Hi thanks for the question
Az App Service does not support Windows Authentication (it's the same for most PaaS services)
You do have the option of using AAD Auth here as per https://learn.microsoft.com/en-us/azure/azure-sql/virtual-machines/windows/configure-azure-ad-authentication-for-sql-vm?view=azuresql&tabs=azure-portal
App service supports managed identities - so if it's App to app you need then using a user-assigned or system-assigned MSI toward SQL on the VM would be preferable