(Wines&Vines) - Everyone in the wine industry knows that any business involved with alcohol is heavily regulated at the state and federal levels. On Dec. 18, 2015, that regulatory weight got a little bit lighter for approximately 80% of the wineries across the country. That was the day U.S. president Barack Obama signed the Consolidated Appropriations Act (also known as the Fiscal Year 2016 Omnibus Appropriations Bill) into law. Unbeknownst to most wineries, one section of the law, the Protecting Americans from Tax Hikes Act of 2015 (a.k.a. “the PATH Act”) included changes to excise tax due dates, bond requirements and the definition of wine eligible for the “hard cider” tax rate. Wineries should note, however, that these changes will not take effect until January 2017.

Changes in excise tax due dates

According to an announcement issued by the Alcohol and Tobacco Tax and Trade Bureau (TTB) on Jan. 14, “Section 332 of the PATH Act changes the excise tax due dates and eliminates bond requirements for certain eligible taxpayers.” The announcement continued, “Taxpayers who reasonably expect to be liable for not more than $1,000 in taxes imposed with respect to distilled spirits, wines and beer for the calendar year (and who were liable for not more than $1,000 in such taxes in the preceding calendar year) can pay those taxes annually rather than quarterly.”

Under present regulations, wineries that expect to owe up to $50,000 per year in federal excise taxes have to file and pay those taxes on a monthly basis. Under the new law, those wineries will be permitted to pay their taxes on a quarterly basis.

In looking at some specific examples, a winery holding a TTB basic winery permit and qualifying for the small producers tax credit (which reduces the excise tax rate from $1.07 to 17 cents for wine with less than 14% alcohol) would be liable for less than $1,000 in federal excise tax if they produced 5,880 gallons of wine (2,473 cases) or less. The maximum volume of wine for a winery to qualify for the small producers tax credit is 250,000 gallons. The first 150,000 gallons (or 63,078 cases) gets the full 90 cents per gallon credit. A winery of that size (150,000 gallons) producing wine with an alcohol level below 14% would anticipate paying about $10,723 in federal excise tax under the small producers tax credit. Above 150,000 gallons, the wine excise tax increases by 1% per 1,000 gallons up to 250,000 gallons, at which time the winery must pay the full rate of $1.07 per gallon for wine under 14% alcohol.

Changes in bond requirements

The PATH Act states that alcohol producers eligible for annual or quarterly filing of excise taxes as of Jan. 1, 2017, will be “exempt from the requirement to file a bond covering their operations or withdrawals of distilled spirits, wines for non-industrial use or beer.” According to Michael Kaiser, director of public affairs at WineAmerica, these changes will affect the majority of wineries across the country. “A winery that has a tax bill below $50,000 won’t have to maintain a wine bond,” he stated, “and that can save a winery from $100 to $1,000, depending on the size of the winery.” Kaiser noted that TTB is working on regulations to implement the new law, and he stressed, “Nothing will change to the existing law until the new law goes into effect in 2017.”

Mary Beth Williams, president of Williams Compliance and Consulting Group outside Richmond, Va., noted that the premium small wineries pay for their wine bond is often between $100 and $200 per year. “That’s not a lot of money,” she said, “but every little bit helps. With small wineries, often the winery owner is the grapegrower and the winemaker and the sales person in the tasting room. An additional benefit to small wineries is that it’s one less regulatory headache.”