In January of this year came the announcement from the TTB that starting in January of 2017 many US winery TTB permit holders will no longer be required to maintain their TTB wine bond. See my blog post on this.
Now just late last week comes another news update that offers even more significant excise tax consequences for all US wineries. WineAmerica posted about these updates on April 7th. They involve two major updates related to TTB excise taxes which are currently part of a bill recently revived and back under review by congress.
Here’s what these TTB excise tax changes would mean to your winery if the bill is passed:
The first major update of this bill would increase the small producers tax credit rate from 0.90 cents per gallon up to $1.00 per gallon. This credit amount of $1.00 per gallon would be available to wineries that qualify for the small producers tax credit on the first 30,000 gallons of wine they produce per year. A caveat here for all wineries to be aware of is the term “produce” in that statement. If its use is based on the TTB’s definition of “produced” then that would mean the $1.00 per gallon credit could be taken on only up to 30,000 gallons of wine that a qualifying winery “produced by fermentation”. (see my earlier blog post with the details on where those numbers actually come from) For an example of what the math looks like on this if a winery was submitting TTB excise tax payments on 30,000 gallons of table wine that it produced under the current 0.90/gallon credit amount it would owe $5,100 in excise taxes on that amount. Under the proposed $1.00/gallon credit amount it would instead owe $2,100 on that same 30,000 gallons.
The second, and definitely in my mind the more major development included in this bill is that the alcohol content for the table wine tax class would be changed from it’s current range of between 7% & 14% alcohol (for still wines) to between 7% & 16% alcohol. With that one change a MUCH larger percentage of wines that are bottled and/or sold on an annual basis by US wineries would then be taxed at the current table wine tax rate of $1.07 gallon. (*Note: wineries that qualify for the small producers tax credit as referenced above would then qualify to pay their TTB excise taxes on their table wines at .07 cents/gallon!)
The savings that will come for the majority of US wineries as a result of this bill being passed are significant.
In my view it has been long overdue for the alcohol ranges of the two still wine tax classes to be updated to match the current winemaking world. Around the time that congress approved the current tax rates for still wines if a wine had an alcohol content of over 14% chances are it was a port or sherry, hence a “dessert wine”, which is the TTB’s name for that tax class of still wine between 14% & 21% alcohol. Up until roughly the late 1980’s into the early 1990’s most still wines produced at US wineries were below 14% alcohol. But by just a few years later that had progressively changed to a significant amount of still wines being well over 14% alcohol, due to changes in winemaking style, much of which was based on allowing the grapes to ripen much longer, therefore resulting in much higher sugar content at the beginning of fermentation and thus a higher alcohol after fermentation. Making wineries track, report, label and pay their excise taxes based on outdated regulations that no longer fit the current winemaking world has been long overdue.
One other area worth mentioning related to these potential TTB alcohol tax class changes is that wineries will need to make adjustments to their wine tracking and reporting processes. Whereas before all bulk or bottled wines produced, stored, bottled and reported on their winery site have been required to be logged by the current tax class ranges of 7 to 14% and 14 to 21% they will need to make edits to whatever their recordkeeping system is. Of course if they are a tech savvy winery which uses a wine production database software for their recordkeeping then the responsibility for these tax class tracking changes will fall to their software provider.