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All producers pay excise tax, by the gallon or the barrel, on the alcoholic beverages they produce. However, qualifying small wineries are entitled to a "small producer's credit" that reduces their tax rate to varying degrees related to their volume of production. Qualifying small brewers are also eligible for a reduced tax rate. Since the savings are significant and depend on meeting very specific criteria, it's worth obtaining expert help to learn and apply the regulations correctly.

Needless to say, claims for these credits are closely monitored to ensure compliance with the strict eligibility requirements. Many producers don't realize that a seemingly innocent business decision can jeopardize their eligibility for an entire year of tax breaks. For example, a small winery may retroactively lose its small producer's credit for an entire calendar year due to a mid-year change of ownership or business restructuring. New wineries that start by selling wine produced by others must also be careful in their tax planning. Up to $90,000 in taxes is at stake (plus interest)! Wineries are especially at risk, because credit eligibility is tied to production, and the season for wine production each year is so short.

Therefore, if you are planning a winery transaction, you should pay close attention to the rules for the small producer credit -- and for extra insurance, consult the experts at CSA. We can help you plan your transaction so your entitlement to small producer tax credit is maximized and preserved.

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