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Welcome!. Four Federal Ways to Enter the Wine Business Or We Have the Grapes- Now What ?. Speaker. Martha J. Tebbenkamp, TTB Investigator 503 946 8346. Morning Agenda. 4 Ways In Advantages Disadvantages. Key Concepts. Production-turning materials into wine

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  1. Welcome! Four Federal Ways to Enter the Wine Business Or We Have the Grapes- Now What ?

  2. Speaker • Martha J. Tebbenkamp, TTB Investigator • 503 946 8346

  3. Morning Agenda • 4 Ways In • Advantages • Disadvantages

  4. Key Concepts • Production-turning materials into wine • Bond-legal agreement protecting excise tax liability. • Bonded Premises-winery/wine cellar covered by a bond.

  5. Key Concepts • In Bond-untaxpaid wine at a BW/BWC • Transfer in bond-moving wine from one bonded facility to another • Removal from bond-identifying wine and creating a removal record • Taxpaid-wine removed from bond

  6. Key Concepts • Wine is always either taxpaid or in bond. • Whoever removes the wine from bond pays the taxes • Whoever bottles the wine gets the COLA-always before bottling

  7. Four Options • Bonded Winery • Bonded Wine Cellar • Alternating Proprietor • Custom Crush Client

  8. “Stand Alone” Bonded Winery • Produce/blend/bottle wine • Do so ONLY on own premises • CANNOT loan/rent/share premises, except with specifically authorized alternator • Is responsible for all wine there

  9. Stand Alone: • ADV: Complete autonomy Small producer tax credit • DISADV: Complete responsibility Larger capital outlay

  10. Bonded Wine Cellar • Receive, store, blend wine in bond • MAY receive bulk, bottled, labeled or unlabeled wine • MUST pay taxes on all removals • Is NOT an extension of any other winery premises

  11. Bonded Wine Cellar ADV: Less capital outlay Simple system DISAD: Limited label claims No producer credit

  12. Alternating Proprietor • Two or more wineries alternate use of a portion of bonded wine premises • “Host” is a bonded winery • Alternating Proprietor is also a bonded winery • Use of Equipment and Space is alternated for 24-hour (minimum) periods AP AP AP Host Winery’s or Alternating Proprietor’s Premises, as needed

  13. Alternating Proprietor-Host • Must fully qualify as a winery • Host winery proprietor files documents with TTB to curtail its bonded premises • Responsible for own production, recordkeeping, reporting, labeling and taxes, • $$$ Investment- in major winemaking equipment or winery premises AP AP AP

  14. AP-Host ADV: Fuller use of expensive equipment Improved cash flow DISAD: Much more complicated record system Must coordinate with tenant May lose certain label claims

  15. Alternating Proprietor-Tenant • Must fully qualify as a winery • Responsible for own production, recordkeeping, reporting, labeling and taxes, independent of host winery • Less investment in major winemaking equipment or winery premises AP AP AP

  16. Alternating Prop-Tenant ADV: Less capital outlay Quick entry to the wine business DISAD: Much more complicated records Must coordinate with host May lose certain label claims

  17. Other Factors for Alternators • Economies of scale-bulk glass, etc • Crush pad chaos • No “Divorce Court” • No “virtual wineries”

  18. Custom Crush Operations • Client contracts with a Bonded Winery to have wine produced • Winery produces the wine to client’s specifications • Client receives finished, taxpaid wine WLD Taxpaid Wine BondedWinery

  19. Custom Crush Winery • Qualifies as a bonded winery • Responsible for ALL production, records, reports, labeling, taxes • Bottling winery obtains the COLA • Incurs expenses for winemaking equipment and winery premises

  20. Custom Crush Winery ADV: Cash flow from extra capacity DISAD: Must count all production as theirs Full recordkeeping, reporting responsibility Must deal with client

  21. Custom Crush Client • Qualifies with TTB as a Wholesaler • Minimal recordkeeping requirements as a Wholesaler; no report to file • No responsibility for production, recordkeeping, reporting, labeling or tax • No investment in winemaking equipment or premises

  22. Custom Crush Client ADV Quickest, cheapest way in to the industry DISAD Limited label claims May be “lowest priority” for crusher Must deal with crusher

  23. Other Factors for Crusher/Client • Client may receive wine in bond as “starter inventory” after issuance • Client has to allow name to be used • Some states restrict ownership of brands • BOTTLER MUST GET COLA • REMOVER MUST PAY TAXES

  24. RECAP • In Bond • Tax Paid • Bonded Premises • 4 Options: 1) Stand Alone BW 2) BWC 3) Alternator 4) Custom Crush

  25. THANK YOU! QUESTIONS?

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