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Thread: Tax ?'s

  1. Default Tax ?'s

    First I will say hi since Iam new here, thank you all for what looks like a solid young forum.

    I would like to open the conversation on tax issues, and business classification. One of the common and should be obvious is to have your recipies in order when applying for licences, etc. But I was wondering if it is possible to classify yourself as a developmental business to kick start things, not selling any mead, and keeping the volume below the legal limits to be considered a home brewer? I know that this may seem like a cart before the horse thing in some regards. Also tax law seems to be a moving target, particularly for the small or home business in recent and upcoming years.


  2. #2

    Default Re: Tax ?'s

    Certainly develop your recipes to a very consistant form and repeatability. Once you have accomplished this, you will be able to then apply for the lisences. However, if you start brewing prior to the approval of your lisence, you must have a temporary lisence to do so. At least, this is the case in Florida. AND you aren't allowed to brew until you have the temp one. And then the health inspections... Sheesh! Those are enough to drive you insane!
    The legality of that matter is you can brew up to your legal limit as a homebrewer. The caveat is that your homebrewed stock can't be used as part of the opening stock for sale from your meadery simply because it was brewed with an unapproved recipe and is considered outside the "government regulated" portion of the alcohol and tobacco industry.
    So, what you do is when you get your application filled out and submitted, take and apply for your labels and recipe at the same time. After you get your temp lisence, if your state supplies them, start brewing using the unapproved recipe. Follow it to the letter! If it doesn't get approved, then you've got mead to give away and use as a marketing item. It's a tax write-off. Else, you've got your first batch of mead going for sale.


  3. Default Re: Tax ?'s

    You've got to get a federal license as well, and they don't have a "temporary permit". You are not allowed to brew for sale until you have their permit. And many states won't give you their state permit until you have the federal one in hand.

  4. Default Re: Tax ?'s

    that is kind of what I am getting at, is it possible to have a business that develpos mead recipies and production plans, has and uses small scale equipment, but sells no mead, therefore not requireing a license to produce the beverage. At that point you would have business expenses and equipment to procure, tax deductions and such. If profit needs to be shown you could consult, or sell you knowledge to sombody perhaps.

    Then you can increase your line of business to accomadate the actual sale of beverage when all of the proper permits and inspections have been acomplished.

    Just trying to figure, plot, plan and sceme a little, if I can figure it out wiithout being fined or going to jail.

  5. #5

    Default Re: Tax ?'s

    Here's what I found:
    W13: How Do I Become a Bonded Wine Premises?

    Federal law requires that anyone wishing to conduct wine operations (other than as a home winemaker) must first establish premises, obtain a bond and receive permission from the Alcohol and Tobacco Tax and Trade Bureau (TTB). In addition, law requires that anyone wishing to produce or blend wine in the United States must first obtain a Federal Basic Permit from TTB.

    Where can I get the application papers? You may obtain the application from TTB’s National Revenue Center, 550 Main St., Ste. 8002, Cincinnati OH 45202. toll free telephone number 877-882-3277 (877-TTB-FAQS). You may also download the forms individually below or visit our Forms page for a complete list of TTB related forms. Please submit in duplicate:

    TTB F 5120.25, Application to Establish and Operate Wine Premises
    TTB F 5100.24, Application for Basic Permit under the FAA Act (not required for non-producing storage-only bonded premises)
    TTB F 5120.36, Wine Bond
    TTB F 5000.29, Environmental Information
    ATF F 5000.30, Supplemental Information on Water Quality Considerations
    For Signing Authority, either TTB F 5000.8, Power of Attorney, or TTB F 5100.1, Signing Authority for Corporate Officials

    Other documents related to trade name registration and corporate or partnership structure are required; please contact the National Revenue Center for further information.

    Where may I read the federal wine regulations? You may find the regulations governing the application process, wine production and labeling in Title 27, Code of Federal Regulations, Parts 1, 24 and 4, respectively or click here.

    How much does it cost to apply to be a winery? There is no charge for TTB’s application for new bonded wine premises. When and if permission is granted, Special Occupational Tax must be paid each year at the rate of $1,000 per year, or $500 per year, if qualified for the reduced rate. See 27 CFR 24.50-.55. Also, a surety bond or cash collateral bond is required in the minimum amount of $1000. There may also be State and local government fees.

    How long does it take to qualify? Applicants should allow 2-4 months for TTB’s consideration of the application and investigation process.

  6. #6

    Default Re: Tax ?'s

    got all that info from:

  7. Default Re: Tax ?'s

    I can tell you though that the IRS isn't going to be happy when they find out you established a business with no real way to make money. All expenses and no income means an audit is headed your way faster that you can say "No please Mr Jackbootedthug, please don't take my fermenters!"

  8. #8
    Vicky Rowe Gotmead Visitor

    Default Re: Tax ?'s

    Naw, you get about 5 years before they get nasty.......at least thats what my accountant says.....

  9. #9
    Join Date
    Dec 2004
    The OC

    Default Re: Tax ?'s

    Yup, they want to see solvency in five years or it's time to start looking for another way to make cash hand over fist.

    The conversations usually go like

    "Did you make money last year?"
    "Did you give us most of it?"
    "OK, you can go."


    Is it tasty . . . precious?

  10. Default Re: Tax ?'s

    I've had a Business Tax Number in doll making a while ago... I got quarterly tax forms to fill out and send in my taxes paid. I sold at miniature & doll shows.... sometimes I sent in payments and sometimes I made no money (didn't have a show that quarter) and paid no taxes.
    After 5 years of not making money... they considered it a hobby and canceled my tax number. I can still use my number if I have a sale one month... I call them and get a temp. tax number.
    Also.... wouldn't you want to get the experience in brewing, build your recipes to perfection before you spend the time and money on aquiring the licenses and business formalities.
    I would like to eventually sell my mead at Ren faires & such... I have a 5 year plan... the first two or three on research, recipe building, location hunting and then the last two on the government end of starting a business. Should I start the government applications earlier?
    I've read the "Starting a Meadery" article here on the gotmead site... and they seem to jump right in with both feet before they've developed their recipe base.
    Are there special or different licenses for selling at Ren Faires & selling bottles privately than there would be for selling bottles in grocery & liquor retail stores?

    Suzy Q, Brewmistress

  11. #11
    Vicky Rowe Gotmead Visitor

    Default Re: Tax ?'s

    They don't really 'jump right in'. The article deals more with the business end of starting a meadery, and it assumes that you have already come up with recipes, since without mead recipes, you can't really start a meadery. Additionally, there are restrictions as to how much honey is required, what additives/herbs/fruits can be used.

    If you developed a perfect recipe, spending a couple years putting it together and getting it right, only to find out that you'd be violating recipe rules, then you've wasted two years. Better to find out your state and the federal regs first. Get the paperwork, and discover what is needed.

    Likewise, you might find the perfect location, and discover that your state health department or the BATF won't approve it.

    You could land a great deal on equipment, only to discover that what you have won't be allowed.

    So, know the government regs as best you can before putting a lot of time into starting a meadery. If you don't, you could invest a great deal of time, and find you've been researching in the wrong direction entirely.

    This is what I get from the meadery owners I've spoken with. All got the paperwork first. They might not get the paperwork *in* for a couple years, but they know going in what they're getting into regarding recipes, labels, locations, equipment, bottling, etc.


  12. #12
    Join Date
    Dec 2004
    The OC

    Default Re: Tax ?'s

    Sage advice! Dealing with the feds and the state folks on requirements doesn't have to be totally daunting if you take time to know what they require and what they forbid up front.

    Fore-warned is fore-armed.


    Is it tasty . . . precious?

  13. Default Re: Tax ?'s

    Thanks Vicky,
    as you can see, I've not thought it through.... or rather... I've been approaching it from the wrong direction.
    Perhaps I'll stick with making mead for fun.... after all... once I start doing things for a living, I have to do it... it can become no longer fun.

    Can you tell me if there are different licences options if one makes to sell privately and one that sells retail?

    Suzy Q

  14. Default Re: Tax ?'s

    If you want to sell at all, you have to get the federal basic permit. Your state will require separate licensing, which obviously will depend on the state. MI offers a small winemakers license, which allows you to sell to retailers, wholesalers, or directly to consumers. Not all states are as nice - some force you to work through a wholesale distributor, virtually guaranteeing that your meadery will fail.

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