OAR 845-008-0060: Small Winery Exemption

ORS 473.050(5) provides that no tax shall be levied, collected or imposed upon the first 40,000 gallons of wine sold annually in Oregon from a United States manufacturer of wine producing less than 100,000 gallons annually. This rule explains the criteria to qualify for this small winery exemption. (1) A winery qualifies to take the small winery exemption if the winery produces less than 100,000 gallons of wine during the calendar year in which the exemption is claimed. A winery’s total production for the year is measured by the volume of wine produced by fermentation as reported to the Alcohol and Tobacco Tax and Trade Bureau (TTB) for the calendar year. Wine is considered produced for Oregon tax purposes when fermentation is completed or the wine is removed from the fermentor. (2) The winery claiming the small winery exemption must hold a federal basic permit to produce wine and must have produced a minimum of 1 gallon of wine in the calendar year that the exemption is taken. A winery that holds a federal basic permit to produce wine but does not produce any wine during a calendar year may not take the small winery exemption on any wine it removed from federal bond during that calendar year. (3) A winery may exempt no more than 40,000 gallons of wine under this exemption during a calendar year. While eligibility for the small winery exemption is based on the current year’s wine production (less than 100,000 gallons), the exemption itself (no more than 40,000 gallons combined total) can be taken on any wine removed from bond during the year regardless of the year it was produced. (4) A winery may claim the small winery exemption for wine that it removes from federal bond and intends, at the time of removal, to sell in Oregon. The exemption may be taken at the time of removal if the winery intends in good faith to sell the wine in Oregon. Wine qualifies as being sold in Oregon if ownership of the wine is, or is expected to be, transferred to a person or entity located within this state. (5) The winery claiming the small winery exemption must have removed the exempt wine from federal bond. No exemption is available for wine that was not removed from bond by the winery claiming the exemption, such as wine that the winery received or imported federally tax-paid, or wine that the winery has transferred to another entity in bond. (6) The Commission will deny the small winery exemption if it determines that allowance of the exemption would benefit a winery who would otherwise fail to qualify for use of the exemption. (7) Wine that is claimed as exempt under the small winery exemption may not be claimed as exempt from tax under any other provisions of ORS 473. (8) A bonded winery or warehouse may claim the small winery exemption on behalf of an eligible small winery for wine that the winery or warehouse receives from the transferring small winery and removes from bond, provided that all of the following requirements are met: (a) The wine on which the exemption is claimed must have been produced by the small winery that transfers the exemption and must be eligible for exemption if it were to have been removed from bond by the transferring winery. The exemption may not be transferred on wine that the transferring winery received from another producer. (b) The winery or warehouse taking the exemption on behalf of the transferring winery must remove the wine from bond. (c) The transferring winery must hold title to the wine for which the exemption is transferred at the time the wine is removed from bond. (d) The total amount of the exemption that may be claimed by a winery or warehouse on behalf of a small winery in any calendar year may not exceed 40,000 gallons minus all amounts claimed under the small winery exemption by the transferring small winery or by others on its behalf for that year. The transferring winery must provide to the transferee all information necessary for the transferee to determine the amount of exemption it may claim.