How Tax Reform Brings Opportunity for Wineries and Vineyards

Sole traders and partnerships can use sideways loss relief in their initial trading years to offset losses against other income. Establishing a vineyard incurs significant initial costs, including planting and cultivating vines, categorized under biological assets. The cost to establish a vineyard per hectare can reach up to £40,000, and grape costs typically take at least three years before the vineyard yields its first crop. Businesses in the wine industry with less than $30 million in average annual gross receipts (AAGR) may qualify for special treatment as a small business.

• These costs are recorded as expenses in the profit and loss account, impacting the vineyard’s financial statements and long-term financial health.
• Your fixed assets come up fast—especially if you’ve taken accelerated depreciation.
• These are known as COGS (cost of goods sold) and COGP (cost of goods produced).
• All of these costs should be accounted for in the costing of your product and ultimately the value of your inventory.
• Tax rates vary depending on the business structure, affecting the overall tax burden.
• The craft beverage industry on Long Island is booming—from family-run vineyards on the North Fork to small-batch breweries with taprooms on the South Fork.

Final Thoughts: Make Your Finances as Refined as Your Product

Such records provide important ongoing accounting and internal control data about the grapes throughout the production process. Wine accounting helps vineyard owners track income from grape sales, manage expenses related to cultivation, and monitor cash flows. By maintaining detailed financial records, vineyard managers can identify cost-saving opportunities, plan budgets more effectively, and improve overall accounting for vineyards and wineries financial health. This enables better decision-making and enhances the vineyard’s financial stability​.

Accounting for Vineyards and Wineries Kindle Edition

Additionally, they needed us to liaise effectively with their tax preparer. With decades of experience, our wine accounting team is committed to providing solutions that align with your specific goals and help you maximize tax opportunities, optimize operations, and sustain growth. Utilize accounting software to generate accurate and timely financial statements. You can also consider consulting with bookkeeping professional like we have here at Protea Financial to analyze your statements and gain valuable insights. Accrual accounting allows for a smoothing of income and expenses (accomplished through the matching principle) and provides an accurate picture of your business short- and long-term financial health.

Accounting Methodology

Our team can confidently answer your questions and guide you through the process easily, and we are here to help wherever we can. The problem is that the distributors have to report the amount of cases sold back to the winery, usually in the form of a contribution margin bill-back, so the winery ends up paying the distributor. This is an issue at month-end, when the winery is closing its books, since distributors may not report back about the number of cases sold for several weeks. And if you’re trying to close the books, this means that the amount of the depletion allowance has to be accrued, and it’s pretty much a guess. And if you’re wrong on the accrual, then the adjustment falls into the next month.

Importance of Accurate Record Keeping

• This is opposed to the much smaller sales volume a winery generates through its tasting room or wine clubs, where the gross margins can be in the 70% range.
• So, for example, if 1,000 gallons of Merlot are aged in barrels for six months, then that is 6,000 gallon/months of Merlot.
• Initial costs relating to the establishment of vines may also be included within the value of either the biological asset or underlying land on initial recognition.
• Many wineries fail to account for the full cost of staffing, facilities and samples when evaluating tasting room profitability.
• A rolling 18-month forecast with monthly recalibrations based on wholesale sales.

This involves cross-referencing your internal records and bank statements to look for any anomalies and verify transactions were recorded. Please consult one of our trusted business advisors at RHN CPA for further clarification and Accounting for Marketing Agencies interpretation of your circumstances. We are compliant with the requirements for continuing education providers (as described in sections 10.6 and 10.9 of the Department of Treasury’s Circular No. 230 and in other IRS guidance, forms, and instructions).