The United States is the largest wine market in the world. You may want to start a home vintner business and become part of this growing multibillion-dollar industry. Starting your own winery requires a substantial investment of time, effort, expertise, and money. Yet some wine enthusiasts have taken on this challenge and converted their home wine-making into thriving commercial operations. Before you toast to your new success, there are many legal requirements placed on wine-making operations.
Here are some major concerns you must address before changing your wine-loving hobby into a wine-making business.
Home wine-making for personal consumption is legal in all fifty states since July 1, 2013 and has been allowed under federal tax laws since 1979. On a federal level, adults may make wine for personal consumption without a license or tax payments under the Internal Revenue Code. Home vintners may produce up to 100 gallons per year in one adult households and up to 200 gallons per year for homes with two or more adults. The U.S. Department of the Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB) provides a helpful conversion chart that translates gallons into different bottle sizes.
Federal rules allow homemade wines to be transported outside of the home for wine tastings, demonstrations, contests, and organized meetings. Be mindful that if you wish to offer your wine for commercial purposes, a host of federal, state, and local rules will kick in, such as federal and state taxes, licensing requirements, bonding mandates, labelling approvals, and grape designations.
Determining the nature of your winemaking business is essential before starting operations. The TTB has federal authority over bonded wineries, bonded wine cellars, alternating proprietors, and custom crush clients. A bonded winery is a facility that produces and sells wines while bonded wine cellars do not make wine but are warehouse facilities that store, blend, and bottle wines. Other wine entrepreneurs, known as alternating proprietors, prefer to make wines for sale by sharing an existing bonded winery’s facility. Some wine wholesalers provide the grapes and other raw materials to bonded wineries which produce wines for these custom crush clients. Bonded wineries that make wines for sale for custom crush clients are referred to as custom crush wineries. The nature of your participation in the wine industry will determine what applications, forms, laws, and regulations apply to your activities.
Before starting operations, the TTB requires impacted wine businesses to submit various applications with supportive documentation under the terms of the Internal Revenue Service Code and the Federal Alcohol Administration Act (FAA Act). In general, bonded wineries and bonded wine cellars must complete an Application to Establish and Operate Wine Premises. Bonded wineries, bonded wine cellars planning to blend wines, and custom crush wholesalers must also also submit an Application for Basic Permit under the FAA Act.
Your wine business can begin the application process online using the TTB’s Permits Online system. The TTB application process seeks information about your business structure, signatory authority, wine-making premises, wine-making activities, trade name, grape designations, labelling approvals, and any alternating proprietor agreements. As part of the application process, you must provide a Wine Bond to underwrite your payment of federal taxes on your planned wine sales. Your application may also need to include environmental and water quality information to show compliance with applicable laws.
After filing your application, your submission and supporting documentation are entered into the TTB’s tracking system. A TTB Wine Applications Unit Specialist will review your application and will call you about your application and to obtain any further information needed to complete your application. Subsequently, the TTB’s Trade Investigations Division (TID) may undertake an on-site inspection of your wine operations. If appropriate, the TTB will then approve your application to start your wine business. Due to the complexity of this process, you might want to initially work through an approved bonded winery or bonded wine cellar until you are ready to seek approval for your own wine-making business.
Bonded wineries and bonded wine cellars that make beverages for human consumption must register as a food facility with the FDA. This federal registration scheme is intended to provide avenues for food facilities, such as wineries, to alert the FDA to cases of adulterated products or food-borne illnesses. This reporting mechanism aids the FDA in warning the public and impacted businesses about these food security concerns. Your wine-making operation can register online for free. The FDA’s What You Need to Know about Registration of Food Facilities: Small Entity Compliance Guide helps your wine-making enterprise to better understand this registration process.
State laws and regulations may further limit wine-making for both personal consumption and commercial purposes. For example, state laws may determine if your homemade wine may be shared with your house guests, transferred to other locations, or provided in public tastings, exhibits, and competitions. Alternatively, your wine business may operate a home winemakers’ center which provides facilities, material, and advice to the public on wine-making or may make and sell wine-making kits to those wishing to make homemade wine for personal consumption. Although the TTB does not regulate these businesses, they may be subject to state, county, and local laws. Even wine businesses approved by TTB must further comply with relevant laws and licensing requirements. Your wine business may need a general business license to operate locally along with beverage distribution and premises licenses. State laws on cleanliness, health and safety, zoning, and environmental rules may also impact your new wine-making business.
For further assistance on converting your home wine-making into a commercial enterprise, check out the TTB’s Frequently Asked Questions-Wine or the National Association of American Wineries for legal, policy, and market news on the wine-making industry.