Posted on 2014-09-25 by Ann Reynolds
This headline in the wine industry last week caught my attention- Wine Cellar owner sentenced to prison . This was related to lack of payment of TTB excise taxes due for over a year’s period of time. The thing was, this business had been including on their customer’s invoices payments made for excise taxes but those taxes were never paid to the TTB, so the owner was just pocketing those amounts.
The owner of this wine storage & shipment business was actually sentenced to 9 months of prison time in addition to restitution payment due to the TTB of closer to $900,000. That dollar figure would come from the past due tax payment amounts, late fees and penalties related to her knowing neglect in paying them.
But what about the wineries that stored their cased wines there? What about their responsibility? Are they in trouble with the TTB as well? No they are not, their responsibility would lie in the details of how they shipped their wines to the warehouse. The paperwork that goes along with a shipment of cased wine to a storage warehouse is called a bill of lading. (or what the TTB call a transfer in bond record) On their bill of lading a winery would have specifically indicated “transfer in bond” on it, meaning that the federal excise taxes had not been paid on those cased wines. This in turn generally means that when the winery receives an order for those wines it is forwarded to the warehouse for fulfillment and then they, the warehouse as the site that actually shipped the wines are required to file the federal excise tax report and submit payment to the TTB on the amount of wine shipped.
This is what all the winery customers of this warehouse in Salinas thought was happening, especially since they were seeing the tax payment amounts coming back to them on their invoices. Why would they have suspected otherwise?
The only way a winery can be 100% sure that all their TTB (And California BOE by the way too) excise tax payments have been made is if they are filing them themselves.
What this scenario looks like is all of a winery’s cased wine shipments going to a wine warehouse for storage & fulfillment are all sent “Taxpaid”. This “taxpaid” statement is also indicated on the bill of lading sent with the wine to the warehouse, so the warehouse will know how to log in into their system and keep track. Plus it is also the start point indicator for the warehouse that they do NOT have to submit any of the tax filings/payments on shipments of those wines. The TTB excise tax reporting and tax payments are then fully the responsibility of the winery itself.
Another item of note related to this same issue I have heard several times in recent months is that some wine storage warehouses in Napa and Sonoma county are no longer willing to file TTB excise tax payments under the small producers tax credit. So for any of their winery clients that qualify for this hefty 0.90 cent a gallon tax credit they would essentially be telling them “if you want to take advantage of this huge tax savings on your wines, you’ll need to send them into us “Taxpaid””. Which would mean that the winery would document their bills of lading of cased wines being sent to their warehouse as “Taxpaid” and then follow up on those shipments for their next reporting period by submitting the TTB excise tax report along with payment.
For more info on the bill of lading document go here: BOL info
For more info on the TTB excise tax for the small producers credit go here: SPC tax info
To talk more about your winery records and reports please contact me here: email@example.com