sales was sent Monday to Gov. Doug Ducey.

HB2773 allows a bar, wine bar, or liquor store to lease its off-sale privileges of non-mixed cocktails for one-year periods to a restaurant which under current law is prohibited from engaging in such to-go sales. The lessee and lessor must be located in the same county, and the lessor’s liquor license must be held in non-use status.

Under the legislation, the Arizona Department of Liquor License and Control (DLLC) will be required to establish an off-sale privileges lease amount for urban and rural counties “that fairly recognizes and is derived from the commercial value of selling spirituous liquor for off-premises consumption.” However, the lessee and lessor can agree to a lease amount different from the DLLC amount.

Other provisions of HB2773 allow a bar or liquor store to begin selling mixed cocktails with a tamper proof seal for off-premises consumption as of Oct. 1. And restaurants can apply to lease those mixed cocktails to-go privileges from a bar or liquor store for one-year periods through Dec. 31, 2025 before applying for a newly created to-go mixed cocktails permit beginning Jan. 1, 2026. The value of a to-go cocktail lease will be established by the DLLC.

If the lease plan is signed by Ducey, the legislation calls for all lease payments to be paid in full in advance, and all existing applicable laws and regulations concerning containers, quantities, and training will apply. Any violations or liability connected to liquor service under a leased privilege or permit would be attributed only the leasing restaurant licensee, according to the bill.

Most restaurants operate with a Series 6 or 7 liquor licenses which cost a few hundred dollars, while bars typically have a Series 12 license which allows for more options such as selling liquor to-go. Series 12 licenses are limited in number and can cost tens of thousands of dollars.

Finding a way for restaurants to conduct off-premises sales of spiritous liquor has been a priority for the Arizona Restaurant Association since November when a state judge ordered the immediate end to one of Ducey’s COVID-19 executive orders which allowed restaurants to violate state law by selling alcohol on a to-go basis even though their liquor license prohibited such sales.

The executive order issued in June 2020 also forbid law enforcement agencies or DLLC from taking any action to enforce the state law. At the same time, many bars, saloons, and wine bars were forced shut due to other Ducey executive orders or public health regulations.

The executive order was challenged in court by attorney Ilan Wurman on behalf of dozens of Series 6 and 7 licensees. Judge Pamela Gates of the Maricopa County Superior Court shot down the governor’s order, ruling that Ducey was not allowed to suspend Arizona’s liquor laws even during a state of emergency.

Gates’ order forced restaurants to stop to-go sales of liquor at the end of 2020, but Dan Bogert of the Arizona Restaurant Association suggested at the time that a change in state law was needed.

“I think that you don’t need to look any further for evidence of that to how popular this is with the consumer base,” Bogert said. “Furthermore, we’re going to be looking at bringing some legislation forward in the next legislative session to address this permanently.”

HB2773 outlines restrictions on the percent of on-site and off-premises liquor sales a restaurant can have. The bill also authorizes a bar, beer, and wine bar or restaurant with a lease to maintain a delivery service. And it includes language retroactive to July 1, 2020 to exempt the manufacture or sale of certain bitters products from regulation under Arizona’s alcohol beverage laws.