1. Welcome! Four Federal Ways to Enter the Wine Business Or We Have the Grapes- Now What ?

2. Speaker Martha J. Tebbenkamp, TTB Investigator 503 946 8346

3. Morning Agenda 4 Ways In Advantages Disadvantages

4. Key Concepts Production-turning materials into wine Bond-legal agreement protecting excise tax liability. Bonded Premises-winery/wine cellar covered by a bond.

5. Key Concepts In Bond-untaxpaid wine at a BW/BWC Transfer in bond-moving wine from one bonded facility to another Removal from bond-identifying wine and creating a removal record Taxpaid-wine removed from bond

6. Key Concepts Wine is always either taxpaid or in bond. Whoever removes the wine from bond pays the taxes Whoever bottles the wine gets the COLA- always before bottling

7. Four Options Bonded Winery Bonded Wine Cellar Alternating Proprietor Custom Crush Client

8. “Stand Alone” Bonded Winery Produce/blend/bottle wine Do so ONLY on own premises CANNOT loan/rent/share premises, except with specifically authorized alternator Is responsible for all wine there

9. Stand Alone: ADV: Complete autonomy Small producer tax credit DISADV: Complete responsibility Larger capital outlay

10. Bonded Wine Cellar Receive, store, blend wine in bond MAY receive bulk, bottled, labeled or unlabeled wine MUST pay taxes on all removals Is NOT an extension of any other winery premises

11. Bonded Wine Cellar ADV: Less capital outlay Simple system DISAD: Limited label claims No producer credit

12. Alternating Proprietor Two or more wineries alternate use of a portion of bonded wine premises “Host” is a bonded winery Alternating Proprietor is also a bonded winery Use of Equipment and Space is alternated for 24- hour (minimum) periods Host Winery’s or Alternating Proprietor’s Premises, as needed AP

13. Alternating Proprietor-Host Must fully qualify as a winery Host winery proprietor files documents with TTB to curtail its bonded premises Responsible for own production, recordkeeping, reporting, labeling and taxes, $$$ Investment- in major winemaking equipment or winery premises AP

14. AP-Host ADV: Fuller use of expensive equipment Improved cash flow DISAD: Much more complicated record system Must coordinate with tenant May lose certain label claims

15. Alternating Proprietor-Tenant Must fully qualify as a winery Responsible for own production, recordkeeping, reporting, labeling and taxes, independent of host winery Less investment in major winemaking equipment or winery premises AP

16. Alternating Prop-Tenant ADV: Less capital outlay Quick entry to the wine business DISAD: Much more complicated records Must coordinate with host May lose certain label claims

17. Other Factors for Alternators Economies of scale-bulk glass, etc Crush pad chaos No “Divorce Court” No “virtual wineries”

18. Custom Crush Operations Client contracts with a Bonded Winery to have wine produced Winery produces the wine to client’s specifications Client receives finished, taxpaid wine Bonded Winery WLD Taxpaid Wine

19. Custom Crush Winery Qualifies as a bonded winery Responsible for ALL production, records, reports, labeling, taxes Bottling winery obtains the COLA Incurs expenses for winemaking equipment and winery premises

20. Custom Crush Winery ADV: Cash flow from extra capacity DISAD: Must count all production as theirs Full recordkeeping, reporting responsibility Must deal with client

21. Custom Crush Client Qualifies with TTB as a Wholesaler Minimal recordkeeping requirements as a Wholesaler; no report to file No responsibility for production, recordkeeping, reporting, labeling or tax No investment in winemaking equipment or premises

22. Custom Crush Client ADV Quickest, cheapest way in to the industry DISAD Limited label claims May be “lowest priority” for crusher Must deal with crusher

23. Other Factors for Crusher/Client Client may receive wine in bond as “starter inventory” after issuance Client has to allow name to be used Some states restrict ownership of brands BOTTLER MUST GET COLA REMOVER MUST PAY TAXES

24. RECAP In Bond Tax Paid Bonded Premises 4 Options: 1) Stand Alone BW 2) BWC 3) Alternator 4) Custom Crush

25. THANK YOU! QUESTIONS?