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60 WINES&VINES April 2016 WINEMAKING G iven oxygen, stable temperatures and a supply of sugar, yeast will happily get to work powering a fermentation. And perhaps at the microbial level, the yeast do not even perceive a difference be- tween fermenting beer and wine. In Califor- nia's capital city of Sacramento, however, the state department that applies sales tax did see a difference between yeast used for brew- ing and yeast used for winemaking: Wine yeast was subject to sales tax, while brewing yeast was not. According to the California State Board of Equalization (BOE) sales tax annotation 440.0780, selling yeast to wineries was tax- able because "yeast is used in the manufac- ture of wine in order to bring about the fermentation process and is not used for the purpose of physically incorporating it into the wine." Annotation 245.1101 stipulates, "Tax does not apply to the sale of viable yeast, which is sold as a food for human consumption in the production of bread and malted alcoholic beverages such as beer, mead and ale." The difference, according to the state BOE, is that "yeast for wine is not incorporated, and thus, not consumed by humans." Earlier this year, however, an attorney with the BOE made the unexpected decision that the viable yeast sold for winemaking is in fact a food product and should not be subject to a sales tax. Suppliers and industry representatives had been pushing for a change for years but made little progress with the state. Winemaking to get a little cheaper The state's change in policy means that a crucial ingredient to making wine should be a little cheaper in time for the 2016 harvest. Wineries that paid a sales tax on yeast will also be able to seek refunds from sup- pliers. That refund process, however, has caused suppliers a certain amount of con- sternation as they wait on the state to con- firm the changes and refund them the sales tax monies so they can in turn refund their customers. "We receive numerous calls a day from wineries wanting their refunds back," said Scott Laboratories CEO Zack Scott. "It's hard to tell them we don't know the extent of the changes, and we don't know when we can get the refunds to them." S c o t t a d d e d h e was hopeful that further meetings with state of- ficials would clear up any remaining confu- sion. The changes by the BOE could mean other winemaking products—such as yeast nutrients or fining agents—may also no longer be subject to a sales tax. The California companies that supply the wine industry with its yeast now need to comb through thousands of accounts to tally up all the potential refunds. Since in most cases it was the supplier that paid taxes to the state, the onus on securing the refund falls on the suppliers. Those suppliers then need to provide detailed ac- counts to the state, showing they Suppliers, Industry Seek Clarity on Yeast Sales Tax California to stop charging sales tax on wine yeast, refunds will be available for wineries By Andrew Adams The total global yeast market is estimated to grow to $4.3 billion by 2020. Winemaking is the third-largest use of yeast behind baked goods and brewing.