The Grapes of Math: Calculating Sales Tax for Vineyards
- Apr 1, 2016 | Jaimy Ford
I live right off the Monticello Wine Trail and am just a quick jaunt away from about 30 Virginia wineries. As the days grow warmer and longer, people are flocking to this area to sample the goods -- and purchase bottles of their favorite vino. It’s big business for many small business owners.
It turns out that the tax rules regarding the selling of wine can be a little tricky, so if you operate a vineyard, take note.
Wine and Sales Tax
Wine sales are subject to sales tax -- at least in most states
If you are approved to operate a bonded wine premise and you do one or more of the following, you are considered a dealer, and you must collect sales tax.
- You charge for winery tours that your customers must take in order to taste your wine.
- You charge for wine that you serve in your tasting room.
- You sell wine to visitors to take home.
Since that describes most vineyards, chances are you should be collecting sales tax. The thing is that state and city/county sales tax rates on wine are all over the place, with some states like New Hampshire and Oregon charging no sales tax at all, and others, such as Kansas and Tennessee tacking on a whopping 8 percent or more.
If you ship it, you must pay an excise tax
If you ship bottles of wine from your facility, those sales are subject to excise tax. Figuring out those rates can make you dizzier than a few glasses of Sauvignon blanc.
The excise tax is based on volume and total alcohol content, so, for example, according to the Alcohol, Tobacco and Trade Bureau, anything with an alcohol percentage of 14 to 21 percent is charged a $1.57 per gallon excise tax, whereas wines below 14 percent are charged only $1.07 per gallon excise tax. There are several other categories with varying rates.
Beyond that, the rates are wildly inconsistent across the states, as each state or locality sets its own rules. For example, Kentucky boasts the highest wine excise tax rate at $3.18 per gallon, while Louisiana comes in at the lowest rate of $0.11. The proprietor of any bonded wine premises -- that’s you, winemaker -- is responsible for paying this tax. So know the rules that apply to you. You do have some wiggle room with how you pay, choosing to pay the excise tax all at once when your wine is bottled or as each shipment leaves your facility.
Rules for Tastings
Wine tastings are usually taxable -- except when they’re not
In most states, when you charge customers to sample each of your wines, you must collect a sales tax. However, that isn’t the status quo in every state. Last year, New York made wine tastings at wineries tax-free. However, Maryland lumps wine tastings under the sale of alcohol, requiring you to charge a 9 percent sales tax.
As with all sales tax, the rules regarding wine sales at vineyards vary from state to state and locality to locality, and they fluctuate. So you need to be in-the-know about your state and local requirements to ensure that you meet local, state and federal guidelines.