2 of 3 wine-related bills fail in Washington Legislature

By on March 12, 2016
Capital Food & Wine Festival

The Washington Legislature passed one of three winery-related bills during the 2016 session, which ended Thursday. (Photo by Andy Perdue/Great Northwest Wine)

OLYMPIA, Wash. – Small wineries in Washington state must wait another year to get a crack on trimming some of their excise taxes.

That’s because the chairman of the Washington House Commerce & Gaming committee intended to discuss such a tax break this session solely to air out ideas to tackle in the 2017 session.

This was one of three significant winery-related bills introduced in the Washington Legislature in the session that ended Thursday. One bill passed that governs the special sales of wine. But that one waits in limbo as a potential item to be vetoed as an incentive to a feuding GOP-controlled Senate and Democratic-dominated House to speed up their glacially paced budget talks.

The GOP and Democrats have gone into extra sessions three out of the past four years, leading to the brink of two partial state government shutdowns.

On Monday, Gov. Jay Inslee said he would veto up to 37 bills Thursday- the end of the 60-day 2016 regular session – if the two sides did not reach a handshake agreement on some budget adjustments by then.

They did not. And he vetoed 27 bills and signed 10 into law Thursday. The 10 bills addressed immediate health, safety and law-enforcement matters.

The special-sales-of-wine bill is part of a big group that has until April 2 to be signed or vetoed. If neither occurs by April 2, that bill would become law without Inslee’s signature. Inslee declined Thursday to say if and when he would veto another batch of bills if budget talks remain stalled.

Meanwhile, the small-winery-tax-break bill and a tasting-room-expansion bill each died in committee this session.

Rep. Cary Condotta, R-East Wenatchee, introduced a bill to remove two of the state’s three wine-specific taxes on the first 20,000 gallons of wine sold by a Washington state winery.

Under current laws, a Washington winery selling its wine pays three wine-related taxes totaling 22.92 cents per liter for table wines with alcohol less than 14 percent; 45.36 cents per liter for fortified wines with alcohol contents of 14 percent or greater; and five cider-specific taxes for cider totaling 8.14 cents per liter.

Condotta’s bills would drop all cider- and wine-specific taxes but one, while keeping intact the normal business taxes. The bill also would keep the state commission fee intact. In solely wine- or cider-specific taxes, that would lead to 0.25 cents per liter for table wines; 0.25 cents per liter for fortified wines; and 0.05 cents per liter for ciders. Condotta said the tax breaks are needed to help small wineries deal with increasing costs of doing business.

The tax breaks are estimated to cost Washington state $2 million in lost revenue in the 2017-18 fiscal year and $4 million in the 2017-2019 budget biennium. Roughly 6 percent of Washington’s wineries provide 94 percent of the state’s wine output – meaning roughly 94 percent of the state’s wineries are not big ones.

Rep. Chris Hurst, D-Enumclaw and chairman of the House commerce committee, said his agenda for this session was to collect ideas for a more comprehensive bill in the 2017 session to tackle taxation matters for wines, beers and liquors. Such an overhaul is needed since Washington’s liquor and wine taxes are greater than Oregon’s, he said.

However, Hurst described a legislative situation in which the liquor industry, wine industry and beer industry all compete for the best tax breaks. Each usually opposes breaks for the other industries, and each hopes to get the best exemptions for itself. Hurst wants to the various alcohol industries to huddle before the 2017 sessions to create proposed legislation that benefits all of them and that all of them can support.

No additional tasting rooms

Charlie Hoppes opened a tasting room for Fidelitas Wines in Woodinville, Washington.

Several wineries operate satellite tasting rooms in Woodinville, Wash, including Fidelitas. A bill that would have allowed wineries to have up to four satellite tasting rooms failed to get out of committee during the 2016 legislative session in Olympia. (Photo by Andy Perdue/Great Northwest Wine)

Here are the fates of the other two winery-related bills.

  • A revived bill in the state Legislature to allow Washington wineries to operate up to four off-site tasting room died in the Senate Commerce & Labor Committee after passing the House 92-6.

The bill by Rep. Cary Condotta, R-East Wenatchee, would have increased the number of allowable off-site tasting rooms per winery from two to four under a domestic winery license. Condotta contended that wineries – especially small ones – need the extra tasting rooms to expand their customer bases. That bill began its journey in 2015, but it stalled in that year’s long, complicated and contentious legislative session.

Sen. Mike Baumgartner, R-Spokane and chairman of the Senate commerce committee, said some lobbyist opposition to the bill popped up, and he did not want to handle a liquor-wine industry war in a short 60-day session – wanting to save that fight for the next year’s 120-day long session. Baumgartner said he could not remember which liquor industry segment opposed the bill.

In 2000, a change in state law allowed Washington wineries to open satellite tasting rooms. Before that, the only way a winery could operate an additional tasting room was to have wine production on the premises.

The change in 2000 provided wineries with the opportunity to have up to two tasting rooms in addition to their main production facility. Wineries didn’t begin to take advantage of the new law until a few years later.

In August 2008, Bookwalter Winery in Richland became one of the first wineries to open a satellite tasting room across the state in Woodinville. Today, Woodinville is home to about 130 tasting rooms – many of which are satellites for wineries in the Yakima and Walla Walla valleys.

Wineries also are opening satellite tasting rooms in other cities, including Leavenworth and Spokane.

  • The House passed 96-1 and the Senate passed 44-4 a bill that governs wine sales at special events, plus selling private collections.

The bill by Sen. Curtis King, R-Yakima, allows a nonprofit organization that obtains a special-occasion liquor license to sell wine in original, unopened containers for consumption on the licensed premises.

And the bill allows a licensed domestic winery to sell wines of its own production at retail, and for off-premises consumption, at licensed special occasion events hosted by nonprofit organizations.

These wine sales must meet the following conditions:

Wine sales conducted under this law are subject to the following conditions: (a) Delivery to the buyer must be on a date subsequent to the special event and at a place other than the location of the special event. All wines must comply with regulations regarding direct sales of wine to consumers. The wine sold at a special event cannot be resold.

Finally, King’s bill would authorize the state’s Liquor & Cannabis Board to issue a special permit for the sale of a private collection of wine or spirits to an individual or business.

The seller must obtain a permit at least five business days before the sale, for a fee of $25 per sale. The seller must report the sales information and pay any taxes due to the Liquor & Cannabis Board within 20 days of the sale.

About John Stang

John Stang is a longtime journalist who covers Washington state politics. He lives in the Seattle area.

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