Examples of food products used to produce wine include:

• Albumen
• Autolyzed yeast
• Bakers yeast mannoprotein
• Carbohydrase
• Casein (a milk product)
• Catalase
• Cellulase
• Enzymes
• Gelatin
• Glucose oxidase
• Lysozyme
• Milk products
• Pectinase
• Protease
• Soy flour
• Urease
• Yeast

Examples include ingredients used to stabilize wine, increase the body and astringency of the wine, and to sterilize or preserve the wine.

The following ingredients and products may generally be purchased for resale when incorporated into, and resold with, the finished product:

Please note, if the actual use of these products or ingredients is different than described above (as it aligns with Section 24.246 of CFR), the stated application of tax may be different and you should contact us for further guidance on the correct tax application regarding your specific use of the ingredient or product in question (How to Contact Us).

If you make wine for personal consumption, and do not intend to resell the wine you make, you may not purchase the above ingredients without tax. These ingredients may only be purchased without tax when they are intended to be incorporated into wine that will later be resold.

Examples of manufacturing aids used to produce wine include:

• Products that stabilize juice color before it is fermented into wine
• Chemicals that assist yeast during fermentation
• Fining agents to clarify wine (and typically filtered out of product)
• Products that precipitate a chemical reaction during or after fermentation, prior to bottling or selling wine.

The sales of the following products to winemakers when used as manufacturing aids are subject to tax:

• Acetaldehyde
• Activated carbon
• Aluminosilicates
• Ammonium phosphate
• Biotin
• Calcium pantothenate
• Copper sulfate
• Chitosan
• Defoaming agents
• Ferrocyanide compounds
• Ferrous sulfate
• Folic acid
• Granular cork
• Inositol
• Isinglass
• Magnesium sulfate
• Niacin
• Polyvinylpolypyrrolidone
• Pyridoxine
• Silica gel
• Thiamine hydrochloride

Please note, if the actual use of these products or ingredients is different than described above (as it aligns with Section 24.246 of CFR), the stated application of tax may be different and you should contact us for further guidance on the correct tax application regarding your specific use of the ingredient or product in question (How to Contact Us).

A refund may generally be claimed at any time within the statute of limitations (generally, within three years). If you are seeking a refund for overpaid taxes on purchases the procedures are different depending on whether the original purchase was subject to sales tax versus use tax.

If the tax you paid was sales tax, you must request a refund from the retailer. The retailer would then file a claim for refund with the California Department of Tax and Fee Administration (CDTFA). As the purchaser, you will need to provide the retailer with a completed resale certificate (CDTFA-230, General Resale Certificate or similar form) and documentary evidence that the original purchase should have qualified as raw material intended to be incorporated into the finished product. However, if the item on which you paid sales tax is a food product, a resale certificate is not necessary.

If the tax you paid is use tax (typically use tax applies when you purchase from an out-of-state vendor), you may file a claim for refund directly with the CDTFA. Simply complete form CDTFA-101, Claim for Refund or Credit and mail it to the address provided. Include as the reason for the refund that the property purchased qualifies as a food product or raw material intended to be incorporated into the finished product.

If you paid sales or use tax on a manufacturing aid or other taxable property and subsequently resell it before making any use of it, you may take a deduction of the purchase price of the property on your sales and use tax return. You must take the deduction under the heading "Tax-paid purchases resold" on your return in the same period in which the sale of the property is included.

For more information on how to file a claim for refund, see publication 117, Filing a Claim for Refund.

The partial exemption applies only to the state's General Fund and Local Revenue Fund 2011 portion of the sales tax, currently 5 percent.

Three requirements defined in Regulation 1533.1 must be met for the partial exemption from sales and use to apply. The item must be:

1. Purchased by a qualified person,
2. Used exclusively or primarily (depending on the type of item) in producing and harvesting agricultural products. Primarily means at least 50 percent of the time, and
3. Defined as farm equipment and machinery, which includes any tool, machine, equipment, appliance, device, or apparatus used in the conduct of agricultural operations.

If any one of these three requirements is not met, the partial exemption from sales and use tax will not apply.

Examples of farm equipment and machinery that may qualify include:

• Planting and seeding equipment
• Crop-spraying equipment
• Harvesting equipment
• Tractors
• Balers
• Trimming tools
• Solar power systems, under certain circumstances
• Irrigation equipment

If you lease rather than purchase farm equipment, you may still qualify for the partial sales and use tax exemption. For more information about leases, please see publication 46, Leasing Tangible Personal Property.

Mobile transportation equipment generally does not qualify for the partial exemption unless it is used exclusively in the conduct of agricultural operations and qualifies as an implement of husbandry under the California Vehicle Code. For a list of items that generally do not qualify for the farm equipment and machinery partial exemption, please see our special notice, Auto Part Retailers' Sales Generally Do Not Qualify for the Farm Equipment and Machinery Partial Exemption.

For more information about this partial exemption and other exemptions available for farming, please see our Tax Guide for Agricultural Industry and look under the Farming Exemptions tab.

For information on when the partial exemption applies to the sale or purchase of diesel fuel used in farming activities or food processing, please see our Tax Guide for Agricultural Industry, look under the Farming Exemptions tab, and go to the Diesel Fuel Used in Farming or Food Processing topic.

However, sales and use tax does not apply to the sale of seeds and plants when:

• The seeds, or the products grown from them, will be used as food for human consumption; or
• The plants will produce food for human consumption, such as fruit (including grapes), grains, berries, or nuts.

For more information, please see Regulation 1588, Seeds, Plants and Fertilizer.

The term fertilizer includes all of the following:

• Commercial fertilizers (as defined in section 14522 of the California Food and Agricultural Code);
• Agricultural minerals (as defined in section 14512 of the California Food and Agricultural Code);
• Cover crops that will be planted on the land and plowed underneath to fertilize that land;
• Carbon dioxide; and
• Manure, which is considered to be:
  1. Waste from any domestic animal or fowl that is not artificially mixed with any material, or
  2. Domestic animal or fowl waste mixed only with materials used for preservation of the manure, or with materials used for bedding, sanitary, or feeding purposes for the animal or fowl.

Other retail sales of fertilizer and packaged soil amendments (as defined in section 14552 of the California Food and Agricultural Code) and auxiliary soils and plant substances (as defined in section 14513 of the California Food and Agricultural Code) are taxable.

Sales of pesticides and insecticides are taxable. However, when those materials are mixed with fertilizer, the portion of the sales price representing the price of the fertilizer is not taxable if the fertilizer is used in a tax-exempt manner.

For more information, please see Regulation 1588, Seeds, Plants and Fertilizer.

• Be engaged in certain types of business, also known as a "qualified person,"
• Purchase "qualified tangible personal property," and
• Use the property in a qualified manner.

A "qualified person" generally means a person who is primarily engaged (50 percent or more of the time) in those lines of business described in the North American Industry Classification System (NAICS) Codes 3111 to 3399, inclusive, 541711, or 541712. These lines of business generally include manufacturing business activities, and research and development business activities. A qualified person may be primarily engaged either as a legal entity or as an establishment within a legal entity in a qualifying line of business.

If you operate a winery, you may be considered a qualified person if you are primarily engaged in the production of wine.

Qualified tangible personal property generally includes:

• Machinery and equipment, including component parts and contrivances such as belts, shafts, moving parts, and operating structures, used in manufacturing or research and development, and treated as having a useful life of one or more years for state income or franchise tax purposes.
• Equipment or devices used or required to operate, control, regulate, or maintain the machinery, including, but not limited to, computers, data-processing equipment, and computer software, together with all repair and replacement parts, with a useful life of one or more years, whether purchased separately or in conjunction with a complete machine, and regardless of whether the machine or component parts are assembled by the qualified person or another party.
• Tangible personal property used in pollution control that meets or exceeds standards established by California or any local or regional governmental agency within California at the time the qualified tangible personal property is purchased.
• Special purpose buildings and foundations used as an integral part of the manufacturing, processing, refining, fabricating, or recycling process, or that constitute a research or storage facility used during those processes. Buildings used solely for warehousing purposes after completion of those processes are not included.

The tangible personal property must generally be used 50 percent or more of the time in qualifying manner. The following activities are generally considered qualifying uses of the property:

• Primarily used in any stage of the manufacturing, processing, refining, fabricating, or recycling of tangible personal property;
• Primarily used in research and development;
• Primarily used to maintain or repair any qualified tangible personal property described above; and
• Property used by a construction contractor purchasing that property for use in the construction of special purpose buildings and foundations used as an integral part of the manufacturing, processing, refining, fabricating, or recycling process, or that constitute a research or storage facility used during those processes. Buildings used solely for warehousing purposes after completion of those processes are not included.

Some examples of winery equipment that may qualify for a partial manufacturing exemption are grape crushers, de-stemmers, presses, bottling equipment, and fermentation tanks.

For more information on the partial manufacturing exemption, please visit our Tax Guide for Manufacturing and Research & Development Equipment Exemption.

As the winemaker, you can provide a CDTFA-230, General Resale Certificate, to your vendor when purchasing oak barrels and/or oak chips.

Examples of packaging materials are bottles, cans, barrels, wrapping materials, twines, bags, cartons, and pallets.

Examples are sales of labels to be affixed to fruit boxes, cans, bottles, and packing cases, made to growers, packers, bottlers and others who place the contents in the containers.

A California winegrower licensee (ABC license type 2) who sells and ships wine directly to California customers must obtain a sales and use tax permit.

Out-of-state wine direct shipper is required to register with us and pay the alcoholic beverage tax as if they were a California winegrower.

If you sell and make shipments of wine directly to consumers in California, such sales are retail sales and you must report all applicable sales and use tax to us, in addition to the alcoholic beverage tax. (Business and Professions Code Section 23661.3)

If you sell and ship wine to customers outside California, the sales are exempt sales in interstate commerce and are not subject to California sales tax. You must keep documentation, such as a bill of lading, to show that the wine was shipped out of California directly to your customer. The amount of wine would also be exempt from the alcoholic beverage tax since it is sold for export and actually exported.

Example

You operate a small winery located in the State of Washington that will make direct shipments of wine to your customers in California. You are required to obtain all of the following:

• A wine direct shipper permit from ABC (license type 82).
• A seller's permit from us to file sales and use tax returns with us.
• A winegrower/wine direct shipper account from us to file winegrower returns with us.
  • We will send you a request for registration shortly after you apply for the wine direct shipper permit with ABC.

If you also sell food during wine tastings, such as cheese, crackers, and smoked salmon, tax also applies to these sales. You may collect sales tax reimbursement from your customers on your wine and food sales as a separately stated charge. Or, you can include the tax in your wine and food charges; however, you must post a sign notifying your customers that the fee charged for wine tasting or food includes sales tax reimbursement. For more information on sales tax reimbursement, please see Regulation 1700, Reimbursement for Sales Tax.

If you do not charge a fee for wine tasting or food served to your customers, you are considered the consumer of the products used. You owe use tax on the cost of the taxable items that you purchased for resale and used to produce the wine, which you let customers taste without charge. For example, if you are a winemaker, you would owe use tax on items purchased for resale, such as bottles, corks, labels, and certain chemicals incorporated into the wine. If you purchased wine for resale, you owe use tax measured by the cost of the wine that you give away or self-consume. However, use tax does not apply to the purchase price of the grapes because they are food products, the sales of which are exempt from tax. For more information regarding components of wine produced for human consumption, please see the Ingredients tab.

In addition to the sales and/or use tax, wine is presumed to be sold and subject to alcohol and beverage tax when it is removed from internal revenue bond (non-tax paid wine).

In general, when you contract to provide and serve food or beverages for an event at the winery and the primary purpose of the winery is to serve the food or beverage at the event, your charge for use of the winery is taxable, even if separately stated. You are considered to be functioning as a restaurant and the charge for the use of the winery is part of the sale of food or beverages.

Example:
A winery has a courtyard area designed for wedding receptions and contracts to furnish and serve food and beverages for a customer's wedding reception (event) under a lump sum charge. The winery's courtyard has tables and chairs for the wedding reception and the winery provides all tableware, linens, glasses, among others, in addition to the food and beverages. In this case, the winery is functioning as a restaurant and the winery's facility charge for use of the courtyard is taxable, even if the charge is separately stated.

However, if you contract to provide and serve food or beverages at the winery, but also rent a separate area of the winery to your customer for a use other than serving food/beverages, the charge for the use of the separate area unrelated to the serving of food/beverages is not subject to tax if the charge is separately stated on the invoice. A nontaxable facility charge could include a charge for a location for the couple to prepare for the wedding or a charge for a room for the couple to spend their wedding night.

Example:
Same scenario as the above example (for example, winery contracts to provide and serve food or beverage for a customer's wedding reception), except in this case the winery also rents the wedding party a separate area to hold the wedding ceremony. This area is separate from the courtyard and no food or beverages will be served in the area where the wedding ceremony occurs. The winery separately states the charge for the use of this area that is unrelated to the serving of the food or beverages. Because the primary purpose of the area for the wedding ceremony is not to serve food or beverages, the separately stated charge is not subject to tax. Under these circumstances, only the charge for the facilities where food or beverages are served is taxable.

Your charge for the use of the winery for an event where the primary purpose of the winery at the event is to serve food or beverages is taxable even if you only provide either the food or the beverages at the event.

Example:
A winery has a courtyard area designed for wedding receptions and contracts to serve its wine at the wedding reception. However, the customer contracts directly with a caterer, unrelated to the winery, to provide and serve the food at the reception. The winery's facility charge for the use of its courtyard area is taxable because the winery is providing and serving the wine at the event, even though the food is provided and served by an outside caterer. The facility charges are taxable even if the charges are separately stated.

It makes no difference that the facilities are not primarily used for serving food or beverages in the normal course of business, such as a barn, cellar, or garden. When you contract to furnish and serve food or beverages for an event and provide facilities whose primary purpose at the event is to serve food or beverages, the charge for those facilities is taxable, even if separately stated.

Example:
A winery operates a catering service and has a cellar that can be used for private parties. The winery contracts to furnish and serve food or beverages using its catering service for a retirement party in the cellar. In such cases, even though the cellar is generally used for making and storing wine, since the primary purpose of the event is to serve food and beverages, the facility charge for the cellar is taxable.

However, in some instances, you may rent or lease the winery for an event without furnishing and serving food or beverages. Instead, the customer provides the food and beverages, including the wine, for the event. For example, the customer hires a caterer unrelated to you to furnish and serve meals at the event. Under these circumstances, you are not considered to be acting as a restaurant because you are not responsible for furnishing and serving the food or beverages at the event. You are merely leasing the premises and the separately stated charge for the use of the winery is not taxable.

For more information, please see Publication 22, Dining and Beverage Industry, under the section Facility fees charged by retailers other than restaurants or hotels.

• Is still in the possession of the winegrower in internal revenue bond within California.
• Has been exported from California by you (the licensee) or has been sold by you for export and actually exported from California.
• Is otherwise exempt.

Adults who bring wine into California for personal or household use do not need an alcoholic beverage license; however, some restrictions do apply. For specific information on importing alcoholic beverages for personal use, please visit ABC's website and review their Importing Alcoholic Beverages for Personal or Household Use webpage.

To qualify as exempt from tax, the wine sold must be:

• Delivered to an armed force of the United States at a depot of the armed force in California for transport outside California, or
• Shipped to a point in a foreign country, where the federal tax on alcoholic beverages is not imposed or is refunded, or
• Shipped to a point outside California by a carrier who is independent of the buyer and the seller, where "carrier" means a person or firm regularly engaged in the business of transporting for compensation property owned by other persons, or
• Shipped to, or delivered to, a point outside California, by any means. The claim for tax exemption must be supported by documentation signed by the purchaser and include a certificate from the appropriate liquor control or tax authority of the state in which the wine has been delivered, showing that the delivery of the wine has been reported to such authority by the purchaser.

Taxpayers must maintain documentation to support that the wine was exported, such as purchase orders, shipping documents, bills of lading, delivery receipts, among others, that show the wine was sold and exported outside California.

Wine sales to customers outside California are generally considered exempt sales in interstate and foreign commerce, and therefore, not subject to sales tax. You must keep documentation, such as a bill of lading, to show that the wine was shipped out of California directly to your customer.

Example: Wine imported for bottling and subsequently exported

An out-of-state winery ships bulk wine to a licensed winegrower/importer (an Importer License is needed to import the wine) in California who will bottle the wine at their bonded facility. The licensed winegrower/importer then exports the bottled wine out of California.

There is no California alcoholic beverage tax due on the bulk wine imported into California for bottling. This is because the bulk wine is being delivered to a licensed winegrower/importer's bonded location. A California winery may receive a bulk shipment of wine in internal revenue bond; however, the winegrower must be licensed with both an importer's license (type 09) and a winegrower's license (type 02) in order to receive the wine in internal revenue bond. See Revenue and Taxation Code section 32174.

There is also no California alcoholic beverage tax due on the bottled wine product that is exported out of California. Wine that has been exported from California by a winegrower is exempt from taxation. The winegrower must keep proof (e.g., bills of lading) of the out-of-state delivery for at least four (4) years after the shipping date. See Revenue and Taxation Code section 32173.

Sales Which Are Not Exports

Alcoholic beverages on which federal excise taxes have been paid, and which are sold to persons operating commercial fishing boats or private carrier freight vessels for use as ships' stores outside California, upon the high seas, are not exports and are subject to the alcoholic beverage tax.

Wine Transactions Exempt from the Alcoholic Beverage Tax

• Wine sold or delivered in internal revenue bond to another winegrower in California (Revenue and Taxation Code section 32174).
• Wine in continuous transit through California in the possession or custody of common carriers (Revenue and Taxation Code section 32051).
• Certain sales of wine for use in trades, professions, or for industrial purposes, and not for beverage purposes (Revenue and Taxation Code section 32052).
• Wine sold in packages of a capacity of larger than one gallon for the following uses (Revenue and Taxation Code section 32053):
  • By any state or federal governmental agency, or by any scientific university or college of learning or any laboratory for use exclusively in scientific research, or by any hospital or sanitarium.
  • The manufacture of any of the following products, if the products are unfit for beverage use:
    • Medicinal, pharmaceutical, or antiseptic products, including prescriptions compounded by registered pharmacists
    • Toilet products
    • Flavoring extracts
    • Sirups (syrups)
    • Food products
    • Scientific, chemical, or industrial products
• Sales of wine to certain commercial carriers of persons when beverages will be used on their facilities outside California (Revenue and Taxation Code section 32054).
• Wine sold for export and actually exported (Revenue and Taxation Code section 32173).

Accurate record keeping will help you keep track of your sales and purchases and assist you when preparing your required tax returns and reports. Records must be kept for at least four (4) years, unless otherwise directed by us. If you do not maintain records, it may be considered evidence of negligence or intent to evade the tax and may result in penalties.

Examples of records to keep:

• Sales invoices
• Cash register tapes
• Sales journals
• Resale certificates
• Shipping documents
• Purchase invoices
• Bank records
• Purchase orders
• Purchase journals
• Tax returns

Every manufacturer, winegrower, wine rectifier, wine importer, and wine wholesaler must keep records of all wine produced, purchased, and sold.

Each invoice covering the sale or purchase of alcoholic beverages:

• Must not be commingled with invoices covering commodities other than alcoholic beverages;
• Must be marked or stamped "Sold for export" if sold for export;
• Must be marked or stamped "No state tax—not for beverage use" if sold for use in trades, professions, or industries, and not for beverage use;
• Must show that delivery was made "in bond" if sold in internal revenue bond by a winegrower to another winegrower;
• Must show all of the following:
  • The name and address of the seller;
  • The name and address of the purchaser;
  • Date of sale or purchase and invoice number;
  • The kind, quantity, size, and capacity of packages of alcoholic beverages sold;
  • The cost to the purchaser, together with any discount which at any time is to be given on or from the price as shown on the invoice; and
  • The place from which delivery of the alcoholic beverages was made, unless delivery was made from the premises of the licensee or from a public warehouse located in the same county.

In addition to the general requirements described above, if you are a winegrower, manufacturer, wholesaler, or importer, the following records must be kept:

If an annual inventory period ends on a day other than June 30 and has been approved by the Federal Alcohol and Tobacco Tax and Trade Bureau (TTB), then you shall take inventory on that day.

You should keep all records used in preparing inventories for certification at your premises, to be readily accessible for examination by a CDTFA representative.

To obtain a refund from us for the alcoholic beverage tax paid, all of the following conditions must be met:

• The beverages are lost, rendered unmarketable, or condemned by a duly authorized official by reason of fire, flood, casualty, or other disaster, or by reason of breakage, destruction, or other damage resulting from vandalism, malicious mischief, or insurrection.
• The beverages were held and intended for sale at the time of the disaster or other damage.
• The disaster or damage occurred in California.
• The licensee has not, and will not, be compensated by insurance, or otherwise, for the loss in the amount of the tax included in the purchase price paid for the beverages.
• The amount to be refunded with respect to a single disaster or other loss is $250 or more.
• A claim for refund is filed with us within six months after the date on which the beverages were lost, rendered unmarketable, or condemned by a duly authorized official.

We will not pay interest on the amount of alcoholic beverage taxes refunded. Losses resulting from theft do not qualify for a refund of the alcoholic beverage tax (see Regulation 2553, Losses Resulting from Disaster, Vandalism, Malicious Mischief, or Insurrection).

Losses resulting from theft do not qualify for a refund of any sales tax because the products were not sold at retail, and therefore, no sales tax was imposed.

The use of wine in the manufacture of any of the following products is considered for industrial uses, if the products are unfit for consumption as a beverage (Business and Professions Code section 23112):

• Medicinal, pharmaceutical, or antiseptic products (such as hand sanitizer), including prescriptions compounded by registered pharmacists
• Toilet products
• Flavoring extracts
• Sirups (syrups)
• Food products
• Scientific, chemical, or industrial products

For more information, please visit the Industry Topics tab of our Tax Guide for Alcoholic Beverage.

Unsupervised Destruction – Wine Importers

Wine importers can claim a credit for unsupervised destruction of wine when the quantity being destroyed as spoilage is 2,500 gallons or fewer of still wine (or 1,500 gallons or fewer of champagne or sparkling wine by volume). However, you must receive written approval from us prior to destroying the wine to claim the exemption or credit (Regulation 2552).

Supervised Destruction

If you do not qualify for unsupervised destruction as noted above, you may still be eligible to claim an exemption or credit on tax-paid wine that is destroyed with supervision (Revenue and Taxation Code section 32176). We will contact you regarding the appropriate type of supervision required, including witnessing the destruction virtually through the use of video conferencing, to claim your exemption or credit after you complete and submit CDTFA-775.

Submitting a Wine Destruction Approval Request

To submit a destruction request, a winegrower or importer must submit CDTFA-775, Application for Approval and Declaration of Destruction for Spoiled Beer or Wine. The steps below outline the process for a destruction request:

1. Complete CDTFA-775 Sections I and II and email it to CDTFA775@cdtfa.ca.gov. On the subject line of the email, include the following: Destruction Approval Request – CDTFA Account (input account number).
2. We will review your request and determine whether your wine qualifies for an unsupervised destruction or if supervision by a CDTFA representative is required. We will contact you if additional information is needed prior to approval.
3. If your request is:
• Approved – We will complete Sections III and IV (if applicable). The approval process generally takes up to three business days; however, if an appointment with a CDTFA representative is needed the process can take up to 12 business days. Once approved, the form will be available on your online services profile at the account level under the unread messages.
• Not approved – We will contact you and the CDTFA-775 will not be returned to you.
4. Please complete Section V after all beverages listed in Section I have been destroyed. This form must be signed by the authorized person in the business organization who witnessed the disposal or destruction of the spoiled alcoholic beverages.
5. When filing your return online, you are required to upload the completed CDTFA-775 for each filing period you are claiming this exemption or credit. You may be required to upload additional supporting documentation (for example, destruction facility invoices, Notice of Intent submitted to TTB, bills of lading, among others), and you will be notified if this is the case. You should retain the original documents for your records.

Please note: All exemptions or credits claimed are subject to verification and may be disallowed for improper destruction and/or insufficient documentation.

For more information, please visit the Industry Topics tab of our Tax Guide for Alcoholic Beverage.

ABC is required to revoke or suspend your alcoholic beverage license if you offer for sale, manufacture, or distribute powered alcohol. Violators will be guilty of an infraction, punishable by a fine of not more than $500.