For many wineries, compliance is something of an elephant in the room –its presence is known to all. Certainly, maintaining full compliance can be daunting, complicated and time-consuming. Not being in compliance, however, can have far more dire consequences. Penalties for noncompliance can include hefty fines, license suspension, even license revocation. Still, too often wineries may opt to take a “wait and see” approach to compliance, figuring if they get caught by a regulatory agency, they will then cooperate, scramble, and get into compliance. By then, though, the fines or penalties may already have been assessed. The winery could experience some much unwanted negative publicity, not to mention that it could also be shut down if the non-compliance is serious enough. The safer road, obviously, is simply to implement policies that every responsible/managerial employee knows, understands and applies on a daily basis to keep the winery in full compliance with all applicable regulations.
Some of the most common compliance (non-compliance) issues include, but by no means are limited to shipping wine to customers in other states without having the appropriate licenses in place, insufficient records supporting the winery’s Report of Wine Premises Operations (TTB form 5120.17), improper transfer of the Small Producer’s Tax Credit, incomplete tax paid removal records, failure to apply for and obtain a new COLA when needed, insufficient records regarding bottled wine, failure to report changes in ownership or control of the winery, taxes (e.g., quarterly tax payments made without sufficient tax deferral bond coverage, late filing of excise tax returns) and exceeding the privileges of a particular license.
While there are a number of excellent compliance companies that assist wineries with compliance issues, there are numerous situations in which a winery may also benefit from the services of an experienced wine law attorney who could compliment the work of the compliance company.
Our next posting will describe what services a wine law attorney can provide to a winery to assist in maintaining a winery in full compliance.
Jeannie Goshgarian and Z Naccasha