Proposed tax on wine shippers aims to grow MN wine industry, sponsor says

John Howe of the Minnesota Grape Growers Association and other growers in the state have a fairness issue: Wine shipping direct to Minnesota from out of state is not subject to local taxes while local grape growers and wineries pay taxes on shipments within the state.

Rep. Barb Haley (R-Red Wing) wants to level the playing field for in-state growers and wineries while further promoting the industry in Minnesota.

Haley sponsors HF2168 that would impose a 2.5% tax on direct wine shippers, would require direct shippers to obtain a license and would establish a Minnesota Grape and Wine Advisory Council.

The bill, as amended, was approved 11-1 by the House Agriculture Finance and Policy Committee and referred to the House Commerce Finance and Policy Committee.

Its companion, SF1478, is sponsored by Sen. Jeff Howe (R-Rockville) and awaits action by the Senate Commerce and Consumer Protection Finance and Policy Committee.

According to Scott Ellenbecker, a co-owner of Round Lake Vineyards & Winery, there are nearly 80 wineries in the state. Ellenbecker said in-state shippers currently pay a 6.875% tax on the shipment and the 2.5% liquor tax.

“This is a matter of fairness,” said Rep. Paul Anderson (R-Starbuck). “If out-of-state wine is coming into our state and not paying the same taxes that our in-state folks are paying, that is an issue that needs to be addressed and looked at.”

The 15-member council would advise the Department of Agriculture and include five wine producers; two commercial grape growers; one member each from the Minnesota Farm Winery Association, Minnesota Grape Growers Association, Explore Minnesota Tourism and the Minnesota Grown program; one department staff member; one member each from the Minnesota Licensed Beverage Association, the Minnesota Municipal Beverage Association and the Minnesota Cider Guild.

The bill would create a grape and wine program for “promotion, education, or development of the Minnesota wine industry.” The program would award grants on advisement of the council.

A Minnesota grape and wine account would be established in the agricultural fund. The portion of the 2.5% alcohol gross receipts tax paid by direct shippers, as well as a portion of sales tax revenue would go to the grape and wine account.

A half-time employee would be added to the Agriculture Department to help with the program.

John Howe said there is no way to currently track the number of direct shipments from out-of-state.

“Our idea with that was to take some of the revenue, or the revenue generated, and at least understand how many cases of wine are being directly shipped to consumers in our state,” Howe said. “We have no idea. This would create a licensing program for out-of-state shippers.”