Issue link: http://winesandvines.uberflip.com/i/830382
30 WINES&VINES June 2017 Viewpoint B ig changes to TTB regulations are continuing to gain congressional support, which is good news for U.S. wineries. These changes would mean substantial savings on TTB excise taxes. The force behind this is the Craft Beverage Modernization and Tax Reform Act, a bill reintroduced into Congress in January of this year. In a discussion this April with Michael Kaiser, vice president of Wine America in Washington, D.C., he said the chances of this bill being passed on its own are very slim. Instead, it will likely be bundled into a much larger tax bill later this year. Should that bill make its way through Congress and be passed in 2017, the TTB would likely put the regulatory changes into effect starting in 2018. These new regulations also would mean that wineries need to make some changes to their records as well as the two pri- mary TTB reports: the Report of Wine Premise Operations (5120.17) and the excise tax report. U.S. wineries would see changes in three primary areas: 1. Changes to their excise tax payments, which would be dramatically reduced. 2. Changes to their wine inventory records and corre- sponding TTB reports (5120.17 and excise tax). 3. Changes that would impact alcohol percentages stated on wine labels. Changes to TTB excise tax payments Currently U.S. wineries pay from $1.07 to $3.40 per gallon in excise taxes. The majority of wineries also qualify for the small producers' tax credit (SPTC) on those tax payments, which reduces their tax bill by 90 cents per gallon for still wines up to 24% alcohol. The SPTC is currently not available for the $3.40 (sparkling) tax class. The passage of this bill would make the following changes to excise taxes: 1. The content range on the table wine tax class would be increased to cover wines from 7% to 16% alcohol instead of the current 7% to 14%. This change alone would mean that wineries currently paying taxes at the rate of $1.57 per gallon, which covers 14% to 21% alcohol, would likely be able to pay taxes on the same wine at a rate of 7 cents per gallon. This is be- cause the bill would also increase the SPTC amount to $1 per gallon for the first 30,000 gallons of wine "removed" by a winery per year. (Removed is the TTB term for when excise taxes are paid.) 2. Here's a real-world example of what the savings amount would look like: Winery A bottles 4,000 cases (or 9,510 gallons) of wine with a 15.4% alco- hol content. At the current full-pay rate, Winery A would owe $14,930.89, which is 9,510 X $1.57. If they applied the SPTC, they would pay only $6,371.78, which is 9,510 X $1.57 minus 9,510 X $0.90. If these proposed excise tax changes go into effect, Winery A's tax bill would drop to $665.71! The math is 9,510 X $1.07 minus 9,510 X $1. 3. The sparkling wine tax class would become eligible to file under the SPTC. 4. The amount per year that wineries would be able to file while deducting the small producers tax credit (SPTC) would increase. Currently wineries can file their excise taxes claiming the SPTC on no more than 100,000 gallons per year. The passage of this bill would remove that amount, allowing wineries to pay a much larger amount of their annual excise taxes while taking advantage of the SPTC deduction. The credit amount wineries may take would vary depending on the overall volume removed in a calendar year. They can remove up to 30,000 gallons and deduct $1 per gallon, remove up to an additional 100,000 gallons and deduct 90 cents per gallon, and finally removals beyond 130,000 gallons up to 750,000 gallons in a one-year period can deduct 53.5 cents per gallon. 5. Here is an example of what that might look like: Winery B sells 145,000 gallons of table wine (between 7% and 16% alcohol) during a calendar year. The total excise tax bill would be $27,125. Compare that to what Winery B would pay now on those same gallons: $65,150. That's a 42% savings! Changes to TTB records and reports Next comes the relationship between how wineries maintain their records and how they assemble their two primary TTB reports. Regulations require winer- ies to track the bulk and bottled wine gallons at their sites by one of six categories that translate back to alcohol content, carbonation level or the final category: hard cider. These inventory and activity numbers are reported by e a c h c a t e g o r y o n t h e i r 5120.17 reports. The passing of this bill would require wineries to look at the bulk and bottled n ANN REYNOLDS What Coming Excise Tax Changes Mean