Report to the General Assembly (Published)

Document Title

Taxation of Farm Wineries

Author

Department of Taxation

Enabling Authority

HJR 148 (Regular Session, 1994)

Executive Summary

The 1994 General Assembly directed the Department of Taxation (TAX) in conjunction with other state agencies to study the taxation of Virginia Farm Wineries. This study arose out of concerns over the possibility of Virginia taxes placing Virginia Farm Wineries at a competitive disadvantage with wineries in other states.

TAX worked closely with the Wine Marketing Specialist of the Division of Marketing, Department of Agriculture and Consumer Services, and consulted with the Department of Alcoholic Beverage Control on various occasions. TAX also established a liaison with the Virginia Winegrowers Association to assist in determining concerns throughout Virginia's Farm Winery Industry. TAX reviewed current department policy regarding farm wineries, taxes and fees imposed on wine by the Virginia Department of Alcoholic Beverage Control, surveyed 23 Virginia localities within which vineyards and farm wineries are located to determine local tax implications, and surveyed those states with wine industries comparable in size to Virginia's with regard to promotional efforts and incentives. The information and recommendations contained herein are based on TAX's findings with respect to trends in other states, local tax trends, and information compiled by TAX and other state agencies.

The Virginia Farm Winery Industry has been, and continues to be, a growing part of Virginia's agriculture and commerce sectors. Virginia wines have been recognized as a high quality product both on the national and international levels. Consumption of Virginia wine by Virginians has steadily risen and state wines are also gaining popularity on the national level (Virginia has been recognized as "the most accomplished of America's emerging wine regions"). As a result of this increasing popularity and reputation, the industry has sustained a steady though modest growth in production volume. Over the past decade, on-site sales (sales at farm wineries) have risen approximately 13.2 percent annually; sales by wholesalers-distributors have risen 18 percent annually.