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As mentioned above, a significant number of wineries cost their wine using the SPID method for management purposes, then convert to LIFO for financial reporting and tax purposes. Changes to tax code in 2017 now allow expensing for many winemaking costs and therefore creating greater disparity between U.S. GAAP and tax-basis financial recordkeeping, so it’s useful to discuss this with your CPA. Under this method, the cost of each inventory item is tracked from the time of purchase or production through the time the wine is bottled.

Wine Accounting 101: Understanding the Basics

The bulk wine cost with additional storage and overhead is combined with the cost of packaging materials used along with bottling labor to derive the individual unit cost of the finished wine. The wineries prefer to use last in, first out costing to value their ending inventory, since it matches their latest costs against revenue, which should lower their taxable income. So, what they do is use the dollar-value LIFO system, where the ending inventory valuation is based on a conversion price index. This index is based on a comparison of the base year cost of the inventory and the current year cost, which is then converted into a percentage and used to value the ending inventory. First, wines could be kept in storage for more than one year, so you have to allocate costs not just to several types of wine, but also to several vintages of each varietal. And on top of that, the winemaster might decide to engage in blending activities somewhere in the production process, which mixes wines together, and, of course, complicates the cost accounting.

Yakima, WA CPA Accountant

She’s a historian who chronicles the financial tales of today, proving that understanding our past can indeed shape our fiscal futures. History, as they say, is about understanding patterns, tracking developments, and narrating tales of growth, decline, and resurgence. Kara’s academic grounding in history has https://www.bookstime.com/ honed her skills in meticulous documentation, unbiased analysis, and comprehensive understanding, all critical attributes in the world of finance. Yet, what sets Hien apart isn’t just his accounting prowess; it’s his academic foundation in Mathematics and Computer Science from San Jose State University.

• Tax reform also included significant changes to bonus depreciation with rules becoming effective for assets acquired and placed into service after September 27, 2017.
• Whether you need assistance setting up your books or preparing for tax season, we can help you navigate the complexities of the wine business.
• Cyndel’s decade-long tenure as the Senior Tax Manager at a San Mateo-based accounting firm provided her with a depth of experience, solidifying her place as an industry veteran.
• There are a few places in the chart of accounts, where we like to add additional accounts to keep track of details that we will need at tax time.
• Katie’s journey in the world of accounting is an inspiring tale of adaptability and passion.
• Our team categorize, tracks, and allocates all the vital COGS and COGP numbers for you.

Your winery deserves a better bookkeeping system

This means a taxpayer with $3.5 million in eligible asset additions wouldn’t be able to take a Section 179 deduction. Knowing the COGS is essential if you want to know the gross profits you earn on different wines. You can take the price of a sold bottle and subtract the COGS to determine the gross profit you earned. Lowering your overall COGS winery accounting will help increase your profit marge, but there are plenty of considerations to carrying this out successfully. The chart below lists expenditures that are commonly considered winemaking costs and some that aren’t. In some cases, certain expenditures may or may not be classified as winemaking costs; it really depends on the situation.

Michael Y. Kim, CPA

If you operate a vineyard in addition to winery, include those labor expenses in your total labor cost. Take for instance a winery that has similarity and consistency across all departments and square footage allocation that reasonably reflects utilization derived by each department. If that winery has 10,000 total square feet and 6,000 is used for production, 60% of the facilities rent and facilities insurance costs could be allocated to wine production based on square footage. This methodology offers the benefit of being measurable and verifiable based on usage.

His commitment to providing exceptional tax support is matched by his academic endeavors at San Jose State University, where he is pursuing a Master of Science in Accounting. This rigorous program is equipping him with a deep understanding of accounting principles and practices, further enhancing his contributions to our team. He joined our firm in 2022 and has rapidly become an integral member of our tax team. Tom is an accomplished finance and accounting professional, bringing to our firm 25-years of experience.

Winery Solutions and Services

As Juelle continues her journey with our firm, her multifaceted expertise and dedication to excellence promise great things for both her future and the continued success of our Audit practice. As a Quickbooks certified professional, Ken stands as a beacon of knowledge and skill in the firm. Whenever there’s a need for a new client implementation, Ken is the go-to expert.

• An avid hiker, she frequently explores the trails of Mount Tamalpais in Marin County, embracing the natural beauty and tranquility that hiking affords.
• His affinity for the outdoors often finds him hiking, while his quieter moments are reserved for indulging in literature.
• Madelyn’s journey began with Hood & Strong, where she honed her skills for a commendable seven years.
• Earning his bachelor’s degree from the esteemed California State University East Bay, Josiah pursued Business Administration with a concentration in accounting.
• Bhonie’s journey with the firm, beginning in 2015, is a testament to his adaptability and wide-ranging skill set.

Accounting Basics Every Business Needs to Remember

• COGS includes the cost of the grapes, the cost of production, and the cost of packaging and shipping.
• In addition, there were changes to the calculation of the excise tax credit and the amount of excise tax that is assessed on wines with alcohol content above 14% and below 16%.
• He has been instrumental in shaping the firm’s reputation, ensuring that the values of accuracy, transparency, and integrity echo through every audit undertaken.
• Specializing in high-net-worth individuals, Cyndel understands the unique challenges and opportunities this niche presents.