Washington Senate Bill Report SB 5013 (Jan. 24, 2024)

Summary

A Senate Bill Report on SB 5013, as of January 24, 2024, prepared by non-partisan staff of the Senate Committee on Business, Financial Services, Gaming & Trade for a bill providing a tax exemption for the first 20,000 gallons of wine sold by a winery in Washington. The bill is sponsored by Senators Warnick, Keiser, Dhingra, Kuderer and Torres. The report sets out definitions and the current per liter tax rates for table wine, fortified wine and cider, including a total of $0.2292 per liter for table wine. It summarizes the proposed substitute, which sets a rate of $0.0528 per liter on the first 20,000 gallons of table wine or cider sold each calendar year until January 1, 2035, with performance reviews due by January 1, 2029 and January 1, 2034. The four-page report ends with a staff summary of public testimony from the 2023 regular session.

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                            SENATE BILL REPORT
                                  SB 5013

                                      As of January 24, 2024

Title: An act relating to providing a tax exemption for the first 20,000 gallons of wine sold by a
     winery in Washington.

Brief Description: Providing a tax exemption for the first 20,000 gallons of wine sold by a
     winery in Washington.

Sponsors: Senators Warnick, Keiser, Dhingra, Kuderer and Torres.

Brief History:
     Committee Activity: Business, Financial Services, Gaming & Trade: 1/19/23; 1/25/24.


                                     Brief Summary of Bill
           • Reduces the tax rate imposed on the first 20,000 gallons of table wine or
             cider sold by a winery each calendar year until January 1, 2035.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES, GAMING & TRADE

     Staff: Alia Kennedy (786-7405)

     Background: Definitions. Cider means table wine that contains no less than 0.5 percent of
     alcohol by volume (ABV) and not more than 8.5 percent of ABV and is made from normal
     alcoholic fermentation of the juice of sound, ripe apples or pears, and includes flavored,
     sparkling, or carbonated cider. Domestic winery means a place where wines are
     manufactured or produced within the state. Tax preference means an exemption, exclusion,
     deduction, credit, deferral, or preferential rate, for a tax administered by the Department of
     Revenue. Wine means any alcoholic beverage obtained by fermentation of fruits, such as
     grapes, berries, or apples, or other agricultural product containing sugar, to which any
     saccharine substances may have been added before, during, or after fermentation, and
     containing not more than 24 percent of ABV, including sweet wines fortified with wine
     spirits, such as port, sherry, muscatel, and angelica, not exceeding 24 percent of ABV and



     This analysis was prepared by non-partisan legislative staff for the use of legislative
     members in their deliberations. This analysis is not part of the legislation nor does it
     constitute a statement of legislative intent.

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     not less than 0.5 percent of ABV. Table wine refers to wine containing no more than 14
     percent of ABV when bottled or packaged by the manufacturer. Fortified wine refers to
     wine containing more than 14 percent ABV when bottled or packaged by the manufacturer,
     with certain exceptions. Winery means a business conducted by any person for the
     manufacture of wine for sale, other than a domestic winery. Wine distributor means a
     person who buys wine from a domestic winery, wine certificate of approval holder, wine
     importer, or who acquires foreign produced wine from a source outside of the United States.

     Wine and Cider Taxes. The Liquor and Cannabis Board (LCB) administers excise taxes
     relating to wine and cider. The Department of Revenue administers retail sales and use
     taxes on wine and cider when purchased in the original container and when consumed on
     the premises of the seller. For table wine, the total tax rate per liter is $0.2292, which
     includes the following per liter taxes:
                                    Base tax      $0.2025
                                    Additional tax     $0.0142
                                    Additional tax     $0.0025
                                    Additional tax     $0.01

     For fortified wine, the total tax rate per liter is $0.4536, which includes the following per
     liter taxes:
                                    Base tax           $0.2025
                                    Additional tax     $0.0142
                                    Additional tax     $0.0025
                                    Additional tax     $0.2344

     For cider, the total tax rate per liter is $0.0814, which includes the following per liter taxes:
                                      Base tax          $0.0359
                                    Additional tax     $0.0025
                                    Additional tax     $0.0005
                                    Additional tax     $0.0018
                                    Additional tax     $0.0407

     The base taxes are distributed to the Liquor Revolving Fund. LCB is authorized to
     distribute $0.25 per liter to Washington State University solely for wine and grape research.
     Additional taxes are deposited into the state general fund, except for the additional per liter
     tax of $0.0025 and $0.0005 for cider, which are distributed to the Washington Wine
     Commission to finance its activities.

     Tax Preferences. All new tax preference legislation is required to include a tax preference


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     performance statement. The performance statement must clearly specify the public policy
     objectives of the tax preference and the specific metrics and data that will be used by the
     Joint Legislative Audit and Review Committee to evaluate the efficacy of the tax
     preference. An automatic ten-year expiration date is applied to new tax preferences if an
     alternate expiration date is not provided in the new tax preference legislation.

     Summary of Bill: The bill as referred to committee not considered.

     Summary of Bill (Proposed Substitute): The first 20,000 gallons of table wine or cider
     sold by a winery each calendar year is subject to a tax rate of $0.0528 per liter. All revenue
     from the reduced tax rate on table wine and cider must be deposited in the Liquor Revolving
     Fund and are subject to allocation to the Washington State University.

     The first 20,000 gallons of table wine or cider sold by a winery each year is not subject to
     any other taxes imposed on table wine or cider except those taxes for which revenues are
     distributed to the Washington Wine Commission.

     The reduced tax rate for table wine and cider expires January 1, 2035.

     The act contains a tax preference performance statement that states it is the Legislature's
     specific public policy objective to promote the development of small wineries. The Joint
     Legislative Audit and Review Committee must complete an initial tax preference
     performance review by January 1, 2029, and a final review by January 1, 2034.

     Appropriation: None.

     Fiscal Note: Available. New fiscal note requested on January 22, 2024.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: Ninety days after adjournment of session in which bill is passed.

     Staff Summary of Public Testimony (Regular Session 2023): PRO: The bill has no
     known opposition within the wine industry. Wineries are hurting in Washington and the
     state is losing about fifty each year. Wineries need a little bit of tax relief. Breweries and
     craft distillers already receive larger tax breaks than the one contained in this bill. There are
     34 other states with lower tax rates than Washington. Most wineries in this state make less
     than 20,000 gallons each year and will not receive the full benefit of the tax exemption. The
     benefit is small but would help pay for equipment to help increase production. Tax breaks
     help small wineries grow. There is at least one winery in every district in Washington.

     Persons Testifying: PRO: Senator Judy Warnick, Prime Sponsor; Tom Wark, National
     Association of Wine Retailers; Paul Beveridge, Family Wineries of Washington State;
     Sandi Moreno, Leony's Cellars; Perry Preston, Stina's Cellars; Josh McDonald, Washington


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     Wine Institute.

     Persons Signed In To Testify But Not Testifying: No one.




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