QB Winery Solutions

California Sales Tax MAJOR CHANGE

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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

 

Reset Inventory Accounts in the New Year

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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.

Journal Entry to Transfer Winemaking Cost to Balance Sheet

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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.

Office Hours 12-18-18

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Here is the recording for office hours. The topics that came up were:

  1. Year-end Quickbooks
  2. Costing Class Quick Rundown
  3. Juice Flow & Blending Math
  4. Custom Cash
  5. Journal Entry & AR List
  6. Write-off a customer + Credit Memo
  7. Expense vs Cost of Wine
  8. G&A Costs + GAAP
  9. Bottling

These are the links to places we discussed:
Juice Flow & Blending Math
Quickies
Bottle Runs

Silver Club members, please log in to view the recording

Clear Old Transactions in Accounts Payable

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This is a companion video to the Year End Preliminary Checklist. Go here to find that post Year End Prelim Checklist.

In this video I show how to clear out transactions that keep showing up, month after month in your Accounts Payable Aging Report. These must be cleared so that you have a realistic value for total Accounts Payable that you owe. Often they are duplicate bills which means that you have reported too many expenses.

This step could be done at any time, not just at the end of the year. If you make a regular habit of reviewing these lingering transactions, your file will stay tidy, clean, and accurate.

This video (must be a Silver Club member to view) 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 https://QBWinerySolutions.as.me/Coaching  

DOWNLOADS

Year End Preliminary Checklist

 

Clear Old Transactions on the Bank Reconciliation

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This is a companion video to the Year End Preliminary Checklist. Go here to find that post Year End Prelim Checklist.

In this video, I show how to clear out transactions that keep showing up, month after month. These must be cleared so that you have a realistic value for your bank balance. Often they are duplicate transactions, so that, for example, if you have a duplicate payment for some corks, that will make the cost of your wine too high.

This step could be done at any time, not just at the end of the year. If you make a regular habit of reviewing these lingering transactions, your file will stay tidy, clean, and accurate.

This video (must be a Silver Club member to view) 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 https://QBWinerySolutions.as.me/Coaching  

DOWNLOADS

Year End Preliminary Checklist

 

Clear Old Transactions in Accounts Receivable

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This is a companion video to the Year End Preliminary Checklist. Go here to find that post Year End Prelim Checklist.

In this video I show how to clear out transactions that keep showing up, month after month in your Accounts Receivable Aging Report. These must be cleared so that you have a realistic value for total Accounts Receivable due to you. Often they are leftover short pays or credits that have not been applied. Sometimes they are invoices that you have, sadly, decided you will never collect.

This step could be done at any time, not just at the end of the year. If you make a regular habit of reviewing these lingering transactions, your file will stay tidy, clean, and accurate.

This video (must be a Silver Club member to view) 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 https://QBWinerySolutions.as.me/Coaching  

DOWNLOADS

Year End Preliminary Checklist

 

Year End Winery Accounting Preliminary Checklist

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Harvest has begun, that means that the year end is right around the corner. While you are waiting for the grapes to ferment, this is a great time to review your winery accounting file to make sure that you are caught up with the bookkeeping tasks. If you do these now, you won’t have to scramble next year when you need to send the file to the tax preparer.

We call it the Preliminary Checklist because this gets the file ready for the year-end. There are additional tasks to be completed to officially close out the year.

One key task is completing what we call The Costing Book. We  can start to lay this out, but it cannot be completed until several of the tasks on this list are completed. Please note that if you would like our assistance in completing The Costing Book, this Year End Preliminary Checklist must be completed before we will begin that step.

This video is an overview of each step. For some companion videos check out these quickies.

This video (must be a Silver Club member to view) will show you how to find all the information. I will add more videos to show you how to do all of the steps. If you would like assistance, use this link to set up a coaching session https://QBWinerySolutions.as.me/Coaching  

DOWNLOADS

Year End Preliminary Checklist

 

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