AZ HB2778

Creates a statewide tobacco retail sales license program administered by the Arizona Department of Health Services, effective January 1, 2028, requiring all tobacco retailers to obtain and display a valid license before selling tobacco products.

Expands the definition of "tobacco product" to include electronic smoking devices (e-cigarettes, vape pens, e-hookahs), their components, and any substances intended for vaporization, whether or not they contain nicotine.

Establishes escalating civil penalties for retailers violating tobacco sales laws: $500-$750 for first offense (or education class), up to $3,000 plus three-year sales prohibition for fourth or subsequent violations within 36 months.

Requires retailers to verify purchaser age through government-issued photo ID for anyone appearing under 30 years old, with at least two unannounced compliance checks annually using individuals aged 18-20.

Removes criminal penalties for minors possessing tobacco products while maintaining misdemeanor penalties for sellers, and creates a tobacco retail sales licensing fund with 90% of fees dedicated to enforcement.