Olympia Tries to Cut Wine Red Tape

In wake of Prop. 1183, legislators look to minimize winery reporting

by Peter Mitham
washington liquor tax
House Bill 1373 would permit Washington state wineries selling less than 6,000 gallons of wine per year to report state liquor taxes once per year rather than quarterly.
Olympia, Wash.—Washington state legislators returned to work in Olympia this week and revived a bill that could provide welcome relief to smaller wineries grappling with the state’s liquor tax-reporting requirements. Existing rules require wineries that do business in the state, regardless of size, to report and pay liquor taxes quarterly. But the paperwork required to comply with the regulations is onerous, according to the Family Wineries of Washington State, which has asked that smaller producers be allowed to report and remit taxes annually rather than quarterly.

The request, presented as House Bill 1373 (and its companion, Senate Bill 5259), is sponsored by state Rep. Cary Condotta of East Wenatchee and four other lawmakers. “This bill would allow wineries and certificate-of-approval holders (out-of-state wineries) annually selling less than 6,000 gallons of wine in Washington to report and pay their state liquor taxes not more frequently than annually,” explained John Morgan, a board member of the association and winemaker at 3,500-case Lost River Winery
in Winthrop, Wash.

“We believe this bill would not only represent an immediate reduction in paperwork for the overwhelming majority of Washington wineries, but it also would greatly reduce no-activity or minimal-activity reporting for out-of-state certificate-of-approval holders shipping small amounts of wine to consumers in Washington,” Morgan said.

FWWS president Paul Beveridge, who with his wife Lysle Wilhelmi operates 2,000-case Wilridge Winery in Madrona near Seattle, said his wife spends about an hour per month completing sales reports and tax remittances for their winery. She also assists other wineries with recordkeeping. With an hourly rate of $50 per hour, Wilhelmi’s fees often outstrip what’s owed to the state.

Voter decision paves the way
Introduced a year ago in January 2011, the bill’s cause was advanced by voter acceptance of ballot initiative 1183 this past November, which is recasting the Washington State Liquor Control Board as a regulator rather than a distributor and retailer.

While taxes will still flow through the WSLCB, overhaul of the board’s computing and record-keeping systems as part of privatization of liquor sales in the state will allow it to make changes to remittance requirements that would otherwise have been in themselves too costly to maintain.

A fiscal note appended to the bill during last year’s session of the legislature indicated that changes required under the bill would require 1,400 hours of programming time—approximately one hour for each of the 1,430 wineries affected by the bill—at an estimated cost of $256,500. This was out of proportion to the $20,000 in assessments and $26,000 in taxes remitted annually by these wineries, even though testimony before a state committee last winter noted that the changes would also reduce paperwork required of liquor regulators.

Now, with the shakeup of the state’s liquor control board, the cost of change is not an issue. The WSLCB now believes it can implement these changes “without additional significant impact within the process of changing the licensing and reporting system to implement Initiative 1183,” Morgan told Wines & Vines. “They are, accordingly, removing their fiscal note from our bill.”

While there have been court challenges to I-1183, implementation of the bill continues. A judge in Cowlitz County last month dismissed a bid for an injunction seeking to halt implementation (see “Washington Wine Privatization Still Stands,” Dec. 21, 2011).

“(This) is part of a growing trend toward reduced reporting frequency in wine shipment,” Morgan said, citing recent moves by Idaho and New York to allow annual reporting. Oregon has also considered making similar changes. “We will be proud to see Washington share leadership on this front,” Morgan added.

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