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Stephen Pepe: Wine BID constitutes taxation without representation
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Guest Commentary

Stephen Pepe: Wine BID constitutes taxation without representation

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The Santa Barbara County Vintners Association has been working on a Wine Business Improvement District (BID) for two years.

Their first proposal was a 2% tax on all direct-to-consumer (DTC) wine sales, which would include wine clubs, tasting rooms, wine merchandize sales, food sales, winemaker’s dinners and weddings.

The 2% tax would not apply to wholesale wine sales to grocery stores, wine shops, hotels and restaurants (the Trade), despite the requirement that the funds raised be used for the “direct benefit” of those paying the tax.

Wholesale sales to the Trade are mostly made by the large wineries. The funds raised would be used to promote Santa Barbara County wines to consumers and sales to the Trade. In other words, the small mom and pop 10,000-case wineries would be paying for the large wineries marketing costs to the Trade.

This initial tax proposal was not met with a lot of enthusiasm. The Vintners, to make it more appealing, reduced the 2% to 1% saying the county had provided the Vintners with the wrong tax information and only 1% was needed.

This second proposal of 1% received push back from wine club members who said you tell us we are “special” and part of your wine “family,” so why are we paying a 1% tax the same as someone who is not a wine club member?

The Vintners then conducted a “survey” which asked "do you favor a 1% on all wine sales or 1.5% on tasting room sales," which would include food, wine merchandize etc. sales but not wine club or sales to the Trade.

Noticeably, none of the above was NOT a survey choice. Allegedly, 60% voted for the 1.5% tax on tasting room sales. The Vintners have refused to report how many wineries responded. The Vintners then scheduled an “informational” meeting with the Board of Supervisors on Aug. 18.

The auditor-controller’s staff report which was issued around Aug. 14, said the 1.5% “may not be practical or feasible.” Nevertheless, the Vintners went ahead with the “informational” meeting on the Aug. 18, having their Sacramento consultant make a presentation as well as several Vintner board members.

Some of the supervisors expressed concern about the self-reporting aspect of the proposal and the inability to verify and audit the 1.5%.

On Thursday, the Vintners announced they were scrapping their third wine BID proposal — the 1.5% on tasting room sales and will next week propose 1% on all DTC sales, which would include wine club sales but not wholesale wine sales to the Trade.

So, the mom and pop small wineries will still have to pay for the large wineries’ promotion and marketing costs to the Trade.

What is the Vintners problem? It is structural. There are 270 bonded wineries in Santa Barbara County. The Vintners’ website lists 78 wineries as members. Yet the Vintners want to tax the 192 wineries who are not members. Is there any surprise that the wine BID’s taxation without representation is being opposed?

Where are Sam and John Adams when you need them?

Stephen Pepe, Clos Pepe Vineyards LLC, is a vintner and resident of Lompoc.

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