Did you know the majority of wineries in the US are below 5,000 cases in annual production? They are small in production numbers and also usually small in staff numbers too. This also means they experience the “many hats” syndrome, where each of their staff members is responsible for multiple duties to keep the business going. This can be an ongoing challenge for them so they can use all the breaks they can get. One hefty break available to them (in many cases) is the small producer’s tax credit on their excise taxes paid to the TTB. (federal regulating agency) This tax credit can save them up to 80% on their taxes.
This tax credit is available on an annual basis for wines that are removed from bond, generally when they are shipped out for sale. At the full amount of credit small wineries can take off .90 cents per gallons from their federal excise tax payments.
To give you a better idea what that looks like in actual dollars here is an example of what a winery that produces the 5,000 annual case amount I referred to earlier would pay in federal excise taxes.
To keep things simple for this example let’s say that their annual 5,000 case production was half and half between the two tax classes. This means that 2,500 cases were wines that had alcohols in the 7 to 14% range and the other 2,500 cases had alcohols in the over 14 to 21% range. Each of these two alcohol ranges has its own tax class, and so tax rate per gallon. ($1.07 & $1.57 respectively)
Here is what the calculation would look like for these amounts:
First to convert cases to gallons: 2,500 X 2.37753 = 5,943.83 gallons
Next multiply the gallons by the two different tax amounts –At the lowered tax rate:
5,943.83 X .17 = $1,010.45
5,943.83 X .67 = $3,982.37
Sum the two dollar figures together: $1,010.45 + $3,982.37 = $4,992.82
This is the amount the winery would pay in federal excise taxes for that year’s bottlings.
What would the amount have looked like for these same gallons at the FULL tax rates?
$15,691.71! That’s an almost $11,000 savings!
For more information on all the details on qualifying and proper use of this tax credit available to small wineries here is a link to the TTB’s site:
If you’d like further instruction on understanding this tax credit and how to complete the TTB report form for it properly this is a training service which I provide.
You can email me at: firstname.lastname@example.org for more info.