I was contacted by Danielle Rodabaugh, the chief editor at SuretyBonds.com, a surety provider that issues bonds to working professionals across the nation. I’ve never studied this, nor have I ever helped a new business owner better understand how surety bonds affect the business licensing process. That’s a pretty specific area of starting a winery, and I’ve only been working established brands.
As a public service, I’m providing Danielle’s information, which is way beyond my own personal bailiwick, because Danielle writes articles that help new business owners better understand how surety bonds affect the business licensing process. (You can keep up with Danielle on Google+.)
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How to legally start a winery
If you’re interested in starting a winery, there’s more to the process than knowing how to produce delicious wine. You also need to become familiar with the rules that regulate your local wine industry. The exact regulations you’ll be expected to follow will vary depending on a number of factors, such as:
- where your winery will be
- how much wine you’ll produce
- how much money you’ll earn
Licensing and Registration
You’ll have to license and register your winery with the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) if you plan to
- produce wine for commercial purposes (not for personal or family use)
- store, blend or bottle untaxpaid wine OR
- wholesale or import wine products
Anyone intending to operate such a wine premise — whether it be a bonded winery, bonded wine cellar or taxpaid wine bottling house — must first apply to the federal TTB. Operations may not begin until the TTB approves the application. You’ll also have to license and register your winery according to whatever state and local laws regulate the wine industry in your area.
Surety Bonds
Government agencies typically require winery owners to file surety bonds to protect the state against the anticipated tax liability. The government agency can make a claim on a bond if a winery owner fails to pay taxes appropriately. The bond’s funds are then used to pay all taxes fully. Claims on alcohol tax bonds are rare, but without the bonding requirement, state agencies would lose the benefit of the surety’s prequalification standards. Because surety providers want to avoid losing money on claims, they thoroughly review all applicants before issuing a bond. To put it simply, the bonding process prohibits licenses and permits from be issued to individuals who lack the financial capacity to fulfill their tax obligations.
Permits
Those intending to produce or blend wine for commercial purposes must obtain a basic permit from the Federal Alcohol Administration. Bonded wine cellars that don’t produce wine don’t have to maintain a basic permit. Before a permit can be issued, the Federal Alcohol Administration Act requires winery owners to provide information about the ownership of the company rather than the wine operations themselves.
Still Have Questions?
If you have questions about starting a legal commercial winery, you can contact the TTB’s National Revenue Center by phone at 1 (877) 882-327, or by e-mail at ttbquestions@ttb.gov. You might also want to get in touch with a local university or college, that offers courses on the wine industry. And, don’t forget to speak with established winemakers in your area, as they usually have some good advice for fellow enthusiasts. The wine-making community is a warm and inviting place.
Jo:
As someone who does beverage industry compliance for a living I can’t tell you how many people I’ve worked with who don’t fully understand how complex the process of starting and running a winery can be. I’ve often felt that prior to being issued a state or federal winery license applicants should be required to sit through a class outlining the regulation involved in the alcoholic beverage industry. We would probably have fewer wineries if this were the case. Consulting with a good compliance specialist or beverage law attorney can do a lot to prepare aspiring winery owners for the regulated road ahead.
Wesley
Great advice, Wesley.
Thanks for the tips, Wesley. I fully agree with you about a need for standardized classes. The more information winery owners have beforehand, the better prepared they’ll be to make decisions about their ability to run a winery (i.e. whether doing so is even feasible). There’s a lot that goes into running a winery; this stuff is just the tip of the iceberg.
Thank you for all of the tips.
We are thinking of opening a winery in the next couple of years.