Close

Transferring a Wineries Small Domestic Producer’s Credit

Share on facebook
Share on twitter
Share on linkedin

Blog 18

How does my winery transfer its’ Small Domestic Producer’s Credit?

If you are a new winery, the best question to ask first may be: what is the Small Domestic Producer’s Credit? Back in 1991 the federal government increased the wine excise tax.  In order to keep the rate the same for smaller producers, a credit was created for those wineries that produced less than 250,000 gallons of wine per year, on the first 100,000 gallons produced.  Because of the credit there is no change from 1991 on the tax rate for those producing less than 100,000 gallons.  Those producing more than that see a phase out of the credit in the amount of 1% per 1,000 gallons produced over 150,000 gallons, with total phase out at 250,000 gallons.

Sometimes producers may have the right to take the tax credit, but because of certain circumstances, choose not to do so.  For example, physical space restrictions of the production area, perhaps because of an urban winery setting, will sometimes effectively force a winery to transfer their wine to other bonded wine premises, including commercial bonded wine cellars.  At that point, the product may be stored and then distributed.  The producers may elect to pay the excise tax on the wine prior to shipping it to the bonded wine cellar.  Many times the motivation for this is to make sure that the small producer gets the tax credit.  What the producer may not realize is that it is possible to transfer the credit to the other bonded wine premises to be used when the wine is removed for consumption or sale.

Of course, proper procedure must be followed in order to make sure the credit transfer is technically correct.  According to TTB, a winery may transfer its credit if it meets the following four conditions:

•    The wine produced by the small winery would be eligible for the small winery tax credit if removed from its own premises.
•    The transferee becomes liable for the tax when it receives the wine in bond.
•    The producer holds title to the wine at time of taxable removal, and
•    The producer provides credit information to the transferee in writing each time wine is to be tax paid.
The documentation expected in a transaction of this sort contemplates the producer providing the bonded wine cellar with a document that includes both the name of the producer and the transferee, the quantity and tax class of the wines to be shipped, the date the wine is to be removed from bond for consumption or sale, confirmation that the producer is eligible for the credit and the credit rate to which the wine is entitled, and confirmation that the shipment is within the first 100,000 gallons removed by (or on behalf of) the producer for the calendar year.

From a tax return and operational reporting standpoint, either the producer is reflecting the calculation of the credit on its return, or reflecting that the credit was transferred.  If a transferee is taking the credit, its return and operational report shall reflect the credit and from whom it was transferred so that TTB may track the credit and abuse can be deterred and detected.

If you have questions about the Small Domestic Producer’s Credit or transferring a credit, please don’t hesitate to contact our office.

We're Here to Help

Dear friends in the alcoholic beverage industry,

As we as an industry, nation and planet collectively try to navigate this unprecedented period the coronavirus has brought us, We’d like you to know that we at Craft Beverage Consultants (the other CBC!) are here to answer any question you may have (or not know you have) about not just surviving this time but positioning yourself to thrive as soon as social distancing measures allow your business to function at full capacity again.

If you schedule a free 60-minute phone or video conferencing consultation with me or any of my 11 highly specialized colleagues, we’ll help you figure out any of your immediate and/or longterm business needs, or “everything but the staffing,” as we like to say. We’re not high-pressure sales kind of people, especially these days, so you don’t have to worry about fending off annoying pitches. Make an appointment on our website or Facebook page, or just call us the old-fashioned way at 314-768-0220.

Our experts have a combined 150 years in the alcoholic beverage industry, with deep knowledge in everything from sales and distribution, production, and regulatory compliance to marketing, package design, event planning, IT, (social) media, hospitality, and even values-based executive coaching. 

For example, we can coach you through this season when chain accounts have canceled their spring, in some cases, fall resets and distributors have drastically cut orders. Our director of business strategy and compliance can save you money – now – on excise taxes, caution you to avoid naming your beers in ways that risk alienating your buyers (Wuhan Wheat? Coronavirus Cream Ale? Groan. No.), and secure TTB approval for the tastefully named beers you do make. Our creative director and web team can get your e-commerce site up and running and launch a social media campaign that keeps you top of mind for current and future customers. Our director of storytelling can put you in front of the press so you can tell your story to your community. 

Once you’re ready, we can look forward together. Now is the time to talk about post-virus. We all suspect the legal landscape to look different. But how? And how do you prepare yourself in a way that positions you to charge out of the gate ready to maximize the potential and profit of whatever the “new normal” turns out to be? Please get in touch so we can talk about it. 

CBC’s roster includes local and regional clients like Epic Brewing, Logboat Brewing, Piney River Brewing, SudWerk Brewing, Waves Cider and Common Cider Company, just to name a few.  The agency was founded in 2004 by Jacob and Beth Halls, formerly known as Convergence Consulting; Rick Laxague, joined as a partner in charge of sales, marketing and distribution consulting in 2019. 

Rick hase close to 20 years of experience, a bulk of which was with Crescent Crown Distributing in Arizona. His last role there was Area Sales Manager for the dedicated craft beer division, coaching and leading a sales team to be nationally recognized. In early 2014 Rick helped take a regional brewery national as their Director of National Accounts and increase that segment of their business from 30,000 cases to almost 300,000 cases in two years, an increase that equates to $4.8 million in IRI dollar sales. 

Co-founder Jacob Halls brings 17 years of experience in regulatory compliance, business strategy, marketing and craft brand management to the company. In his former position as craft brand manager for the N.H. Scheppers Distributing Company in Columbia, Missouri, Jacob helped lead his team to winning the 2016 Distributor of the Year award from New Belgium and to a nomination for the Brewers Association’s Distributor of the Year award. Jacob is also the founder and director of the South East Craft Beer Fest and several other industry specific charitable event marketing festivities. Beth Halls is Director of Business Operations and Coordinator of Charity Operations for the festivals and events run by CBC, such as the South East Craft Beer Fest, MO Bacon & Bourbon, and many more. 

Again, please reach out to us for anything.  CBC can be reached at (314) 768-0220 or at craftbeverageconsultants.com.

We look forward to meeting/talking soon.

Sincerely,

Rick Laxague, Jacob Halls, and Beth Halls