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Wine Compliance | Wine Compliance Alliance - Part 2
Category Archives: Wine Compliance
Posted on 2016-01-26 by Ann Reynolds
In last week’s blog post I explained the details behind the TTB’s recent announcement that starting in January of 2017 many US wineries will no longer be required to maintain their TTB wine bond. Not surprisingly I received a lot of follow up questions. There is no shortage of confusion around just this one topic of winery compliance. So I’ll be continuing to follow up with additional blog posts to explain exactly what a TTB wine bond is and how to determine whether or not your winery will qualify to no longer need one. Today’s post however is meant to clarify a possible misunderstanding. Simply because your winery may no longer need to maintain a TTB wine bond does NOT mean that you won’t still need your TTB basic permit as a winery.
All businesses that desire to make and sell wine in the US will still be required to obtain (or maintain) a TTB basic permit as a winery. I underlined make in that sentence because as a “producing and blending” TTB winery permit holder that means your winery must actually ferment either grapes or juice (Or both) on a regular basis. TTB code breaker: ferment = make or produce! I always suggest to winery clients that they ferment at least some gallons every year. (Which would then show up on their TTB 5120.17 report as “produced by fermentation”) If your winery has not or is not showing some “produced by fermentation” gallons on this required TTB report then in the eyes of the TTB your site is not “acting like a winery” and your TTB permit can be downgraded from a winery type to a wine cellar type. I also remind my clients that qualify to file under the small producers tax credit for their TTB excise taxes that they must show “produced by fermentation” gallons every year in order to file for this credit on their TTB excise tax reports. Here are some other thoughts on the TTB’s elimination of the wine bond for qualifying wineries. What will happen to the use of the phrase “bonded winery” for example? We love that phrase, and it is often used incorrectly from my readings in the winery compliance world. For example I’ve often seen the phrase “virtual winery” used to describe what are technically a “bonded winery” type of business, something that is an ongoing annoyance. Plain and simple a bonded winery is a business that holds a basic permit with the TTB as a winery. Who holds this type of TTB basic permit? Stand alone winery sites are one group, alternating proprietors or APs are another, and then sites which house more than one type of alcohol beverage production facility, such as a brewery which also makes cider on the same site will hold both a TTB brewery permit as well as a TTB winery basic permit. (for the cider production) Also a “bonded winery” has a “BWN” number. We often refer to this as the TTB permit number, which is also inaccurate. If you look at your winery’s TTB permit up in the top right corner you’ll see 4 numbered boxes. Box # 1 is titled “permit number” and will list your state TTB permit number. Such as CA-W-12345. This is NOT your “bonded winery” number. Your winery’s “bonded winery” number is the one listed in box #3. This is your BWN #, such as BWN-CA-54321. The TTB calls this your registry number. That however is the correct number to use on all your TTB reports, what is required to be listed on the bill of lading for a shipment of bulk wine, and is also listed on any TTB label approvals that are submitted for wines bottled at your winery site. Share
Posted on 2016-01-19 by Ann Reynolds
As a winery compliance consultant it makes sense that I’m signed up for the TTB’s email updates. Some of these announcements are useful, while some have no effect on me at all. Yesterday’s was a rare breed in that I was surprised by what I read. What was so surprising? Starting in Q1 of 2017 holders of a TTB winery basic permit that meet the requirements to file their TTB excise taxes on either an annual or a quarterly basis will no longer be required to maintain a TTB wine bond. That’s big news! What does that mean for thousands of US wineries? (& for those about to start a new TTB winery application) They will no longer need to apply for or maintain their TTB wine bond, which for most businesses is an annual insurance policy. All wineries that owe up to $50,000 per year in TTB excise taxes can qualify for this “no TTB wine bond necessary” status. Next question, do you know what your winery’s current TTB wine bond amount is? This is the form that you are looking for in your records OR you can call your winery’s insurance office as they are likely who the TTB wine bond was set up through, as well as who you’ll contact come the end of 2016 to cancel the policy if your winery qualifies. Their are currently well over 8,000 wineries in the US and closer to 80% of those produce less than 5,000 cases of wine per year. That means they likely qualify to cancel their TTB wine bond. (as long as their winery isn’t part of a larger winery “portfolio” held by the same umbrella ownership) By the way if your winery ships out up to 23,000 cases of wine per year & qualifies for the small producers tax credit than you also likely qualify for this “No TTB wine bond necessary” status. If you are still wondering about your winery’s TTB wine bond status and whether you’ll qualify to cancel it come the end of this year please reach out to my office here to discuss further.
See the full text of the TTB’s announcement here.
Posted on 2016-01-12 by Ann Reynolds
It’s the beginning of a new year and with that in the world of winery compliance it also means for many wineries the required filing of one federal (TTB) and one state (CA BOE) report related to their 2015 winemaking activities. Has your winery filed? They are both due by Friday, January 15th. Does your winery qualify to file each of these reports on an annual basis? See my previous blog post here about qualifying to file the TTB report, the 5120.17 on an annual basis. For the CA BOE Winegrower tax return if your winery qualifies to file the report annually it will be mailed to you on an annual basis and be filled in with the full calendar year as the reporting period. See an example here of the CA BOE report. You also need to be aware that the CA BOE report is required to be sent in even if you list all zeros on the first page. There is a late fee and your CA ABC license can be suspended if this report is not sent in.
If you’re reading this and wondering about how to complete either of these reports for your winery I invite you to sign up for a brief “Compliance check in” call. There are a lot of what I refer to as moving parts in any winery’s compliance systems. And each of those moving parts are connected in one way or another to the others, but if you or someone at your winery isn’t aware of these connections it can lead to issues such as audits, fines, and in some cases permit cancellation. To further clarify some of these moving parts I discuss some of them in another recent blog post. A summary I called “year end compliance wrap up” tips. See that post here.
For all you annual filers out there, here’s hoping you’ve already checked these two report filings off your to do list.
If not and you’d like some guidance feel free to reach out:
Posted on 2015-12-29 by Ann Reynolds
This post is part 3 of a series on the most common TTB required report that all US wineries must file, the 5120.17 (or 702) Report of wine premise operations. The last two blog posts have both been building up to this one. The first told you about qualifying to file this report on an annual basis and the second detailed specific wine production numbers all wineries are required to be reporting on an annual basis.
This week’s post is about the actual filing of this TTB report, and specifically on filing it using their online system, Pay.gov. I’ve been using this online system since 2009 for clients and continually recommend it. The primary advantages of using Pay.gov are: (1) You know the TTB received your report! (No snail mail issues)
(2) The system won’t allow you to send in an incomplete or out of balance report. I will clarify that when I mention incomplete by that I mean for example, if you list gallons on line 2, “produced by fermentation” it then requires that numbers are also listed in part 4, Summary of materials received and used, specifically line 5. Want to know more about how to file your winery’s TTB reports?
Here are the details for getting started with filing this TTB report on the Pay.gov site.
Sign up for an account. The person who signs up for the account MUST have either signing authority or power of attorney for the winery’s TTB permit. Once your account is set up you’ll receive your logon and initial password and can begin submitting reports. The Pay.gov system is available for submitting the 5120.17 Report of wine premise operations as well as 5000.24 Excise tax report and payments.
All your reports submitted online will be available moving forward, and any necessary amendment filings that come up for your winery down the road can also be submitted on your Pay.gov account. This required TTB report is often the source of audit issues for US wineries, some of which are that they are filed late, incorrectly or not at all. By having and using the Pay.gov system on the filing schedule that best matches their wine making numbers winery staff can gain some peace of mind that they are covered.
Not sure that your winery is covered for required TTB reporting?
Posted on 2015-12-22 by Ann Reynolds
This week’s blog post is the 2nd in a series I’m posting for winery staff to help them understand and be aware of how they need to be reporting some specific numbers annually (at least) on their required TTB Report of wine premise operations, or 5120.17 (702) filing(s). In assisting wineries with this report I regularly see that they are either completed incorrectly or are missing numbers on specific lines that any US bonded winery must list per TTB regulations. If these numbers are not listed on these required reports it can lead to issues such as TTB audits, wine label issues, and potentially loss of your permit.
The specific report numbers I’m referring to are lines 2 & 5 in part 4, Summary of material received and used, and line 2 in part 1, section A, Bulk wines. (See TTB report template here)
Part 4, summary of materials received and used is the “harvest” section of a winery’s report. This is where your wine making numbers will start on this report for all grapes or juice you receive and process at your site. Line 2 is for the pounds of all grapes or gallons of juice (if they came onto your site as juice not grapes) received at your site and line 5 is for when those pounds or gallons have finished fermentation (either alcoholic and/or malo-lactic) and your winery thus “declares” them finished wine which is when they “graduate” to line 2 of part 1 section A, “produced by fermentation”.
Have I lost you already? Click HERE to sign up for my Compliance Check in Call
The problems I commonly see with this report specific to the above report lines are:
Numbers are listed on line 2 “produced by fermentation” but no numbers listed in part 4
No numbers listed in either part 4 or on line 2, “produced by fermentation”
Numbers listed in part 4 are listed incorrectly or are incomplete
What are the potential end results that can come from sending your TTB reports with the above issues:
If like #2 above your reports never list numbers in part 4 or on line 2 in part 1 of section A then your winery would not qualify to file your TTB excise taxes under the small producers tax credit AND in the event of a TTB audit your basic permit could be in jeopardy because in the TTB’s eyes you are not acting like a winery. What does that mean? As part of holding a TTB basic permit as a winery (you know, that BWN # we’re always referring to?) you are actually required to conduct some amount of fermentation activity. At a minimum that would show up on your TTB report as some juice gallons received (line 2, column C in part 4), then the resulting finished wine gallons from fermenting that juice on line 4, column C in part 4 and lastly those finished wine gallons on line 2, produced by fermentation in either column a or b depending on the wine’s alcohol content.
Wine labeling issues. If your wine label lists “produced and bottled by” on it, then per TTB requirements at least 75% of the wine blend must have at least finished fermentation at your winery site. Meeting this requirement backs directly into gallons that appear on line 2, produced by fermentation of the TTB report. Still feeling lost or concerned about this TTB report for your winery?
Sign up HERE for your own Compliance Check in Call
Posted on 2015-12-14 by Ann Reynolds
Not only is it the end of yet another calendar year, but in the winemaking world this time of the year also tends to coincide with the “end” of the winemaking life cycle. That end I refer to is the completion of alcoholic (& for some wines malo-lactic) fermentation of the most recent vintage’s finished wines. US wineries do you know how that translates onto your most common required TTB report, the Report of wine premise operations? Most US wineries qualify to file this required report on an annual basis, which means they must submit it to the TTB by January 15th of each year, reporting the previous year’s numbers. There are two requirements that a winery must meet in order to qualify to file this report on an annual basis. The first is related to your ongoing gallon amounts that sit at your winery site throughout the year. You can have up to 20,000 gallons of wine sitting in tanks, barrels, drums, etc at your winery site and you meet the first qualification. (I should also mention that if your winery stores “in bond” cased wines at your site then you need to include their gallons in that number. “In bond” refers to wines that have not had TTB excise taxes paid)
The second qualification for annual submission of this TTB report is that your winery also must qualify (& does) file an annual TTB Excise tax report. In order to qualify to file the TTB excise tax report on an annual basis you can owe no more than $1,000 in excise tax payments for a year’s worth of your wine shipments. By the way your winery can ship up to about 630 cases of over 14% wine per year and you’d be within this $1,000 total excise tax bill amount. I based that calculation using the small producer’s tax credit amount, which means I deducted 0.90 cents per gallon off the full TTB excise tax rate. (This case amount would be higher if some of your wines are below the 14% alcohol level)
Once you’ve determined that your winery meets both qualifications to submit the Report of wine premise operations on an annual basis the next suggestion to be aware of and sign up for is online filing of the report via the TTB’s Pay.gov site. This is their electronic platform which any winery can use to file both this report as well as file and pay their TTB excise tax reports. A winery representative must apply to set up an account, and that person must also have either signing authority or power of attorney with the TTB offices.
Here is a link to some more information on annual, quarterly and monthly reporting requirements as well as further information on completing the TTB Report of wine premise operations. TTB Reporting
Confused or concerned about your winery’s reporting? You’re a candidate for one of my “Compliance check in” calls! Sign up for one here: Compliance Check In
Posted on 2015-12-08 by Ann Reynolds
2016 is quickly approaching and 2015 is quickly winding to a close. From a wine making compliance perspective there are some specific areas that are in the best interest of all wineries to give attention to before the year ends.
Wine “production”. We reference this term a lot in the wine making world but what I’m referring to specifically here is the TTB’s definition of wine production, and making sure that production numbers are reported every year if you are a TTB winery permit holder. This includes all stand alone wineries AND all alternating proprietorship, or APs. (both of which are wineries in the TTB’s eyes) These production numbers that wineries need to list every year appear on the TTB 5120.17 (“702”) report on line 2, “produced by fermentation”.
There are two main reasons why a winery will want to make sure it lists numbers on line 2 of their TTB 5120.17 report(s) each year. The first is related to their filing for the small producers tax credit when filing their TTB excise tax reports. A winery may only file for this credit if they have shown production in the previous year. The scenario looks like this. Harvest of 2015 winery A did not ferment any grapes or juice, therefore it never listed any numbers on line 2 of it’s TTB 5120.17 reports for all of 2015. In 2016 when it ships out wine to customers and then must file and pay the TTB excise tax it would NOT qualify to file for the small producers tax credit.
The other reason for wineries to pay attention to their production numbers every year on line 2 of the TTB 5120.17 report is those numbers listed there tie directly to the use of “produced and bottled by” on their wine labels. In order to list “produced and bottled by” on a wine label at least 75% of the blend of that wine must have been “produced” at the site that bottled it. Here again “produced” meaning numbers that were listed on line 2 of their TTB 5120.17 reports.
California Grape Crush report preparation or filing. If your winery site holds a California weighmaster license, or if you are an AP and grow, buy or sell grapes then you are required to complete this report to the CDFA every year. It is due by January 10th, but right now is the best time to be preparing it. Napa County use permit holders with a 75% grape reporting requirement. The 75% Napa county grape source requirement has been in effect since post 1990 and creation of the Winery definition ordinance. (WDO). In more recent years when the county planning office has issued winery use permits it has made annual grape summary reporting a requirement. If your winery’s use permit (in Napa county) was approved in the last few years take a look at your list of conditions attached to your use permit approval letter. That is where it would list whether or not your winery is required to submit an annual report to the county planning office by December 31st which summarizes all grapes received at your site by appellation, which would prove that you are meeting the (at least) 75% grapes from within Napa county requirement.
If after reading all of this you are confused or unclear as to your winery’s compliance you are a perfect candidate for a “Compliance Check in Call”
You can sign up for one here: Compliance Check in Call
Posted on 2015-12-01 by Ann Reynolds
If you’re involved in the Napa winery industry you’ll likely be interested in attending the next Napa County supervisors meeting on Tuesday, December 8th at 9 am. The topic of great interest: discussion of the recommendations of the APAC committee. This is a list of their 11 final recommendations after their session of meetings began upon the committee’s formation in March of this year. The supervisors review and potential eventual approval of items on this list will mark the next chapter in Napa County’s evolution of how it defines and regulates a winery. The list of the committee’s recommendations cover a wide scope; from specifics related to winery compliance reporting to developing new use permit application processes to completing the county’s climate action plan. Here are their recommendations which would impact your compliance reporting as a Napa county use permit holder.
Signature (by principal officer) certification of compliance with all use permit conditions
Submission of copies of your TTB 5120.17 & California Grape crush reports Based on the results of these annual report filings, civil penalties would be assessed on any non-compliant wineries
My key suggestion to all current Napa County winery use permit holders is this: Are you currently keeping watch on your use permit conditions as they are connected to your ongoing TTB & CDFA report numbers?
Those two specific use permit conditions being your production gallons and 75% grape source requirement. If you aren’t familiar with how the county determines compliance for these see my earlier blog post here.
What I often find interacting with wineries is that the individuals who are responsible for tracking the above two sets of numbers are simply not aware of their site’s county use permit conditions. So though they are the ideal source to be keeping an eye on their county use permit compliance, the connection has not been made for them to take ownership of it. They simply have never seen the use permit and it’s list of conditions. The solution to this is simple. Track down your site’s county use permit. The original, plus any modification updates needs to live at your winery site. If for some reason you cannot locate it you can contact the Napa county planning commission offices for a copy of your site’s complete file. If your site has not been random audited by the Napa county planning office in recent years then run a self assessment of your numbers (from your TTB 5120.17 & CA grape crush reports) to determine whether or not you’re currently in compliance with your use permit.
Questions on any of this my office can provide guidance and/or assistance. Please contact me at: ann@winecompliancealliance.com or (707) 266-1946
Here is a link to the APAC committee’s list of recommendations:
Posted on 2015-11-23 by Ann Reynolds
Yes I know, “thankful” and “compliance” don’t usually show up in the same sentence together. But if you’re someone who has spent the past 15 plus years interacting with the TTB from a recordkeeping and reporting standpoint you can appreciate the improvements that have come along to simplify the process. Plus I’m a person who believes in a regular practice of gratitude. So in the spirit of marking this Thanksgiving week I’ve summarized a few of this years compliance “developments” that I’m grateful for.
Some of these items on the list are developments from the TTB over this past year while others are about new developments in my business.
1. Label approval times are still relatively “quick”. Average processing time is now 20 days. http://www.ttb.gov/labeling/labeling-resources.shtml
2. Another TTB update related to label approvals. The “You can get it wrong but still get it right!” update they posted in September. See my blog post which summarizes this: 9-29-2015 Blog post 3. I’m now teaching a winery compliance course through the Napa SBDC offices. The class is offered twice a year. Sign up for my newsletter to find out about upcoming 2016 dates.
4. Wine Compliance Alliance has had a Youtube channel for a year now. 2015 was quiet as far as posting new videos but starting January 2016 you can expect to see regular weekly uploads on topics related to TTB winery compliance, from permitting through record keeping, reporting, paying excise taxes and label design/label approval. Here’s the channel to subscribe: Wine Compliance Alliance Youtube channel
5. Last but not least I’m continually thankful to all of you who have found my blog and made contact with me to let me know that it made you smile, helped you out or you became another awesome client. Thanks! I’m very grateful to hear your appreciative feedback! It is you that I am writing for! Make sure you stay in my loop of the wonderful world of winemaking compliance by signing up for my newsletter by accessing my “5 Simple Steps” download here on my site.
Here’s to more updates and improvements to be thankful for in your winemaking compliance as we approach 2016! Stay tuned!
Posted on 2015-09-29 by Ann Reynolds
Those 3 application fields are: net contents, alcohol content & vintage. So what does this mean? If you submit a label approval for a wine and the information you put in any of the above fields of the COLAs online application (net contents, alcohol content & vintage) does NOT match what appears on the label files that you upload, then the TTB specialist viewing the application will still go ahead and view your label files since those 3 fields are all part of the list of allowable changes. As long as all other fields on the application match the label files, and the balance of items on the actual label(s) are all compliant they will approve it.
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