Reduces the tax rate on table wine and cider sold by a winery that sells less than 20,000 gallons of table wine or cider in a calendar year.
Wine and Cider Taxes. Wine is taxed when it is sold to distributors, retailers, or consumers. The total excise tax rate on wine or cider consists of the base tax rate and additional taxes required by statute. The total tax rate for table wines is $0.2292 per liter. The total tax rate for cider is $0.0814 per liter.
Most revenue from the wine tax goes to the state general fund. The Liquor and Cannabis Board is authorized to allocate a specified amount of wine tax revenue to the Washington State University for wine and grape research. The Washington Wine Commission receives revenue collected from the following additional taxes on wine and cider:
Tax Preference. A tax preference includes an exemption or preferential rate for a tax. Legislation that proposes a new tax preference must include a performance statement that specifies the public policy objectives of the tax preference and the metrics that will be used to evaluate the tax preference. An automatic ten-year expiration date is applied to new tax preferences if an alternate expiration date is not provided.
Definitions. Cider means table wine that contains no less than 0.5 percent of alcohol by volume (ABV) and not more than 8.5 percent of ABV and is made from normal alcoholic fermentation of the juice of sound, ripe apples or pears, and includes flavored, sparkling, or carbonated cider.
Table wine refers to wine containing no more than 14 percent of ABV when bottled or packaged by the manufacturer.
Wine and Cider Taxes. A winery that sells less than a combined total of 20,000 gallons of table wine and cider in a calendar year is subject to a reduced tax rate of $0.0528 per liter of table wine and cider. A winery that qualifies for this tax rate is not subject to most other excise taxes on wine and cider, except for the additional taxes for which revenues are distributed to the Washington Wine Commission.
The revenues from the reduced tax rate on table wine and cider must be deposited in the Liquor Revolving Fund and are subject to allocation to the Washington State University.
Tax Preference. A tax preference performance statement is included that states the Legislature's public policy objective is to promote the development of small wineries and the jobs they provide, and to extend this tax preference if a review finds the preference accomplishes its specified goals.
The committee recommended a different version of the bill than what was heard. PRO: The tax rate for wine in Washington is disproportionally high compared to other states, which puts wineries in the state at a competitive disadvantage. Many small wineries in Washington are closing and this trend has persisted for years. Small wineries need relief. Similar tax exemptions apply to liquor and beer.
OTHER: The bill should be amended to support the entire wine industry in Washington. Many family wineries would not have access to this change in tax policy as written. It is unclear how this bill would be applied to out-of-state wineries. The bill should be amended to apply the tax exemption to the first 20,000 gallons of wine or cider for all wineries.
PRO: Senator Judy Warnick, Prime Sponsor; PAUL BEVERIDGE, Wilridge Vineyard, Winery & Distillery.
PRO: This bill supports small businesses. Wineries pay a wine tax on top of the state's business and occupation tax. Small wineries are requesting that the cost of the wine tax go down from $0.87 per gallon to $0.20 per gallon on the first 20,000 gallons. Lowering the wine tax could save small wineries thousands of dollars each year. The state is already providing reduced tax treatment to small breweries. The state has lost hundreds of small wineries since the great recession and the number of wineries went down for the first time in 2023. This bill ensures that the state does not have a wine industry dominated by wealthy corporations. The bill is pro small business, not pro alcohol. The small wine industry is hurt by climate change, forest fires, and economic downturn. This bill makes Washington wine more competitive with states like California that have lower wine taxes.
CON: The revenue that would be lost from this tax exemption could be used to support other essential state services. The state's alcohol licensing and tax system has been described as a permissive system in that businesses and organizations can only do a limited range of activities for which they have been granted permission. New exemptions should not be granted until the state completes a comprehensive study on the current alcohol licensing and tax system. Any policy that makes alcohol cheaper increases youth access to such products.
OTHER: The bill should be amended to apply to all wineries, as was the case when this policy was introduced in prior sessions. Wineries from around the country and world should have access to this tax preference. It is unclear how the state would track which wineries would qualify for the lower tax rate. Taxes may not discriminate based on winery size or location.
PRO: Paul Beveridge, Family Wineries of Washington State; Sandi Moreno, Family Wineries of Washington State.