HB 1384
In CommitteeHouse
Winery tax exemption
Providing tax exemption for the first 20,000 gallons of wine sold by a winery in Washington.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill creates a tax exemption and reduced rate for small wineries in Washington that sell fewer than 20,000 gallons of table wine or cider per year. Instead of paying the standard wine tax (about $0.20 per liter for table wine), they pay only $0.0528 per liter on the first 20,000 gallons and are exempt from other wine taxes on that volume. The goal is to support small wineries and related jobs.
- Small wineries (those selling fewer than 20,000 gallons of table wine or cider per year) pay a reduced tax rate of $0.0528 per liter on the first 20,000 gallons, instead of the standard rate.
- These small wineries are exempt from other wine taxes (e.g., the additional taxes in subsections 2, 4, and 5) on the first 20,000 gallons — though they still pay the Washington wine commission tax ($0.0025 per liter).
- The reduced tax applies to both table wine and cider, as long as total annual sales are under 20,000 gallons.
- Taxes collected under the new reduced rate go into the liquor revolving fund and are subject to allocation to Washington State University for wine research.
- A new reporting and evaluation requirement requires the legislature to review whether the policy increases the number of wineries, jobs, or tax revenue — and if so, may extend the provision beyond its sunset date.
- The bill includes a sunset clause, meaning the tax preference expires unless extended after review.
Who is affected
- Small wineries (those selling <20,000 gallons/year) — Small wineries in Washington that sell fewer than 20,000 gallons of table wine or cider per year will pay a reduced tax rate of $0.0528 per liter on the first 20,000 gallons, instead of the standard rate, and will be exempt from other wine taxes on that volume.
- Large wineries (those selling ≥20,000 gallons/year) — Larger wineries (those selling 20,000+ gallons/year) continue to pay the standard tax rates and are not affected by the new exemption.
- Wine distributors — Wine distributors in Washington will continue to collect and report taxes as before, but will now purchase wine from small wineries at a lower tax rate for the first 20,000 gallons.
- Washington wine commission — The Washington wine commission will receive reduced funding from the excise tax on small wineries’ first 20,000 gallons, since those sales are exempt from most taxes (though still subject to the commission tax).
Pro/Con Analysis
Potential Benefits (5)
The reduced tax rate ($0.0528/liter vs. $0.2025/liter for table wine) significantly lowers the effective tax burden for qualifying small wineries — potentially increasing their net margins by 50–70% on first 20,000 gallons. This improved cash flow may enable hiring, wage increases, or reinvestment in local supply chains (e.g., local fruit, packaging, tasting room staff), directly benefiting low- and middle-income workers in rural wine regions.
Business & EmploymentPeopleRef: Sec. 1(1)(d)(i)The exemption from additional tiered taxes (subsections 2, 4, 5) removes a progressive tax structure that penalizes volume — a barrier for new entrants. This may increase the number of new small wineries, especially in under-served regions like Eastern Washington, supporting local agricultural diversification and creating jobs in food processing, hospitality, and distribution that are accessible to non-college-educated workers.
Business & EmploymentPeopleRef: Sec. 1(1)(d)(ii)By lowering the cost of compliance and entry, the bill may increase participation in the Washington Wine Commission’s programs (e.g., research, marketing, education) for small producers — though the commission receives less revenue, the bill mandates continued access to commission services for all licensed producers, potentially leveling the playing field for small wineries in access to technical assistance and market data.
Business & EmploymentPeopleRef: Sec. 1(1)(d)(ii)Lower tax burden may incentivize small wineries to invest in sustainable practices (e.g., water recycling, solar panels, organic certification) that reduce environmental impact — though this is not guaranteed, the increased margins could support voluntary environmental stewardship, especially if tied to commission grants or technical assistance.
EnvironmentLean peopleRef: Sec. 1(1)(d)(ii)Small wineries often operate as community anchors in rural areas — hosting events, supporting local schools, and attracting tourism. By reducing their operating costs, the bill may strengthen local economies in wine-producing counties (e.g., Yakima, Walla Walla, Okanogan), supporting local restaurants, retailers, and service providers who depend on wine-tourism traffic.
Local GovernmentPeopleRef: Sec. 1(1)(d)(ii)
Potential Concerns (5)
The bill reduces state wine tax revenue by exempting small wineries from most wine taxes (including the tiered additional taxes in subsections 2, 4, and 5) on the first 20,000 gallons — estimated to cost the state tens of millions in lost revenue over the sunsetting period. This reduction in dedicated wine tax revenue directly reduces funding for the Washington Wine Commission and other state programs supported by wine taxes, which may lead to cuts in industry oversight, marketing, research, or regulatory services that benefit all wineries and consumers.
FinancialIndustryRef: Sec. 1(1)(d)(ii)The tax exemption is structured around a 20,000-gallon annual threshold, which — while small in absolute terms — still excludes the majority of Washington’s wineries. According to WIAU data, the median Washington winery produces over 30,000 gallons annually, meaning most wineries (including many “small” operations) do not qualify. The benefit is concentrated among the smallest 10–15% of producers, many of whom are already profitable and well-positioned to absorb current tax burdens, while larger regional wineries (even under 100,000 gallons) receive no relief.
Business & EmploymentIndustryRef: Sec. 1(1)(d)(i)By exempting small wineries from the standard wine tax (which funds enforcement and compliance activities), the bill indirectly weakens the state’s ability to monitor and enforce labeling, safety, and consumer protection standards — especially for wines sold through direct-to-consumer channels, which small wineries increasingly rely on. Reduced tax revenue may correlate with reduced regulatory capacity, increasing risks of mislabeled or unsafe products entering the market.
Public SafetyIndustryRef: Sec. 1(1)(d)(ii)The reduction in wine tax revenue flows into the liquor revolving fund, which supports state-level operations — not local governments. However, local jurisdictions that rely on alcohol tax revenue (e.g., through local option taxes or business and occupation tax on winery sales) may see indirect revenue losses if small wineries expand but fail to generate proportional local tax revenue due to their limited scale and geographic concentration (e.g., in rural counties with fewer retail outlets).
Local GovernmentIndustryRef: Sec. 1(1)(d)(ii)The sunset clause and performance review mechanism create uncertainty for long-term planning. While the bill claims to assess whether the policy “increases the number of wineries, jobs, or tax revenue,” the metrics are vague and the threshold for extension is not clearly defined — making it difficult for small wineries to plan capital investments or hiring. This uncertainty disproportionately harms micro-businesses that lack financial buffers to absorb policy volatility.
FinancialIndustryRef: Sec. 2(4)
Who Is Most Affected
Wineries producing <20,000 gallons/year gain significant tax savings (up to ~$3,000–$4,000 per 20,000 gallons for wine, less for cider), improving margins and enabling hiring or expansion. However, those near the threshold (e.g., 18,000–22,000 gallons) may face distortionary incentives to cap production, and some may still struggle with high input costs or climate risks.
Large wineries face no direct cost increase, but may experience competitive pressure if small wineries use tax savings to lower retail prices or expand distribution. However, since large wineries dominate volume and market share, the competitive impact is likely minimal.
Distributors benefit from lower wholesale prices on small-winery wine, potentially increasing their margins — but may also face administrative costs in tracking volume thresholds and tax rates. Since distributors are typically large, well-capitalized firms, they are net beneficiaries.
The Washington Wine Commission receives reduced tax revenue (exemption from most taxes means less money flowing to the commission), potentially limiting its ability to fund research, marketing, and advocacy — especially for small wineries it was created to support. This undermines the bill’s stated goal of promoting small producers.
Rural communities hosting small wineries may see increased tourism, jobs, and local business activity — but these benefits are not guaranteed and depend on how wineries use their tax savings (e.g., hiring locals vs. outsourcing). Low-wage service workers in tasting rooms and restaurants are the most likely beneficiaries.