I ran into Steve Raye of Bevology two weeks ago at Tre Bicchieri. We’ve known each other for about nine years. Since I met Steve he has gone through many iterations, his latest is as guru of the new tax law and it’s impact on the beverage industry. Here is one article he wrote on the topic and I am sure many will follow. Steve said he’s like Madonna and just keeps reinventing himself and I must say, that was a pretty good analogy. He did get me think about the tax laws and if I am up to speed on them or not. I started to do some research of my own and began thinking how complicated this must be for foreigners.
What I have gleaned is the following:
1. Major revisions have occurred to the tax code, regarding wine & spirits but they are only in place until December 31, 2019, unless they are extended.
2. The changes are based on the Craft Beverage Modernization and Tax Reform Act of 2017.
3. Credits have been phased out and currently the following are in force:
a. $1.00 credit per gallon for the first 30,000 wine gallons produced
b. $0.90 credit for the next 100,000 wine gallons produced (30,001 to 130,000)
c. $0.535 for the next 620,000 wine gallons produced (130,001 to 750,000)
d. All wine produced over 750,000 gallons will be taxed at the regular rate
e. Credits are extended also for natural sparkling wines ( does this mean the ancestral method only?) I think not…
f. The Tax Cuts and Jobs Act amends existing law so that wines up to 16% alcohol by volume qualify for the $1.07 tax rate, rather than the previous higher rate.
g. They have raised the threshold for table wine from 14% to 16%. – This means a lot for sweet wines or other than have higher alcohol.
h. The Tax Cuts and Jobs Act increases tolerance to 0.64 gram of carbon dioxide per hundred milliliters of wine for wines produced primarily from grapes, which is generally taxed at $1.07 per wine gallon.
i. Wines exceeding this limitation were taxed as “sparkling wine” at either $3.30 or $3.40 per wine gallon.
There are a number of questions I have about all of this and I am sure the same is true for wineries and producers. Much of the impact of all of these changes is really on importers but still, I imagine the industry in general is watching and taxing stock. Will we see label changes so that producers put actually ABV on the labels. Most lower the amount listed in order to pay less tax. It seems from my reading, although I could be wrong, that there will not be lots of label changes. We shall see what the TTB has to say.