W.I. to seek cut in fed table wine excise tax

Wines & Vines, April, 1991

W.I. to seek cut in fed table wine excise tax

Directors of California's Wine Institute narrowly voted to seek a reduction in the federal table wine tax and offset the cut with a whopping increase in the tax on aperitif/dessert wines. The concept is called "revenue neutral."

At its March meeting in Monterey the board followed the recommendation of its Executive Committee. Under the proposal, the federal tax on wines from 8 to 14% (table wine) would be reduced from the current $1.07 to 85 cents, wines below 8% (including wine coolers) would be cut from $1.07 to 58 cents, and wines over 14% would be increased from $1.57 to an all-time high of $4 a gallon.

At least one major producer of high ethanol wines, Canandaigua of New York, would be affected in a major way. Grape growers in the California Central Valley -- from Merced County south, -- could be counted on to protest because much of their fruit goes into aperitif/dessert wines.

On the other hand, observers pointed out the proposed cut in under-8% wines could make wine coolers competitive with malt coolers, and build an increasing market for the Central Valley. The same area is the source of a number of jug wines, and thus would benefit from a lower table wine tax of 85 cents.

Smaller table wine wineries (under 100,000 gallons of production yearly) would not benefit as much under the proposal as under the present system whereby the government gives them a 90-cent credit on the $1.07 rate, leaving them with a net tax of 17 cents, the same as for 40 years. But the 90-cent credit was on shaky ground at press time; Canada has protested it as unfair under the Free Trade Agreement with Canada and under GATT. One possible solution would be to extend the credit to small foreign wineries for a level playing field. But in that case the credit would have to be reduced if the proposed tax rate of 85 cents is enacted for table wines.

The $4 tax on aperitif/dessert types -- some as high as 20% -- would apply to high-priced imported ports, sherries and the like as well as to the low-priced sneaky-petes which have drawn the ire of the new prohibitionists. Marketing of aperitif/dessert wines exceeded that of table wines in the U.S. until 1969, the first year the latter pulled ahead. In the 20-plus years intervening the more potent wines have steadily dropped. In 1989, U.S. production of aperitif/dessert wines was about 30 million gallons, compared with 41.6 million in 1980. That contrasts with 1989 U.S. table wine production of 272.7 million gallons and marketing of 58 million gallons of foreign table wine. Special natural wines above 14% added 13.8 million gallons to the potent-wine figure in 1989, for a total of under 45 million gallons of 14-20% wines.

The tax on such wines was $2 a gallon in 1935 and by 1951 had dropped to 67 cents, where it stayed until the 1991 increase to $1.57.

At the Directors' lunch the Wine Institute paid tribute to the Armed Forces, having an enlisted man from each of the Coast Guard, the Army, the Air Force and the Marine Corps at the head table to speak briefly on their experiences at home and abroad. To a man, they expressed appreciation for civilian support during the Persian Gulf war, from which Gunnery Sergeant Michael Snell had just returned. Snell summed up the four servicemen's sentiments by saying "the American people won the war." Air Force Staff Sgt. John Chalmers emphasized civilian-military teamwork, emphasizing "without public support we would have failed."

In his remarks, President John De Luca advised industry members to take a lesson from the Persian Gulf victory. He called attention to the $15 million allocated by the USDA to promote exports of American wine -- 95% plus generated in California -- and advised the industry to emulate the Armed Forces.

Results of the golf and tennis competition, a feature of the spring meeting, will be covered in Wine Institute publications.

Vintech Ch. 11

* Vintech, Inc. has filed for Chapter 11 bankruptcy protection for both the parent corporation and the four wineries it operates. The attorneys who represent Jekel, Domaine Laurier, Lyeth and Mazzocco are: Buchalter, Nemer, Fields & Younger, attn: Stephen F. Biegenzahn, 601 S. Figueroa St., Ste. 2500, Los Angeles 90017.

The attorney for Vintech, Inc. is Clifford Ross Chernick, Chernick & Draeger, 770 Menlo Ave., #101, Menlo Park, Calif. 94025. Vintech, Inc. operates under such other names as Vintech Farms, Vintech Properties, Inc., Vintech Management, Inc., Vintech Management Corp. and Vintech Group.

Concentrate?

* The market for California grape juice concentrate may be shrinking. The reason: a rising tide of imports, particularly from Argentina (which is gearing up for a renewed assault). That is the word from Bert Silk, president of California Fruit Products Co., a Canandaigua Wine Co. subsidiary that specializes in concentrate.

Silk told a San Joaquin Valley gathering of California Association of Winegrape Growers that in 1990 about one-third of the grapes grown from Stanislaus County in the north to Kern in the south went into concentrate.