Reporting: Once you have been issued your permits, you will have ongoing reporting requirements with both TTB and ABC. Reports for TTB are submitted using gallons as the unit of measurement; reports for ABC are submitted using liters as the unit of measurement. There are 9 liters in a standard case of 12 750ml bottles; there are 2.377548 gallons in that same case. A conversion chart to help you make those calculations is attached in Resources.
TTB Reporting: 2 periodic reports must be filed with TTB, the “Report of Wine Premises Operations”, commonly referred to as the “Premise Report” or “702” along with the “Excise Tax Return.” Both these reports, which are explained in more detail, can be submitted on the federal website www.pay.gov . You’ll first need to register to use the system and submit a “Pay.Gov User Agreement”, which is in the Appendix. Login credentials will arrive by email. It can take several weeks to receive login credentials, and like the other registrations from TTB, these emails are often caught in spam filters, so check there as well if the email doesn’t arrive in a timely fashion. On the pay.gov website, there is a very helpful tutorial to help you navigate on the site to get your reports filed.
Report of Wine Premises Operations: The Premise Report form itself, as well as a tutorial for completion of this report can be found on the TTB website here. Premise Reports must be filed each period beginning with the effective date of your TTB permit, regardless of whether or not you have reportable activity.
The frequency of your federal premise reporting is based on the tax liability and amount of wine onsite at each winery. There are 3 frequencies of filing.
· Annual filers -postmarked no later than January 30th
o Eligible to file an annual Excise Tax Return (see Taxation section for qualifications)
· Quarterly filers – Must be postmarked by 15th day after end of period
o Must be eligible to file a quarterly federal Excise Tax Return (see Taxation section for qualifications)
· Monthly filers – Must be postmarked by 15th day after end of period
o If over the limits for quarterly filing, must file monthly. Also required to file semi-monthly federal Excise Tax Return. The taxable removals included on both Excise Tax Returns for a given month will be reflected in the monthly Premise Report.
The default filing frequency is as a semi-monthly filer for Excise Tax Return and a monthly filer for Premise Reports, so unless you’ve been advised otherwise, you should assume that is your filing frequency. If your production and expected tax liability is such that you would be eligible for less frequent reporting, send a letter to TTB advising them of this and asking to have your reporting frequency changed to either quarterly or annual filing status. A template of the letter to submit, along with a letter template requesting to be allowed to destroy wine are attached in the Appendix.
The information you will generally need to complete this report includes:
ü Copies of prior submitted Premise Reports and/or Excise Tax Returns (if applicable)
ü Copies of invoices, receiving records or bills of lading (and/or details from them) listing dates, quantities and varieties (where appropriate) of sugar, spirits, grapes, other fruit, juice, concentrates and bulk wines received during period.
ü Quantities of each of above products actually used during the period
ü Listing of any grapes processed that period, grapes still on hand at end of period needing to be processed (if being held in cold storage to be processed on a subsequent day), gallons of wine produced that period, approximate gallons of juice still in fermenter (not through with fermentation)
ü Gallons of formula wines produced during period (if applicable) and gallons formula wine removed from bond during period
ü Gallons reported for under 14%, over 14%, cider and/or sparkling wines on federal excise tax reports for period, and volume of product in each category listed above that was removed from bond during period – sales, samples, personal use, etc.
ü Gallons bottled during period, and class into which they were bottled (for under 14%, over 14%, cider and/or sparkling wines)
ü Documentation of any wine destroyed with TTB permission
ü Gallons of wine sold to or received from other wineries in bond during the period (if applicable)
Note that you must get TTB approval prior to destroying wine in order to avoid tax liability for that gallonage. A template of a destruction request letter is attached in the Appendix.
Excise Tax Return: After the Premise Report is complete, the Excise Tax Return can be prepared based on the taxable removals calculated in the Premise Report. The frequency of filing, and additional information on Excise Tax Return is in the Taxation section, but if there are no taxable removals within a reporting period, an Excise Tax Return does NOT have to be filed. The Excise Tax Return form can be found on the TTB website here . Details on the federal excise tax return are provided in the Taxation section.
ABC Reporting: There is a report associated with every VA license a winery has. The 3 most common reports for VA farm wineries are: (1) Monthly Winery Tax Report; (2) Direct Shipper Report; and (3) Delivery report.
Monthly Winery Tax Report: Wineries need to submit a monthly report to ABC, a copy of which is attached in the Appendix. The winery identification and period that the report covers goes at the top, the total liters transferred from your winery to your retail outlet, and the number(s) of the Purchase Order(s) (“PO”) that document those transfers. If your winery holds only a Farm Winery license, you do not need to complete section 2 regarding commercial wines transferred.
Wineries only need to prepare and submit 1 PO per month (a copy can be found in the Appendix), summarizing the wine transferred out of the winery to the retail operations (including wine shipped out under your wine shipper permit, if you have one). You can, of course, submit them more frequently if you wish, but only 1 PO per month is required. That PO needs to be submitted to ABC, postmarked by the 5th of the following month; if you choose to submit your monthly report and tax payment with your PO, that must also be postmarked by the 5th. If you choose to submit your PO separately, the report and tax payment must be postmarked by the 15th. You no longer have to include the case cost on the PO, and you no longer have to prepare a corresponding invoice. Remember that ALL wine for sales, sampling, tastings, barrel tastings, in-state direct ship or personal use is subject to state excise tax, and MUST be reported on your PO. The only wine being removed from bond that DOESN’T go on the PO is wine sold to wholesalers or sold to out-of-state consumers via direct ship.
Each wine you sell will be on its own line on the PO; if you have multiple bottle sizes of a single wine, each size will be reported on a separate line as well. Remember that you must have all your products registered with the VABC before you make any sales in Virginia. When you register your products, you will receive a 5 digit product registration code; that code must be entered for each product on your PO.
You must have a process by which wine being moved from your winery to your retail space in order to complete the PO. This process can be as complicated or simple as you wish, but it needs to be followed by everyone who will be transferring wine so that all wine is reported on the POs. A simplistic, but effective method is to hang a clipboard at the door that connects the winery to the tasting room area. At the beginning of the year, make 12 sheets, one labeled for each month across the top. Down the right side, list all the products in the sales rotation (using separate lines for multiple bottle sizes, if applicable); update as needed through the year. As each case of wine is moved from the winery for retail use (as detailed in bold, above), make a mark next to that product’s name on the sheet. At the end of the month, you’ll just add up all the marks for each product to get your tally for the PO. A sample of this sheet is in the Appendix.
Direct Shippers Report: If you have a direct shipper’s license, you must also submit a monthly Wine Shippers Report, which must be postmarked by the 15th of the month. A copy of that report, along with instructions, can be found in the Appendix.
Since you have already paid your excise tax on this wine as part of your monthly tax report, discussed above, you ONLY need to report the total number of liters sent to VA consumers on the first page of this report, and do not need to calculate or submit any tax associated with these liters. The report is used for both in-state and out-of-state wine shippers; since out-of-state shippers won’t have otherwise paid the excise tax on wine shipped to Virginia consumers, the spaces for calculation of excise tax are on the report for their use; they do not apply to you, so just write “0” in all the tax calculation spaces. The second page (and any subsequent pages, if necessary) should have a total literage per page. Also make sure that you’re including the VABC common carrier code in the last column on those pages. The codes are: FEDEX EXPRESS #1000, UPS #1001 & FEDEX GROUND #1002.
Delivery Report: If you also have delivery privileges, you must file a report in any month where you made deliveries. A report must be submitted ANNUALLY, regardless of whether any deliveries were made. The report is in the Appendix.
Recordkeeping: The record retention period for both TTB and ABC is 2 years.
TTB: TTB has recently switched to product integrity audits, where they will pick up a couple of different bottles of your wine from your shelf in the tasting room and ask you to show them exactly where that wine came from. They will be looking not only as a way to see a sample of your production records, but also to ensure that all claims on your label are valid. They will want to follow the wine back to fruit, and see that that the varietal, vintage, and appellation on the label are correct. This can become tricky on your blended wines. Try to do a similar in-house audit on a couple of your wines to see if you have the records that will allow you to establish this if TTB comes to visit. TTB expects you to have records establishing all operations in 3 categories:
(1) Where did the product come from? Inventory and sourcing of all raw materials (fruit, sugar, etc.) used in making the wine, as well as transfer in bond paperwork for any wine purchased from another winery in bond.
(2) What did you do with it while it was being produced? Wine is considered produced when it comes out of initial fermentation, and it is at that point that an accurate inventory needs to be kept. Records of inventory, cellar treatments, addition of spirits, racking, losses, spoilage, bottling, and anything else you did with the wine while it was in bond need to be kept.
(3) Where did it go once it was finished? Records of removals from bond (both retail and wholesale), transfers in bond, proof of destruction.
More details on the specific items they will be looking for can be found in Resources.
ABC: Pursuant to 3 VAC 5-60-50 , in addition to the records and information you’re already maintaining to satisfy federal recordkeeping requirements, Farm Winery licensees must also maintain records establishing that the fruit sourcing requirements have been met(51% from property owned or leased by the licensee, and no more than 25% from outside VA), and records establishing that some production is taking place at the licensed premises. You should keep copies of leases, grape purchase agreements, and invoices for fruit purchases. Specifically, VA ABC will want to see:
ü Records. Complete and accurate records shall be kept at the licensee’s place of business for a period of two years. The records must be available during reasonable hours for inspection by ABC.
§ The amount in liters and alcoholic content of each type of alcoholic beverage manufactured during each calendar month;
§ The amount of alcoholic beverages on hand at the end of each calendar month;
§ Withdrawals of alcoholic beverages for sale to the board or licensees;
§ Withdrawals of alcoholic beverages for shipment outside of the Commonwealth showing:
(1) Name and address of consignee;
(2) Date of shipment; and
(3) Alcoholic content, brand name, type of beverage, size of container and quantity of shipment;
§ Purchases of cider or wine including:
(1) Date of purchase;
(2) Name and address of vendor;
(3) Amount of purchase in liters; and
(4) Amount of consideration paid.
§ For farm wineries, you must keep separate records of fresh fruits or other agricultural products grown or produced elsewhere and obtained for the purpose of manufacturing wine, including leases, if applicable, showing source of fruit used in wines adequate to satisfy the sourcing requirements for the licensee’s farm winery license, which can be found here.
Fruit sourcing waivers: If you experienced a crop loss due to weather, pests, or natural disaster which would prohibit you from producing 51% of the fruit in your wine, you can provide an explanation and request that VDACS waive the fruit sourcing percentages required by your farm winery licenses. Upon review, and if approved, VDACS will inform ABC that the requirement that 51% of your production come from fruit from land you either own or lease is waived for the year, and, if necessary, that the requirement that 75% of your production come from VA fruit is also waived.
Note that this waiver is only available up to the quantity you would have expected to harvest absent the event causing the crop loss. You do have to document how much you harvested in the prior year as part of the submission. This waiver is meant to be a way to return you to status quo in the face of unexpectedly natural adversity, not as a way around the fruit sourcing requirements for a Farm Winery. A template of the letter requesting this type of waiver can be found in the Appendix.
Inspections:
ABC: ABC has started conducting drop-by inspections of wineries. They are required by law to conduct these types of inspections every 2 years, but have been short-staffed so have not been able to follow this mandate in recent years. As ABC licensees, you’re required to have all your records available for review during your normal hours of operation, but given the different levels of recordkeeping that wineries and farm wineries are required to keep, ABC has agreed to the following process for inspections:
If ABC is going to do an in-depth inspection including production and sourcing records, they will call ahead and schedule a time to conduct that inspection when an owner or manager with access to and knowledge of the records required to be kept under state law can be present.
However, when ABC does a drop-by inspection, there are some things that they expect your on-site ABC manager to know and be able to show them. A best practice is to train all your tasting room staff, but certainly anyone named as an ABC manager, on the following:
ü Where your permits are posted (they’re required to be posted where the public can see them.)
ü Basic areas of the winery
ü Where VWDC area is located in winery (if applicable)
ü Process for moving wine from bond to the tasting room
Remember that you must have copies of your federal and VA licenses posted where visible to the public, along with a CURRENT list of ABC Managers posted on the wall as well.
ABC has the right to inspect any and all documents related to your licensed activities at any time during regular business hours or as needed, but a list of documents to make sure you have ready access to prior to an inspection can be found in Resources.
FDA/VDACS: Wineries and farm wineries are subject to an annual inspection from VDACS, which is acting on its own behalf as well as an agent of the FDA. There is an annual $40 inspection fee assessed against any business which is subject to inspection by VDACS. While you will likely not be inspected annually, you are still required to pay this annual $40 inspection fee. The things VDACs will be looking for during these inspections are included in the Resources section.
Bond Sufficiency: Remember that your bond is based on your tax liability, so as you grow, you’ll likely need to increase the amount of your bond coverage by submitting either a supplemental bond or a superseding bond to TTB. Your bond company should be able to help you with either of these changes. Ensuring that a wine has sufficient bond coverage is one of the things that TTB will specifically look for during an audit, and the deficiency most likely to earn a winery a penalty. Make sure that your bond coverage is sufficient using the bond worksheet attached in Resources. NOTE: As of January 1, 2017, licensees who reasonably expect to be liable for less than $50,000 in annual federal excise tax liability and who paid less than $50,000 in annual federal excise tax liability last year are exempted from the requirements of carrying a bond. span> You’ll need to file an amendment to remove the bond requirement. Once that amendment is approved, you send a copy of the Notice of Termination to your bond company to cancel the existing bond, so that you can stop paying your bond premium. You can also refer to the Bond section above to refresh yourself on the basics of bond coverage.
Ownership/Operational Changes: You are also required to keep both TTB and ABC informed of any changes in ownership, operations, or use of premises.
TTB: The timeframe in which you have to report changes, as well as if an amendment or just a notification is required, and what documents need to be submitted to effect that change, can be found in Resources.
ABC: Most changes to your license, including expanding or contracting the licensed premises and addition or removal of an owner, officer, or member, can be accomplished by emailing your ABC agent with the relevant information for the change. If new owners, officers, or members are being added, they may need to submit the personal history form, along with a copy of their driver’s licenses and driver’s histories. The personal history form is included in the license application package, which can be found in the Appendix. There is no fee to add an owner, officer, or member.
The 2 changes that require completely new applications are:
(1) Change in entity owning the winery: For instance, if a winery originally owned as a sole proprietor changes to being a single member LLC, a new application would need to be filed with both TTB and ABC. If the owner entity isn’t changing (i.e. an LLC had 3 members originally, but 2 have left and been replaced by 4 new members), the licenses must be amended rather than having to re-apply. Legal name changes (i.e. ABC Winery, LLC to ABC Winery and Vineyards, LLC) made through the State Corporation Commission where the FEIN and all other information remains the same are considered a continuation of the same entity rather than a new entity to be licensed, and can therefore be handled as amendments as well.
(2) Change in location/address of licensed premises. Both your federal and state licenses are attached to a specific location, and moving that location will require new licensing associated with the new address.
License Renewals: In Virginia, Farm Winery and Winery licenses and Wine Shippers Permits must be renewed annually. Your expiration dates for all Virginia licenses will be printed on your license itself. Make note of your expiration dates so that you don’t let your licenses lapse. ABC will generally send you a renewal notice, but ultimately, the responsibility to renew your license on time falls on you, regardless of whether you receive the renewal notice or not. You can always call the ABC at 804-213-4632 and obtain another renewal notice, or you can send a letter requesting to renew your license(s) along with a check in the appropriate amount (see license fees above in licensing and shipping sections). Make sure that you include the license numbers of the licenses you want to renew.
Licenses you may have obtained to allow you to sell your products to wholesalers or sell and ship wines direct to consumers in other states will generally also have expiration dates. Most states will send you a reminder to renew your licenses, but again, that responsibility ultimately falls to the licensee. Ensure that you know when those licenses expire, and if you haven’t received your renewals by approximately a month before the expiration of the current license period, call the issuing agency and request that they send you another copy.
Also note that in some states, product registrations expire and must be renewed. VA product registrations do not expire, but many states where Virginia wineries commonly sell their wines (WV, FL, LA, KS, GA, CT, RI, NJ, NY to name a few) expire and must be renewed