Business & Management
Overcome Fear of Filing
It has happened to you: You see it as the return address on a letter, or write it down as you’re checking your voicemail—and your lips start to tremble, a small drop of sweat forms on your forehead: Those words you dare not utter out loud—Alcohol and Tobacco Tax and Trade Bureau. You envision hiding your face from the TV cameras, and what might happen to you in federal prison (yes, the kind they talk about in the movie “Office Space”). Next, you think you feel a tingling in your left arm, and things are getting blurry.…
OK—breathe.
Believe it or not, the TTB is staffed by a large group of hard-working people who actually want to help you do your compliance reporting in a correct and timely manner. While you pride yourself on making sure your winery files the correct reports at the correct times, with numbers that are an accurate reflection of your operation, you should always remember this:
At some point in your career, you will make a mistake on a report, or you will forget to file some piece of paper, and the TTB will ask you where the correct information is.
It may be a simple math error; you may transpose some numbers, you may leave an ID number out that you should have included—the list goes on. During the next few paragraphs, we will look at some common pitfalls that TTB looks for, and how to best avoid them.
Our winery bought some tanks, and they are being delivered today, and we can’t wait to use them—do I have to report this?
YES: When you are changing tanks (either increasing or decreasing the number of tanks you have at your winery), you have to file this change with the TTB (within 30 days of the change).
It is a fairly simple procedure. You would file the Application to Establish and Operate Wine Premises (TTB Form 5120.25), using the next serial number. When you first apply, and receive approval to operate your winery, this is Serial No. 1. Each time you have changes to the plant (whether it is tanks, corporate personnel, etc.), you will need to file an amendment to your Wine Premises operations.
In this case, since you are adding tank(s), you need to submit (in addition to the form) an updated site map showing the new tanks, as well as an updated tanks list, adding these tanks (you will have to assign them a number), the quantity and the capacity of each. The tanks should come with some certification of capacity (and a gauging chart would be great, too).
Mostly, TTB wants to have a current map to reference if they visit your facility, and the map and the actual site should match. Anytime you file changes to your premises, it is also a good idea to send it in a way that allows tracking (FedEx, UPS or U.S. mail with a tracking number), because the 30-day reporting requirement is from when TTB logs the forms as received in their system.
You may also have to increase the bond coverage for your winery, if your enlarged capacity will increase your potential tax liability above what your current bond covers (that’s another topic, which I would be glad to discuss privately with any reader out there).
I sent in my excise tax report with the check and noticed on the copy I kept for my records that I forgot to put my Bonded Winery (BW) number on it. Will they still credit me for paying?
NO: If you forget to put some part of your required information on your Excise Tax Return, your check will be cashed but you will not be credited for payment of your taxes. This includes the BW number, EIN number, correct address, serial number for the payment, etc. Also, you usually will not be notified that there is a problem until several months—or even years—later.
So, before you send in your return, double check to make sure all the required information is on it. If you find that you did forget some piece of information, it is best to contact TTB as soon as you can. A specialist can walk you through correcting this. As with any report, if you find a mistake before TTB does, and you inform them of it, they are generally more than happy to receive an amended report.
I am doing some custom bottling for a guy under his trade name—do I have to report this?
YES: Custom bottling has increased exponentially during the past decade. If your client wants only to use its brand name on the labels, then you must file for addition of trade name(s), using the Application for Amended Basic Permit Under the Federal Alcohol Administration Act (TTB Form 5100.18; you can now also use the 5120.25 form mentioned in the previous discussion, but then have to assign a serial number, etc. The 5100.18 is a much cleaner way to do this).
In addition to this form, you must register the Trade Name in the county where you are located (through a Fictitious Business Name statement), as well as a letter from the custom bottling client stating that you are allowing registration of the trade name(s) for the purposes of custom bottling. Also, the form requires submission with an original signature, so you must send it to the TTB’s Cincinnati office for approval, which can take a few weeks.
Keep in mind, if you try to use a trade name that is not on your permit, you will not get a label approved (any trade name you use must be on file with the TTB), so it’s best to take this step long before you need it.
I’ve always had my (insert name of your signature wine here) wine right at 13.8% alcohol, but
this year it came in at 14.2%. Can I use the same label approval when bottling this?
NO: As many of you know, the wine label is crammed with information (and may get more crowded in the near future), and it is there to identify that particular wine in that particular bottle. The only variant that can occur without having to file for a new label approval (COLA, or Certificate of Label Approval) is this: IF everything else on the label remains the same, and ONLY the vintage is changing, you do not need to file a new approval. IF, however, any other informational piece changes (appellation, varietal, bottler statement, etc.) or if you change into a different tax class (14% and under, or more than 14%), you must apply for a new COLA. TTB does look for this during an audit.
As long as our winery reports how many gallons we bottled during a particular month, that suffices for reporting, right?
NO: Just reporting how many gallons is required on your Report of Winery Operations, but you must also maintain records of each distinct wine that is bottled. This includes lot numbers, when it was bottled, the COLA number (and, preferably, a copy of the approved COLA), alcohol, fill tests, varietal, vintage and appellation composition, as well as glass, cork, capsule suppliers and identifiers (basically, anything that comes in contact with the wine that you did not produce must be identified by its source), and the list does go on a bit.
Most of this is to assure that what is inside the bottle is what it is supposed to be. In addition, you must keep track of your “dry goods” (empty glass, corks, etc.), in case some problem appears down the road in the life of any of your wines (this mostly comes in play from the Bio-Terrorism Act).
Another winery has a couple hundred cases of this great wine, all bottled up, just no labels—I can buy these cases, bring them over to my place, label them up and start selling them, right?
NO: Bottled goods without labels (known as “shiners”), while covered from a legal standpoint, are both awkward to deal with and to understand in most cases, but here is an overview.
Any wine that is bottled must have its label approved prior to bottling, even if no label is applied at the time of bottling. This works for many small wineries, as they can have the graphic artist design the label, the winery can submit it for approval (and have it approved), then bottle it up (so the wine can benefit from some bottle aging), and not have to outlay the cash to get the labels printed right then.
This works out fine if the wine is always going to stay with that winery. But, as happens from time to time, a winery may have more wine to bottle than it needs, bottle it up without labels, and then market the shiners to other wineries. The problem comes if the shiners are sold and leave the bottling winery for the purchasing winery—the labels the purchasing winery would want to apply to the wine have to reflect where the wine was bottled, i.e. the bottling winery, since that is where the original label was approved and the wine went into bottles.
There are two ways to do this right: File for addition of trade name (from above—but that can be a conflict in the TTB system, so might not be approved), or have the bottler information reflect the bottling winery (i.e. cellared and produced by Joe’s Winery, Anytown, Calif.), while using the brand name of the purchasing winery (Crazy Zebra Wines) on the front label on the bottle.
If you are feeling a little dazed, don’t worry: It is an odd situation. My personal recommendation: Buying shiners is probably more hassle than you want to deal with. You’re better off buying bulk wine and bottling it yourself.
I’ve really gone high tech—I keep my files on my computer. There can’t be any issues with that, can there?
YES: In this day of sophisticated computers, nearly all of us keep our records digitally (although TTB still likes to have paper in their hands, so it’s best to keep both). Electronic records are great from a space consideration, but not so great if your computer gets hacked. TTB is now checking to see if wineries have some type of security for their computers—a logon at the very least, so not just anyone can access all this information.
Wrapping up
While we could go on, these are some of the more common issues that come up from wineries, or from the TTB. It mostly comes down to this: If you keep a good record (paper or electronic, but the TTB still likes its paper) of all of your operations, you are halfway home.
If you are not sure whether you can do something or not, call—either TTB or your compliance people (or sometimes both). It is always better to ask first, double-check your information, and then do your operations, so when the day comes that you get a letter or call from TTB, you know you have done everything in accordance with regulations. Plus, you will then be able to breathe easy when you hear those words.
David Sandri has almost 20 years experience in the wine industry, and has been concentrating on compliance issues with wineries throughout the North Coast and Lodi regions during the past decade, as well as lecturing on these subjects. He is a compliance and project manager with American Winesecrets in Sonoma County, and runs his own compliance consulting firm, Sandri Ranch Consulting/ WineTopics.net. Reach him at winetopics@gmail.com. To comment on this article, e-mail edit@winesandvines.com.
