If you have more than $500,000 in revenue in California (excluding distribution and wholesale sales), you are subject to the sales tax filing rules that were effective April 1, 2019. Many small wineries now meet this requirement and filing the California Sales Tax return is much more complicated than in the past. You can thank South Dakota vs Wayfair for this new complication. In the past, the district tax only applied to companies that had a “physical presence” in that district, but it now applies to any winery (or business) that exceeds $500,000 in retail sales in California.

This is not as simple as looking up the zip code because it might cross different districts. For example, the zip code for Healdsburg, 95448, includes addresses in the City of Healdsburg which are taxed at 8.75% whereas an address in Dry Creek Valley which is outside the city has the rate of 8.25%

The State of California has a nice webpage where you can plug in an address and it will lookup the sales tax rate. Click Here. But it is not realistic to lookup up every address.

You could signup for a service like ShipCompliant or Compli, which are programs designed for the wine industry, but these are expensive, and you may not justify the fee just to file your California Sales Tax Return.

Here is the outline for a process that will cost about $210 per year. I will record a complete video to show the steps, but in the meantime, these are the basic steps

1. Sign up for a Basic plan at Taxjar.com. This is a sales tax program that will look up the sales tax rate. It is not an alcohol compliance program, so you will have to keep an eye out for those details with whatever procedure you are currently using.
2. Find a report from your POS program that includes the shipping address and the taxable sales.
3. Edit that report to fit the format required by Taxjar.
4. Upload the report to Taxjar.
5. Print the California report and use those details to enter the sales in the various districts.

This process is super fast. The most complicated part is formatting the report to match Taxjar’s required format, but once you do it the first time, it will be easier the next time.

Note: TaxJar could file the California return for you, but there is additional information that must be included, so you still have to file the return yourself using the CDTFA portal. But, having TaxJar summarize the sales for each district is a huge time saver.

If you already have ShipCompliant: You need to turn on the reporting module, and then turn on the California state form. Make sure your settings have been revised for the new rules.  As with TaxJar, you will use ShipCompliant to calculate the sales by district, but you will still need to manually enter the details into the CDTFA sales tax portal.

If you are interested in the full mini-course on how to file the California sales tax return, fill out the form below and we will notify you as soon as it is ready.

I am not a huge fan of QuickBooks Online, however for some situations, it is a good choice. Here is my list of the Pros and Cons to QBO for a winery:

Pros

• Great bank feed integration
• Good integration with Square (there is still an extra step, but it’s easy)
• Up to 5 people can use it simultaneously
• PC and Mac users can both access
• VineSpring has a new integration, but I have not tested it

Cons

• No Custom Summary report (only in the Accountant version)
• Cannot do the 2-step bottling method
• No Inventory value adjustment, only quantity (workaround is to do a JE check)
• Hard to have multiple windows open
• Bank reconciliation is clunky
• The bank reconciliation report does not update after you make changes (for example, if you delete a duplicate transaction, it will still show up on the report)
• No sales by rep report
• Chart of Accounts and Item list will only show up alphabetically (workaround is to use numbers and a dash)
• Payroll is funky and it cannot do job costing, so my usual procedure which is super simple in Desktop does not work. This is not a problem for a super small winery, but once you have staff it becomes a big problem.

I find that the best use for QBO is the small, startup winery where the owner is doing the bookkeeping, because you want to take advantage of as many automatic integrations as possible. You will need some method of processing credit card charges, and Square integrates nicely. However, Square is a short term solution, and as soon as you can justify a true winery program that will handle a Wine Club, you want to get that going so that you can start to capture details about your customers.

There is no hard close to the QuickBooks file at the end of the year because that is how QuickBooks works. However, resetting the inventory accounts is a step that needs to be done at the beginning of the year.  This step does not affect any of the accounting, but it makes the sub-accounts of the bulk wine and case goods zero which makes it much easier to match the costing book to the balance sheet.

Remember that finishing the costing book and confirming that it matches the balance sheet is a necessary process, even though it is often frustrating. If you reset the inventory accounts it is much easier to match the cost pools and the transfers between the bulk wine and the case goods.

I find that it is fun to do this journal entry. I don’t know why maybe it’s because it means that a new year has started, or maybe it’s just a nerd accounting thing.

Cheers!

In this video (must be a Silver Club member to view) I will walk you through the steps. If you would like assistance, come to Office Hours or use this link to set up a coaching session.

On my recommended Chart of Accounts, the wine making costs are in the “Other Expense” section of the chart of accounts. These costs are really inventory costs, not expenses, but I put them there for two key reasons:

1. You can monitor the costs of the winemaking department with the Budget reports much easier than if they were recorded directly to the balance sheet.
2. Other reports are much easier to run with “expenses” rather than “balance sheet” costs.

Before the end of the year, you will need to create a journal entry to transfer these amounts to the balance sheet. Some people will do this at the end of the month or at the end of the quarter, but the end of the year is fine because you can still use the Profit & Loss report.

I discuss this procedure in the Using QuickBooks in the Wine Industry course, but I don’t actually show how to do it.  So here is the step-by-step video of how to enter that journal entry.

Cheers!

In this video (must be a Silver Club member to view) I will walk you through the steps. If you would like assistance, come to Office Hours or use this link to set up a coaching session.

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