Wine BID Not Ready for Harvest
By Stephen Pepe, Clos Pepe Vineyards
The SB Vintners is proposing to create the first Wine Business Improvement District (BID) in California, a 1.5% tax on “all tasting room sales.”
BIDS were created in the middle of the last century by business owners to build parking lots for their customers in cities where the local government was unable to do so. The business owners financed the cost and upkeep of the parking lots.
At the end of the last century, the hotel industry created tourism BIDS to finance advertising to attract visitors. The hotel BIDS charge a fee either as a percentage of the hotel bill or a fixed fee per guest. In our area, there are hotel BIDS in Lompoc, Buellton, Solvang, Santa Ynez and Santa Barbara. The SB Vintners argue that their Wine BID is like a hotel BID -- it is not.
In the wine industry, there are three types of customers -- the Trade (hotels, restaurants, grocery stores and wine shops) Wine Club Members and Tasting Room consumers.
Does the SB Vintners 1.5% Wine BID tax require each wine customer to pay his or her fair share? Nope. The Wine BID excludes Trade and Wine Club sales. The 1.5% Wine BID tax is only charged to tasting room consumers.
If the Wine BID were a hotel BID it would mean neither business travelers nor consumers who came in thru the hotel’s Wine Club would pay the Hotel BID Tax. The only hotel guest to pay the BID tax would be the tasting room customer.
How would the Wine Bid Tax be spent?
- Promotion to the Trade and consumers: $3,324,832 (62%)
- Protection - advocacy to but not lobbying elected officials: $1,217,651 (23%)
- Community Support: $836,649 (15%)
How would this affect the wine industry? Very discriminatorily.
There are wineries whose revenues from the Trade sales are 40-80%, yet none of this revenue would be taxed while the Wine BID would market to the Trade.
There are wineries whose revenues from Wine Club sales are 30-80%. While the Wine BID would market to consumers, none of the Wine Club sales would be taxed.
The wineries with tasting room sales would pay the entire 1.5% tax on their tasting room sales.
Who is supporting the Wine BID?
Wineries whose revenue comes mostly from wine sales to the Trade or with robust Wine Club sales. These tend to be the large tens of thousands of cases wineries, even some of which are owned by millionaires. The Wine BID is opposed by largely the mom and pop wineries with a tasting room and 10,000 case production or less. They are the ones who must tax their tasting room customers 1.5% to pay for the big wineries’ marketing to the Trade and Wine Club members.
It is refreshing that even some large wineries owned by millionaires recognize the discriminatory effect of the Wine BID and oppose it for that reason.
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