Tax Guide for Winemakers and Distributors

California is the largest wine producing state in the United States and is the fourth largest wine producer in the world. We recognize that understanding and dealing with tax issues related to your industry can be time-consuming. We want to help you get the information you need so that you can spend more time focusing on your business.

To help you better understand your sales, use, and alcoholic beverage tax obligations, we have created this guide with topics important to your business.

Two Wine glasses with a bottle of wine

How to Use This Guide

Each section of this guide contains information important to your business. The Getting Started section provides key resources related to registration, filing returns, account maintenance, required licenses, and other important information you need.

The Ingredients section provides guidance on the tax application to purchases of many items used in winemaking.

The Industry Topics section covers many topics in an at-a-glance format which can be expanded to show more extensive information.

The Resources section provides links to a wealth of information, including web-based seminars, forms and publications, statutory and regulatory information, and access to live help from our customer service representatives.

Get It in Writing

Please note that the information included is general in nature and is not intended to replace any law or regulation. Our tax and fee laws can be complex. If you have specific questions about the information in this guide, we recommend that you get answers from us in writing. This enables us to give you the best advice and may help protect you from owing tax, penalties, and interest in case we give you erroneous information.

To request written advice, please complete and submit the General, Non-Confidential Tax Questions Form online. For more details on how to request written advice, please see publication 8, Get It in Writing!

Man testing wine

If You Need Help

If you need assistance, please see the How to Contact Us page.

If you have suggestions for improving this guide, please contact us via email.

Getting Started

If you make and sell wine, you must register with the Board of Equalization (BOE) for a seller's permit and file sales and use tax returns.

In addition to a seller's permit, you must register for an Alcoholic Beverage Tax account with the BOE if you are required to obtain any of the following licenses issued by the Department of Alcoholic Beverage Control (ABC):

Winegrower (Type02) – "Winegrower" means any person who has facilities and equipment for the conversion of grapes, berries or other fruit into wine and is engaged in the production of wine.

Wine Rectifier (Type 08) – This license authorizes the holder to cut, blend, rectify, mix, flavor and color wine. A wine rectifier may only deal in "tax-paid" wine.

Beer and Wine Importer (Types 09 and 10) – These licenses permit the holder to import and export alcoholic beverages and are only issued to persons who hold another type of license which permits the sale of beer and wine for resale.

Customs Broker (Type 15) – This licensee is generally located near the dock area in seaports or at international airports. "Customs broker" means any person who is authorized to act as an agent or broker for a person whose place of business is out of this state, in regard to the importing of alcoholic beverages into the state under United States Internal Revenue bond or in United States Customs bond.

Beer and Wine Wholesaler (Type 17) – This license permits incidental sales to other supplier-type licensees. The Type 17 does not have an alcoholic beverage tax account registration requirement. However, it is typically issued in conjunction with a Type 09 (Beer and Wine Importer).

Industrial Alcohol Dealer (Type 19) – An industrial alcohol dealer sells alcohol for use in the trades, professions, and industries, but not for beverage use.

Wine Blender (Type 22) – A wine blender is a person authorized to operate a bonded wine cellar pursuant to a Federal Basic Permit issued by the Alcohol and Tobacco Tax and Trade Bureau (TTB) who does not have facilities or equipment for the conversion of fruit into wine and does not engage in the production of wine.

Wine Direct Shippers Permit (Type: 82) – This license authorizes both California and non-California wineries to sell and ship wine directly to a resident of California for the resident’s personal use and not for resale.

For more information about alcoholic beverage licenses, visit the ABC's website.

Interstate Alcoholic Beverage Transporter's Permit

You must also apply with the BOE for an interstate alcoholic beverage transporter's permit if you are a:

  • Trucking company carrier
  • Out-of-state wine manufacturer

Registration

Online Registration – Register with us for your seller's permit and apply for any of the licenses, permits, or accounts applicable to your type of business. Our registration system will prompt you when you select Register a business activity with BOE from Registration – Main Menu.

Sales & Use Tax Returns

Tax Return Filing Deadlines – Find your filing due dates.
File a Tax Return Online – BOE's online filing service is easy, fast, and free!
Online Payment Options – Make payments online for tax and fee programs.

Sales & Use Tax Exemptions

Certain equipment purchases and leases by wine manufacturers may qualify for a partial exemption from sales and use tax. To see if your purchases qualify, please see our Manufacturing and Research & Development Exemption guide.

Certain purchases of farm equipment and machinery by grape growers may also qualify for a partial exemption from sales and use tax. To see if your purchases qualify, please see our Tax Guide for the Agricultural Industry.

Alcoholic Beverage Tax Returns & Reports

Alcoholic Beverage Tax account holders must file alcoholic beverage tax returns and reports in addition to their sales and use tax returns. You must file the alcoholic beverage tax return or report on or before the 15th of the month following the period covered by the tax return. (Example: The return for January would be due by February 15th)

You must file a return even if you do not owe tax for the reporting period or did not receive a tax return in the mail.

Online Forms:

  • BOE-217, Common Carrier's Report of Delivery
  • BOE-269-A, Beer and Wine Imported into California Report
  • BOE-501-BW, Beer and Wine Importer Tax Return
  • BOE-501-WG, Winegrower Tax Return
  • BOE-1096, Customs Broker's Report of Transactions

Notice of Business Change

Keep your information current by using the links below and notifying us of any business changes.

Sales and Use Tax
Special Tax Accounts

Ingredients and Products Used in Winemaking

This section provides guidance on the application of tax to ingredients and products used in the winemaking process. Sales of ingredients and products to winemakers may or may not be subject to tax, depending on whether they fall into one of the following categories:

  • Food Products – Sales of food products intended for human consumption are not subject to tax. Therefore, ingredients used in winemaking such as grapes, berries, and yeast that are considered food products are not subject to tax.
  • Raw Materials – Tax does not apply to sales of non-food products or ingredients to winemakers that are purchased for incorporating into the finished product (wine).
  • Manufacturing Aids – Tax applies to the sales of non-food products or ingredients that are purchased for use in manufacturing or producing the wine and not for the purpose of physically incorporating the item into the finished product.

Important Note: The application of tax for the ingredients and products listed on this page is based on their use in winemaking as described in the Code of Federal Regulations (CFR), Section 24.246, Materials authorized for the treatment of wine and juice. If the actual use of a product or ingredient is different than its described category on this page, (as it aligns with Section 24.246 of the CFR), then you may not rely upon the stated tax application for your purchases of the listed ingredient or product. Instead, you should contact us for further guidance on the correct tax application regarding your specific use of the ingredient or product in question. Please visit our How to Contact Us page.

Food Products Are Not Subject to Tax

Sales of food products are not subject to tax when used to produce wine.

Examples of food products used to produce wine include:

  • Albumen
  • Casein (a milk product)
  • Gelatin
  • Milk products

The following are currently classified as food products. However they are currently being reviewed as to whether they should be categorized as raw materials or ingredients incorporated into wine. We will update this section as more information becomes available.

  • Autolyzed yeast
  • Bakers yeast mannoprotein
  • Carbohydrase
  • Catalase
  • Cellulase
  • Enzymes
  • Glucose oxidase
  • Lysozyme
  • Malolactic bacteria
  • Pectinase
  • Protease
  • Soy flour
  • Urease
  • Yeast

Raw Materials or Ingredients Incorporated into Wine May Be Purchased for Resale

Winemakers may purchase raw materials for resale (without the payment of tax) that become a component part of the finished product that will be resold.

Examples of nonfood products include ingredients used to stabilize wine, increase the body and astringency of the wine, and to sterilize or preserve the wine when the items are physically incorporated into the wine.

The following ingredients and products may be purchased for resale when incorporated into, and resold with, the finished product:

  • Acacia (gum arabic)
  • Ascorbic acid
  • Calcium carbonate
  • Calcium sulfate
  • Carbon dioxide
  • Citric acid
  • Dimethyl dicarbonate
  • Ethyl maltol
  • Fumaric acid
  • Lactic acid
  • Malic acid
  • Maltol
  • Nitrogen gas
  • Oak chips or particles
  • Potassium bicarbonate
  • Potassium bitartrate
  • Potassium carbonate
  • Potassium citrate
  • Potassium metabisulfite
  • Potassium salt of sorbic acid
  • Sorbic acid
  • Sodium carboxymethyl cellulose
  • Sulfur dioxide
  • Synthetic tartaric acid
  • Tannin
  • Tartaric acid

Please note, if the actual use of these products or ingredients is different than described above (as it aligns with Section 24.246 of CFR), you may not rely on the stated application of tax. Instead, you should contact us for further guidance on the correct tax application regarding your specific use of the ingredient or product in question (How to Contact Us).

If you make wine for personal consumption, and do not intend to resell the wine you make, you may not purchase the above ingredients without tax. These ingredients may only be purchased without tax when they are intended to be incorporated into wine that will later be resold.

Purchases of Manufacturing or Processing Aids Are Subject to Tax

Tax applies to sales of products that are consumed in manufacturing wine and are not physically incorporated into the finished product. If property is purchased primarily as an aid in the manufacturing process, it is subject to tax even though some portion may remain in the finished product.

Examples of manufacturing aids used to produce wine include:

  • Products that stabilize juice color before it is fermented into wine
  • Chemicals that assist yeast during fermentation
  • Fining agents to clarify wine (and typically filtered out of product)
  • Products that precipitate a chemical reaction during or after fermentation, prior to bottling or selling wine.

The sales of the following products to winemakers when used as manufacturing aids are subject to tax:

  • Activated carbon
  • Aluminosilicates (for example, kaolin and bentonite clay)
  • Chitosan
  • Defoaming agents
  • Granular cork
  • Isinglass
  • Polyvinylpolypyrrolidone
  • Silica gel

The following are currently classified as manufacturing or processing aids. However they are being reviewed to determine whether they should be categorized as raw materials or ingredients incorporated into wine. We will update this section as more information becomes available.

  • Biotin
  • Copper sulfate
  • Folic acid
  • Inositol
  • Magnesium sulfate
  • Niacin
  • Potato protein isolate
  • Pyridoxine

Please note, if the actual use of these products or ingredients is different than described above (as it aligns with Section 24.246 of CFR), you may not rely on the stated application of tax. Instead, you should contact us for further guidance on the correct tax application regarding your specific use of the ingredient or product in question (How to Contact Us).

Filing a Claim for Refund

If you believe you have paid tax in error on your purchases of ingredients or products used in winemaking, you may be entitled to a refund of the overpaid tax.

A refund may generally be claimed at any time within the statute of limitations (generally, within three years). If you are seeking a refund for overpaid taxes on qualifying purchases of manufacturing or research and development equipment the procedures are different depending on whether the original purchase was subject to sales tax versus use tax.

If the tax you paid was sales tax, you must request a refund from the retailer. The retailer would then file a claim for refund with the Board of Equalization. As the purchaser, you will need to provide the retailer with a completed resale certificate (BOE-230, General Resale Certificate or similar form) and documentary evidence that the original purchase should have qualified as raw material intended to be incorporated into the finished product. However, if the item on which you paid sales tax is a food product, a resale certificate is not necessary.

If the tax you paid is use tax (typically use tax applies when you purchase from an out-of-state vendor), you may file a claim for refund directly with the Board of Equalization. Simply complete form BOE-101, Claim for Refund or Credit and mail it to the address provided. Include as the reason for the refund that the property purchased qualifies as a food product or raw material intended to be incorporated into the finished product.

If you paid sales or use tax on a manufacturing aid or other taxable property and subsequently resell it before making any use of it, you may take a deduction of the purchase price of the property on your sales and use tax return. You must take the deduction under the heading "Tax-paid purchases resold" on your return in the same period in which the sale of the property is included.

For more information on how to file a claim for refund, see publication 117, Filing a Claim for Refund.

Industry Topics

Sales and Use Tax in General

In California, all sales of tangible personal property are subject to tax unless the law provides a specific exemption or exclusion. The law defines tangible personal property as an item that can be seen, weighed, measured, felt, or touched.

For winemakers and distributors, most sales of wine are for resale to other licensees authorized to sell wine. Winemakers may have taxable sales of wine, for example at wine-tasting events. Winemakers may also owe tax on sales of new or used equipment, gift items, glassware, and accessories. Sales of food intended for consumption on their premises is also taxable.

Use tax is a companion to California sales tax. It is due whenever you purchase taxable items, generally from an out-of-state vendor, for use in California, without payment of California tax. You also owe use tax on items that you remove from your inventory and use in California if you did not pay tax when you purchased the items. To pay the use tax, report the purchase price of the taxable items under "Purchases Subject to Use Tax" on your sales and use tax return. Those purchases become part of the total amount that is subject to tax.

The statewide sales and use tax rate is 7.25%, effective January 1, 2017. In many areas of California, local jurisdictions have added district taxes that increase the tax owed by a seller. Sellers are required to report and pay the applicable district taxes for their taxable sales and purchases. To find the tax rate for an address or location, visit the BOE's Find a Sales and Use Tax Rate website and enter the address as prompted.

Alcoholic Beverage Tax in General

The alcoholic beverage tax is a per-gallon excise tax collected on the sale, distribution, or importation of alcoholic beverages in California. The alcoholic beverage tax is in lieu of county, municipal, and district taxes on the sale of beer, wine, and distilled spirits.

Generally, winegrowers or importers are required to pay the alcoholic beverage tax. If the tax has not been paid by the winegrowers or importers, then the wine sellers must pay it. Wine is presumed to be sold, and the alcoholic beverage tax due when it leaves a manufacturer's facility or is removed from internal revenue bond.

The current alcoholic beverage tax rate per gallon of wine is $0.20. Check the BOE webpage Tax Rates – Alcoholic Beverage Tax for any changes in the tax rate.

Agricultural Topics

If you are in the business of cultivating, operating, or managing a vineyard, make sure you know about all of the tax-saving opportunities that may be available to you. This section explains how sales and use tax applies to farm equipment and machinery, seed and plants, fertilizer, soil amendments, pesticides, and insecticides.

Partial Exemption for Farm Equipment and Machinery

In general, the sale of farm equipment and machinery is taxable. However, certain sales and purchases of farm equipment and machinery are partially exempt from sales and use tax. As a grape grower, you may be able to take advantage of this partial exemption.

Three requirements defined in Regulation 1533.1 must be met for the partial exemption to apply. The item must be:

  1. Sold to a qualified person (see A Qualified Person below),
  2. Used exclusively or primarily in producing and harvesting agricultural products, and
  3. Defined as farm equipment and machinery.

If any one of these three requirements is not met, the partial exemption does not apply.

A Qualified Person

A "qualified person" is one whose business falls within the specified Standard Industrial Classification (SIC) Codes listed below:

  • Ranchers, farmers and other growers who operate businesses described in SIC Codes 0111 to 0291 (generally covers most agricultural businesses but excludes timber production).
  • A person who assists a qualified rancher, farmer or grower by performing a service described in SIC Codes 0711 to 0783 (includes soil preparation, crop harvesting, crop market preparation, veterinary services and farm and labor management).

The partial exemption applies only to the state general fund portion of the sales tax, currently 5.00 percent. To calculate the tax rate for qualifying transactions, subtract 5.00 percent from the sales tax rate that would normally apply at the location where the purchase is made. For example, if the current tax rate in your area is 9 percent, the tax rate for a qualifying transaction would be 4.00 percent.

Note: The rate for the state general and fiscal recovery funds portion of the sales tax is subject to change. The rates in this example are for demonstrative purposes only. You must use the rate in effect at the time of the sale. Current rates can be found on our California City & County Sales & Use Tax Rates webpage.

Examples of vineyard equipment and machinery that may qualify:

  • Planting equipment
  • Crop-spraying equipment
  • Trimming tools
  • Solar power systems, under certain circumstances
  • Irrigation equipment

If you lease farm equipment, rather than purchase equipment, you may still qualify for the partial tax exemption. For more information about leases, please see publication 46, Leasing Tangible Personal Property.

Mobile transportation equipment generally does not qualify for the partial exemption unless it is used exclusively in the conduct of agricultural operations and qualifies as an implement of husbandry under the California Vehicle Code.

For more information about this partial exemption and other exemptions available for farming, see our Tax Guide for the Agricultural Industry and look under the Farming Exemptions tab.

Diesel Fuel Used in Farming or Food Processing

Most sales and/or purchases of diesel fuel are taxable. However, a partial sales and use tax exemption exists for certain sales and purchases of diesel fuel used in farming activities or food processing.

For information on when the partial exemption applies to the sale or purchase of diesel fuel used in farming activities or food processing, see our Tax Guide for the Agricultural Industry, look under the Farming Exemptions tab, and go to the Diesel Fuel Used in Farming or Food Processing topic.

Seeds and Plants (rootlings, rootings, and root stock)

Retail sales of seeds and landscaping plants are generally taxable.

However, sales and use tax does not apply to the sale of seeds and plants when:

  • The seeds, or the products grown from them, will be used as food for human consumption; or
  • The plants will produce food for human consumption, such as fruit (including grapes), grains, berries, or nuts.

For more information, see Regulation 1588, Seeds, Plants and Fertilizer.

Fertilizer, Soil Amendments, Pesticides, and Insecticides

Sales and use tax does not apply to the sale of fertilizer to be applied to land or used in foliar application to plants, provided the land is used to produce food products (grapes).

The term fertilizer includes all of the following:

  • Commercial fertilizers (as defined in section 14522 of the California Food and Agricultural Code);
  • Agricultural minerals (as defined in section 14512 of the California Food and Agricultural Code);
  • Cover crops that will be planted on the land and plowed underneath to fertilize that land;
  • Carbon dioxide; and
  • Manure, which is considered to be:
    1. Waste from any domestic animal or fowl that is not artificially mixed with any material, or
    2. Domestic animal or fowl waste mixed only with materials used for preservation of the manure, or with materials used for bedding, sanitary, or feeding purposes for the animal or fowl.

Other retail sales of fertilizer and packaged soil amendments (as defined in section 14552 of the California Food and Agricultural Code) and auxiliary soils and plant substances (as defined in section 14513 of the California Food and Agricultural Code) are taxable.

Sales of pesticides and insecticides are taxable. However, when those materials are mixed with fertilizer, the portion of the sales price representing the price of the fertilizer is not taxable if the fertilizer is used in a tax-exempt manner.

For more information, see Regulation 1588, Seeds, Plants and Fertilizer.

Manufacturing and Research & Development Topics

Manufacturers and certain research and developers may qualify for a partial exemption of sales and use tax on certain manufacturing and research and development equipment purchases and leases.

Manufacturing and Research & Development Partial Exemption

To be eligible for this partial exemption of sales and use tax, you must meet three conditions.

You must:

  • Be engaged in certain types of business, also known as a "qualified person,"
  • Purchase "qualified tangible personal property," and
  • Use the property in a qualified manner.

A "qualified person" generally means a person who is primarily engaged (50 percent or more of the time) in those lines of business described in the North American Industry Classification System (NAICS) Codes 3111 to 3399, inclusive, 541711, or 541712. These lines of business generally include manufacturing business activities, and research and development business activities. A qualified person may be primarily engaged either as a legal entity or as an establishment within a legal entity in a qualifying line of business.

If you operate a winery, you may be considered a qualified person if you are primarily engaged in the production of wine.

Qualified tangible personal property generally includes:

  • Machinery and equipment, including component parts and contrivances such as belts, shafts, moving parts, and operating structures, used in manufacturing or research and development, and treated as having a useful life of one or more years for state income or franchise tax purposes.
  • Equipment or devices used or required to operate, control, regulate, or maintain the machinery, including, but not limited to, computers, data-processing equipment, and computer software, together with all repair and replacement parts, with a useful life of one or more years, whether purchased separately or in conjunction with a complete machine, and regardless of whether the machine or component parts are assembled by the qualified person or another party.
  • Tangible personal property used in pollution control that meets or exceeds standards established by this state or any local or regional governmental agency within this state at the time the qualified tangible personal property is purchased.
  • Special purpose buildings and foundations used as an integral part of the manufacturing, processing, refining, fabricating, or recycling process, or that constitute a research or storage facility used during those processes. Buildings used solely for warehousing purposes after completion of those processes are not included.

The tangible personal property must generally be used 50 percent or more of the time in qualifying manner. The following activities are generally considered qualifying uses of the property:

  • Primarily used in any stage of the manufacturing, processing, refining, fabricating, or recycling of tangible personal property;
  • Primarily used in research and development;
  • Primarily used to maintain or repair any qualified tangible personal property described above;
  • Property used by a construction contractor purchasing that property for use in the construction of special purpose buildings and foundations used as an integral part of the manufacturing, processing, refining, fabricating, or recycling process, or that constitute a research or storage facility used during those processes. Buildings used solely for warehousing purposes after completion of those processes are not included.

Some examples of winery equipment that may qualify for a partial manufacturing exemption are grape crushers, de-stemmers, presses, bottling equipment, and fermentation tanks.

For more information on the partial manufacturing exemption, please visit our Manufacturing and Research & Development Exemption guide.

Oak Barrels

New or used oak barrels and oak chips, purchased for the purpose of incorporating flavor elements derived from the oak into the wine, may be purchased for resale by winemakers who will resell the wine.

As the winemaker, you can provide a BOE-230, General Resale Certificate, to your vendor when purchasing oak barrels and/or oak chips.

Sales and Distribution Topics

If you sell, ship, distribute, import, or export wine, you need to know your sales and use and alcoholic beverage taxes obligations. This section contains information that may be helpful to you.

Packaging Material

Sales and use tax does not apply to the sale of packaging materials when sold to persons who place the contents (wine) in the containers and sell the contents together with the containers.

Examples of packaging materials are bottles, cans, barrels, wrapping materials, twines, bags, cartons, and pallets.

Wine Labels

Sales and use tax generally does not apply to the sale of labels when sold to persons who affix them to nonreturnable containers of property to be sold (wine) or to returnable containers when a new label is affixed to the container each time it is refilled.

Examples are sales of labels to be affixed to fruit boxes, cans, bottles, and packing cases, made to growers, packers, bottlers and others who place the contents in the containers.

Shipping Wine

A winegrower who sells and ships wine directly to California customers must obtain a wine direct shipper permit (ABC license type 82), in addition to a sales and use tax permit and a winegrower license (ABC license type 2).

If the winegrower is located outside of California, they are still obligated to register for a wine direct shipper permit but they do not have to hold a winegrower license from ABC. For the alcoholic beverage tax, the wine direct shipper is required to register with BOE and pay the tax as if they were a California winegrower.

Before sending any shipment of wine to a California resident, you must complete form ABC-248, Wine Direct Shipper Permit Application, and submit it to the Department of Alcoholic Beverage Control (ABC). This permit will allow you to sell and ship wine to any person, 21 years of age or older, for his or her personal use and not for resale. Please visit the ABC website for additional requirements.

If you sell and make shipments of wine directly to consumers in California, such sales are retail sales and you must report all applicable sales and use tax to the Board of Equalization (BOE), in addition to the alcoholic beverage tax. (Business and Professions Code Section 23661.3)

If you sell and ship wine to customers outside of California, the sales are exempt sales in interstate commerce and are not subject to California sales tax. You must keep documentation, such as a bill of lading, to show that the wine was shipped out of California directly to your customer. The amount of wine would also be exempt from the alcoholic beverage tax since it is sold for export and actually exported.

Sales and shipments of wine direct to consumers in California from winegrowers who do not possess a current wine direct shipper permit from ABC are prohibited. Any person who knowingly makes, participates in, transports, imports, or receives such a shipment is guilty of a misdemeanor pursuant to Business & Professions Code Section 25617.

Example

You operate a small winery located in the State of Washington that will be selling wine to customers located in California. You will be making direct shipments of wine to your customers in California. You are required to obtain all of the following:

  • A Wine Direct Shipper Permit from the California Department of Alcoholic Beverages Control (ABC).
  • A Seller's Permit from the BOE to file Sales & Use Tax Returns with the BOE.
  • A Winegrower/Wine Direct Shipper Account from the BOE to file Winegrower Returns with the BOE.

Wine Tasting and Self-Consumption

If you charge a fee for wine tasting, you are considered a retailer of wine and sales tax applies to the wine tasting charges.

If you also sell food during wine tastings, such as cheese, crackers, and smoked salmon, tax also applies to these sales. You may collect sales tax reimbursement from your customers on your wine and food sales as a separately stated charge. Or, you can include the tax in your wine and food charges; however, you must post a sign notifying your customers that the fee charged for wine tasting or food includes sales tax reimbursement. For more detailed information on sales tax reimbursement see Regulation 1700, Reimbursement for Sales Tax.

If you do not charge a fee for wine tasting or food served to your customers, you are considered the consumer of the products used. You owe use tax on the cost of the taxable items that you purchased for resale and used to produce the wine, which you let customers taste without charge. For example, if you are a winemaker, you would owe use tax on items purchased for resale such as bottles, corks, labels, and certain chemicals incorporated into the wine. If you purchased wine for resale, you owe use tax measured by the cost of the wine that you give away or self-consume. However, use tax does not apply to the purchase price of the grapes because they are food products, the sales of which are exempt from tax. For more information regarding components of wine produced for human consumption, please see the Ingredients tab.

In addition to the sales and/or use tax, wine is presumed to be sold and subject to alcohol and beverage tax when it is removed from internal revenue bond (non-tax paid wine).

Facility Fees for Events at Winery

If you contract to provide and serve food and/or beverages at your winery for a customer's event, such as a wedding, birthday party, or retirement party, in general, your charge for use of the winery (facility) is subject to tax.

In general, when you contract to provide and serve food/beverages for an event at the winery and the primary purpose at the event is to serve the food/beverages, your charge for use of the winery is taxable, even if separately stated. You are considered to be functioning as a restaurant and the charge for the use of the winery is part of the sale of food/beverages.

Example:
A winery has a courtyard area designed for wedding receptions and contracts to furnish and serve food and beverages for a customer 's wedding reception (event) under a lump sum charge. The winery 's courtyard has tables and chairs for the wedding reception and the winery provides all tableware, linens, glasses, etc., in addition to the food and beverages. In this case, the winery is functioning as a restaurant and the winery 's facility charge for use of the courtyard is taxable, even if the charge is separately stated.

However, if you contract to provide and serve food/beverages at the winery, but also rent a separate area of the winery to your customer for a use other than serving food/beverages, the charge for the use of the separate area unrelated to the serving of food/beverages is not subject to tax if the charge is separately stated on the invoice. A nontaxable facility charge could include a charge for a location for the bride and groom to prepare for the wedding or a charge for a room for the bride and groom to spend their wedding night.

Example:
Same scenario as the above example (i.e., winery contracts to provide and serve food/beverage for a customer 's wedding reception), except in this case the winery also rents the wedding party a separate area to hold the wedding ceremony. This area is separate from the courtyard and no food or beverages will be served in the area where the wedding ceremony occurs. The winery separately states the charge for the use of this area that is unrelated to the serving of the food/beverages. Because the primary purpose of the area for the wedding ceremony is not to serve food/beverages, the separately stated charge is not subject to tax. Under these circumstances, only the charge for the facilities where food/beverages are served is taxable.

Your charge for the use of the winery for an event where the primary purpose at the event is to serve food/beverages is taxable even if you only provide either the food or the beverages at the event.

Example:
A winery has a courtyard area designed for wedding receptions and contracts to serve its wine at the wedding reception. However, the customer contracts directly with a caterer, unrelated to the winery, to provide and serve the food at the reception. The winery 's facility charge for the use of its courtyard area is taxable because the winery is providing and serving the wine at the event, even though the food is provided and served by an outside caterer. The facility charges are taxable even if the charges are separately stated.

It makes no difference that the facilities are not primarily used for serving food/beverages in the normal course of business; such as a barn, cellar, or garden. When you contract to furnish and serve food/beverages for an event and provide facilities whose primary purpose at the event is to serve food/beverages, the charge for those facilities is taxable, even if separately stated.

Example:
A winery operates a catering service and has a cellar that can be used for private parties. The winery contracts to furnish and serve food/beverages using its catering service for a retirement party in the cellar. In such cases, even though the cellar is generally used for making and storing wine, since the primary purpose of the event is to serve food and beverages, the facility charge for the cellar is taxable.

However, in some instances, you may rent or lease the winery for an event without furnishing and serving food or beverages. Instead, the customer provides the food/beverages, including the wine, for the event; for example, the customer hires a caterer, unrelated to you to furnish and serve meals at the event. Under these circumstances, you are not considered to be acting as a restaurant because you are not responsible for furnishing and serving the food/beverages at the event. You are merely leasing the premises and the separately stated charge for the use of the winery is not taxable.

For more information, see Publication 22, Dining and Beverage Industry, under the section Facility fees charged by retailers other than restaurants or hotels.

Importing Wine

Adults (persons age 21 or older) who bring wine into California for commercial or business purposes must be licensed by the Department of Alcoholic Beverage Control (ABC).

All wine imported into this State by a winegrower or importer is presumed to be sold, and the alcoholic beverage tax is due, when it is received by the licensee. You can rebut this presumption if you can show that the wine:

  • Is still in the possession of the winegrower in internal revenue bond within this State.
  • Has been exported from this State by the licensee making the report or has been sold by him for export and actually exported from this State.
  • Is otherwise exempt.

Adults who bring wine into California for personal or household use do not need an alcoholic beverage license; however, some restrictions do apply. For specific information on importing alcoholic beverages for personal use, please visit the ABC's website and review their Importing Alcoholic Beverages for Personal or Household Use webpage.

Exporting Wine

Wine sold for export, and actually exported outside of California is exempt from the sales and use tax and the alcoholic beverage tax.

To qualify as exempt from tax, the wine sold must be:

  • Delivered to an armed force of the United States at a depot of the armed force in this state for transport out of the state, or
  • Shipped to a point in a foreign country, where the federal tax on alcoholic beverages is not imposed or is refunded, or
  • Shipped to a point outside this state by a carrier who is independent of the buyer and the seller, where "carrier" means a person or firm regularly engaged in the business of transporting for compensation property owned by other persons, or
  • Shipped to, or delivered to, a point outside this state, by any means. The claim for tax exemption must be supported by documentation signed by the purchaser and include a certificate from the appropriate liquor control or tax authority of the state in which the wine has been delivered, showing that the delivery of the wine has been reported to such authority by the purchaser.

Taxpayers must maintain documentation to support that the wine was exported, such as purchase orders, shipping documents, bills of lading, delivery receipts, etc., that show the wine was sold and exported outside of California.

Wine sales to customers outside of California are generally considered exempt sales in interstate and foreign commerce and therefore, not subject to sales tax. You must keep documentation, such as a bill of lading, to show that the wine was shipped out of California directly to your customer.

Example: Wine imported for bottling and subsequently exported

An out of state winery ships bulk wine to a licensed winegrower/importer (an Importer License is needed to import the wine) in California who will bottle the wine at their bonded facility. The licensed winegrower/importer then exports the bottled wine out of California.

There is no California alcoholic beverage tax due on the bulk wine imported into California for bottling. This is because the bulk wine is being delivered to a licensed winegrower/importer's bonded location. A California winery may receive a bulk shipment of wine in internal revenue bond; however, the winegrower must be licensed with both an importer's license (type 09) and a winegrower's license (type 02) in order to receive the wine in internal revenue bond. See Revenue & Taxation Code Section 32174.

There is also no California alcoholic beverage tax due on the bottled wine product that is exported out of California. Wine that has been exported from California by a winegrower is exempt from taxation. The winegrower must keep proof (e.g., bills of lading) of the out-of-state delivery for at least 4 years after the shipping date. See Revenue & Taxation Code Section 32173.

Sales Which Are Not Exports

If federal excise taxes have been paid on wine which was sold to persons operating commercial fishing boats or private carrier freight vessels for use as ships' stores outside of the state upon the high seas, such sales are not considered for export and therefore tax credit is not allowed with respect to the alcoholic beverage tax.

Wine Transactions Exempt from the Alcoholic Beverage Tax

  • Wine sold or delivered in internal revenue bond to another winegrower in this State (Revenue and Taxation Code section 32174).
  • Wine in continuous transit through this State in the possession or custody of common carriers (Revenue and Taxation Code section 32051).
  • Certain sales of wine for use in trades, professions, or for industrial purposes, and not for beverage purposes (Revenue and Taxation Code section 32052).
  • Wine sold in packages of a capacity of larger than one gallon for the following uses (Revenue and Taxation Code section 32053):
    • By any state or federal governmental agency, or by any scientific university or college of learning or any laboratory for use exclusively in scientific research, or by any hospital or sanitarium.
    • The manufacture of any of the following products, if the products are unfit for beverage use:
      • Medicinal, pharmaceutical, or antiseptic products, including prescriptions compounded by registered pharmacists
      • Toilet products
      • Flavoring extracts
      • Syrups
      • Food products
      • Scientific, chemical, or industrial products
  • Sales of wine to certain commercial carriers of persons when beverages will be used on their facilities outside California (Revenue and Taxation Code section 32054).
  • Wine sold for export and actually exported (Revenue and Taxation Code 32173).

Recordkeeping

You are required by law to keep business records to prepare accurate tax returns or other required reports and determine how much tax is due.

Accurate record keeping will also help you keep track of your sales and purchases and assist you when preparing your required tax returns and reports. Records must be kept for at least 4 (four) years, unless otherwise directed by the BOE. If you do not maintain records, it may be considered evidence of negligence or intent to evade the tax and may result in penalties.

Examples of records to keep:

  • Sales Invoices
  • Cash Register Tapes
  • Sales Journals
  • Resale Certificates
  • Shipping Documents
  • Purchase Invoices
  • Bank Records
  • Purchase Orders
  • Purchase Journals
  • Tax Return

Every manufacturer, winegrower, wine rectifier, wine importer, and wine wholesaler must keep records of all wine produced, purchased and sold.

Invoices

Every sale or delivery of wine from one licensee to another licensee must be recorded on a sales invoice, whether or not consideration is involved.

Each invoice covering the sale or purchase of alcoholic beverages:

  • Must not be commingled with invoices covering commodities other than alcoholic beverages.
  • Sold for export must be marked or stamped "Sold for export."
  • Sold for use in trades, professions, or industries, and not for beverage use, must be marked or stamped "No State tax—not for beverage use."
  • Must show that delivery was made "in bond" for sales of wine in internal revenue bond by a winegrower to another winegrower.
  • Must show all of the following:
    • The name and address of the seller
    • The name and address of the purchaser;
    • Date of sale or purchase and invoice number;
    • Kind, quantity, size, and capacity of packages of alcoholic beverages sold or purchased;
    • The cost to the purchaser, together with any discount which at any time is to be given on or from the price as shown on the invoice; and
    • The place from which delivery of the alcoholic beverages was made, unless delivery was made from the premises of the licensee or from a public warehouse located in the same county.

In addition to the general requirements described above, if you are a winegrower, manufacturer, wholesaler, or importer, your records must show:

Retailer Records Needed
Winegrowers and Manufacturers
  • All wine produced or manufactured in this State:
    • The quantity produced, and the disposition thereof,
    • The total quantity of imported wine.
Wine Wholesalers
  • All wine purchased in this State:
    • The kind and quantity of wine purchased,
    • The name and address of the person from whom the wine was purchased, and
    • The date received.
Wine Importers
  • All wine imported into this State shall be recorded on form BOE-269-A, Beer and Wine Imported into California.
  • All wine sold:
    • The name and address of the purchaser;
    • The date sold;
    • The kind and quantity of wine sold;
    • The size and capacity of packages of wine sold; and
    • The price, container charges or deposits, and any discount offered on wine sold.

Inventories

If you are a winegrower, you need to take a physical inventory of all wine on hand in United States internal revenue bond on June 30th of each year.

If an annual inventory period ends on day other than June 30 has been approved by the Federal Alcohol and Tobacco Tax and Trade Bureau (TTB), then you shall take inventory on that day.

You should keep all records used in preparing inventories for certification at your premises, to be readily accessible for examination by BOE employees.

Converting Liters to Gallons

The Federal Alcohol and Tobacco Tax and Trade Bureau (TTB) authorizes the bottling of wine and distilled spirits in standard metric sizes; however, you must file all California returns and reports in wine gallons (A "wine gallon" is the same as a regular gallon, 231 cubic inches or 128 ounces). To convert liters to wine gallons for reporting purposes, you must use the standards established by the TTB.

Wine

Multiply the quantity in liters by 0.26417 to determine the equivalent quantity in wine gallons. The resulting figure must be rounded to the nearest one-hundredth of a gallon.

See Revenue & Taxation Code section 32452.1 and Regulation 2544, Conversion of Liters to Gallons, for more information.

Losses and Allowances

If you are a licensed business and incurred any of the following described losses, the BOE will refund you an amount equal to the state alcoholic beverage taxes included in the sales price of beverages.

Losses Resulting from Disaster, Vandalism, Malicious Mischief, or Insurrection

In order to obtain a refund from the BOE for the alcoholic beverage taxes, all of the following conditions below must be met.

  • The beverages are lost, rendered unmarketable, or condemned by a duly authorized official by reason of fire, flood, casualty, or other disaster, or by reason of breakage, destruction, or other damage resulting from vandalism, malicious mischief, or insurrection.
  • The beverages were held and intended for sale at the time of the disaster or other damage.
  • The disaster or damage occurred in this state.
  • The licensee has not, and will not, be compensated by insurance, or otherwise, for the loss in the amount of the tax included in the purchase price paid for the beverages.
  • The amount to be refunded with respect to a single disaster or other loss is two hundred fifty dollars ($250) or more.
  • A claim for refund is filed with the BOE within six months after the date on which the beverages were lost, rendered unmarketable, or condemned by a duly authorized official.

The BOE will not pay interest on the amount of alcoholic beverage taxes refunded. Losses resulting from theft do not qualify for a refund of the alcoholic beverage tax.

Loses resulting from theft do not qualify for a refund of the sales tax because the products were not sold, and therefore, sales tax was not collected.

Spoiled Wine

A wine importer is allowed a credit for wine sold and subsequently returned as spoiled. The spoiled wine must be destroyed under the supervision of a representative of the BOE. For small quantities of wine destroyed, which are not supervised by a representative of the BOE, the exemption or credit is allowed only after prior written approval is obtained from the BOE.

To secure prior written approval, the wine importer must submit a written request to the BOE, listing the type of beverage, the number of containers, the container sizes, and the total gallons to be destroyed.

After receiving approval from the BOE, and after destroying the wine, the wine importer must submit a declaration, signed under penalty of perjury, listing the number of containers, the container sizes, the total gallons destroyed, and the date and manner of destruction. The declaration must be signed by a person of authority in the importer's organization who witnessed the destruction of the wine.

For the purposes of this regulation, a small quantity means 2,500 gallons or less of still wine, and 1,500 gallons or less of champagne or sparkling wine, by volume.

See Regulation 2552, Spoiled Beer and Wine, for more information.

Powdered Alcohol

Effective January 1, 2017, it is illegal to possess, purchase, sell, offer to sell, distribute, manufacture, or use powdered alcohol.

Starting January 1, 2017, the California Department of Alcoholic Beverage Control is required to revoke or suspend your alcoholic beverage license if you offer for sale, manufacture, or distribute powered alcohol. Violators will be guilty of an infraction, punishable by a fine of not more than five hundred dollars ($500).

Resources

Need to know more? Follow the links below for more information about the topics covered in this guide, as well as other information you might find helpful:

Tax Guides

Laws and Regulations

NAICS – North American Industry Classification System

The Census Bureau is the official US Government Authority who manages the NAICS Coding System. Go to their 2012 NAICS search tool to determine your NAICS code.

Returns, Reports, and Forms

  • BOE-217, Common Carrier's Report of Delivery,
  • BOE-269-A, Beer and Wine Imported into California Report
  • BOE-501-BW, Beer and Wine Importer Tax Return
  • BOE-501-WG, Winegrower Tax Return
  • BOE-1096, Customs Broker's Report of Transactions

Partial Exemption Certificates

  • BOE 230-C, Partial Exemption Certificate for Qualified Sales and Purchases of Diesel and Farm Equipment and Machinery
  • BOE-230-M, Partial Exemption Certificate for Manufacturing, Research and Development Equipment
  • BOE-230-MC, Construction Contracts – Partial Exemption Certificate for Manufacturing, Research and Development Equipment
  • BOE-230-N, Exemption Certificate for Qualified Sales and Purchases of Liquefied Petroleum Gas
  • BOE 608, Certificate of Farming Use

Publications

Tax Rates

Other Helpful Resources