The Wine Industry Network compared 2 major reports  on DTC sales and marketing trends. I typically read industry reports with a grain of salt because they tend to refer to the large-winery-industry, which is very different from the small-winery-industry. However, I noticed the most successful wineries I work with have already implemented the article’s advice.

According to Dawn Dolan of the Wine Industry Network Advisor, these are the Quick Take Aways:

• Online sales are increasing; be sure your e-commerce is accessible and user-friendly for not only your computer-using clients, but optimized for ease of use from your mobile users. Online sales represent the biggest opportunity for growth.
• Utilize your tasting room for client acquisition.
• The better trained your tasting room personnel, the higher the returns. Invest in staff training.
• High intensity marketing = high returns. Develop a multi-pronged marketing plan.

To read Dawn’s entire article Click here

The reports discussed in the article were:

• VinterActive VinQuest Research Summary, released in May 2019 (Click here to read a summary)
• WineDirect’s Annual 2019 DTC Sales Report, released in June 2019 (Click here for a free copy)

I updated the Costing Course (How to Calculate the True Cost of Your Wine) and I added several activities so you can practice some of the techniques I discuss.

I also added a new module with a 4th costing book example. This module explains the different choices you can make when laying out the costing book. Depending on your winemaking processes and your business needs, you may choose to have a few or a lot of bulk lots. If you have just a few bulk lots in your costing book, it will be easier to maintain the costing book.

Module 7 – Steffie Farm and Vineyard

Activity – Chart of Accounts

Activity – Allocation Math

Activity – Costing Book

Activity – Bulk Lots

Have fun!

The CDTFA (California Department of Tax and Fee Administration) made a significant change in the sales tax rules effective April 1st.  Click Here for the ShipCompliant article on this change.

Here is a summary of the changes.

• Applicable for wineries with over $500,000 DTC revenue in California
• Sales tax is now based on the district that the wine is shipped to, regardless if you have a physical presence in that district.
• Retroactive to April 1st

The hardest hit by this rule change are the micro wineries, because the larger ones are already using ShipCompliant (or something similar)

Note: I called the CDTFA to clarify some of the details, but if you have any questions call them directly at 1-800-400-7115. I am only sharing the guidelines

Applicable for wineries with over $500,000 DTC revenue in California

• If you are not close to this threshold, go back to your racking project. Just keep this number in the back of your head.
• Only DTC revenue shipped in California (yes, pickup at the tasting room counts at “shipped in California”). So distribution and wholesale sales are excluded. Also the rules states “tangible personal property” so that would exclude things like event fees, but again…check with your compliance consultant to determine what other exclusions would apply to your situation.
• First, calculate your DTC revenue in 2018. If you were under $500k, you are excluded for now. When you cross that threshold, even if it is in the middle of the year, the rule will begin to apply.
• If you include in “California taxable sales” the sales you make to states that you are not licenced in, then you will need to know that total for this threshold. (See below if you this is not clear)
• If you are not in California, the rule applies if you ship $500k of personal property into California

Sales tax is based on the district it was shipped to

This is the crux of the rule change. In the past you only paid for districts where you had a physical presence. I know that many of you have been doing this all along, especially folks who worked in a large winery and then transferred to a smaller one, but it was actually not correct.

The solutions to this are:

1. Use ShipCompliant
   • This is fine if you feel you are can justify the fee, because the program works well.
   • File the CA return through ShipCompliant, because there will be a lot more boxes to fill in.
   • If you currently have ShipCompliant, double check your settings to make sure they will meet this new rule
2. Do it manually
   • Only for the wineries with minimal shipments
   • You will need to run a report that lists the shipments by zipcode, then match the zip code to the district. Check with your POS program to see if this report exists. If you push in your sales, you can run this report in QuickBooks. Pop a question in the forum for the checklist to make sure you are pushing in all the details.  (I asked the VineSpring team to add this column to their Sales Tax Reconciliation report…let’s see if they come through)
   • Download the CDTFA report with the districts and tax rate. What is useful are the district names. Click Here
   • I am still googling for a report the lists the CA zipcodes and the district it is in.
   • Remember, you are only liable to pay for what you should have collected, not what you actually collected, unless you collected too much. So charge your customers for the CA Statewide rate (currently 7.25%). When you file your return, you will end up paying a little more than what you collected, but consider that a savings over using expensive software.
3. Do a semi manual method
   • Upload your shipment report (described above) to a Sales Tax reporting program that is not winery specific. There are a few out there, and I am testing one right now. That’s it.
   • However, you will not have live updates to the district rate changes, so hopefully your POS program will have that.

Notes for everyone

• Make sure your POS program is properly setup. If the winery is in a district with a high rate, you don’t want to be charging all of your shipments that rate. The best would be to have an on-site rate (your home district) and a shipment rate (the CA Statewide)
• I would strongly recommend NOT setting up a QuickBooks sales tax item for every district. This is too time consuming to manage. I don’t think the difference between what you collect from your customers and what you pay when you file your sales tax return warrants the giant mess you will have with all of these sales tax codes.
• Frankly, I recommend that you shut off the QB sales tax feature and let your POS program handle that calculation
• Double check your ShipCompliant settings

Retroactive to April 1st

This was signed on April 25th and made retroactive to April 1st. So if you already ran your April club run, you are SOL. Sorry.

One final note

Just to clarify what are “California taxable sales”… let’s discuss the 3 ways I have seen wineries handle out-of-state sales

Out-of-State Options

1. If licensed in that state, charge that state’s rate. Report and pay to them.
2. If not licensed in a state
   1. Charge CA rate. Report and pay to CA
   2. Charge zero. Since the wine was shipped out-of-state, CA cannot say it was a CA sale so it is excluded. Since you are not licenced, do not report, and do not pay that state, and include with the Out-of-State exclusion on your sales tax return.
   3. Use a third party shipper like Vinoshipper. Their system will charge the tax, collect it, report it, and pay it.

Discuss with your Compliance specialist or legal team which option you are comfortable with.

Stay tuned for that mini-course on Sales Tax I have been promising for over 3 years now….

Cheers!

Jeanette

 

Last Wednesday Rob McMillan from Silicon Valley Bank hosted a webcast to discuss the annual wine industry report that he and his team put together. The report is a good read, really. I recommend that you at least read the Executive Summary.

Rob has valuable insights for the wine industry, however many of his comments are aimed at the larger wineries because the small wineries do not bank at Silicon Valley Bank. Right at this moment I have to climb down off the ledge due to a few comments made by the panel during the webcast that, if taken out of context, the team at a small winery might take the wrong way. I will make some comments, but first I I am going to digest the report.

They will be doing a follow-up webcast on January 23rd. Check out Rob’s blog for information on how to join that webcast Rob’s Blog

Have a look for yourself:

2019 SVB Webcast Replay

2019 SVB Annual Wine Industry Report

 

Cheers!

Jeanette

While you have been busy pressing and punching down the grapes, we have been busy pressing the keyboard and punching down code (trust me, you had more fun), and we rearranged things on the website. Some key changes are:

• Go directly to all the courses from the Courses tab in the top menu
• The webinars are now mini-courses and are listed under the Advanced courses
• Access our all-new My Favs page under the Account tab for all of the courses you have favorited
• Find the Blog/Quickies link in the footer

Most importantly …. drum roll …. we are launching Office Hours, the last Tuesday of the month at 10:30 am Pacific.

Here is a video to show you around…

Cheers!

Jeanette

My new website just launched. I had hoped to have launched over a year ago, but I am here now and you have found me. This process has been a lesson in humility, and I see many parallels in your journey to understand QuickBooks with my journey to launch this website. [Read more…]