SB 5054
In CommitteeSenate
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 provides a tax break for small Washington wineries by reducing the wine excise tax on the first 20,000 gallons of table wine or cider they sell each year. It aims to support small wineries—especially those impacted by economic downturns and climate-related challenges—by lowering their tax burden and encouraging growth and job creation.
- Creates a reduced tax rate of $0.0528 per liter for the first 20,000 gallons of table wine or cider sold annually by small wineries (those selling less than 20,000 gallons/year).
- Exempts small wineries from other wine taxes (e.g., standard per-liter tax, additional taxes) on those first 20,000 gallons, except for the Washington wine commission assessment.
- Requires taxes collected under the new small-winery exemption to be deposited into the Liquor Revolving Fund and allocated to Washington State University for wine research and promotion.
- Adds a new reporting and evaluation requirement: the legislature will review whether the exemption increases the number of wineries, wine jobs, or tax revenue by 2027 and may extend the provision if successful.
- Clarifies that the exemption applies only to domestic (in-state) wineries and does not apply to out-of-state wineries shipping directly to Washington consumers.
Who is affected
- Small wineries (those selling <20,000 gallons/year) — Small wineries in Washington that sell less than 20,000 gallons of table wine or cider per year will pay a reduced tax rate of $0.0528 per liter on their first 20,000 gallons, instead of the standard rate, and will be exempt from other wine taxes on that volume.
- Large wineries and out-of-state wineries — Larger wineries and out-of-state wineries shipping directly to Washington consumers will continue to pay the standard tax rates and are not affected by the new exemption.
- Wine consumers buying directly from small wineries — Washington wine consumers may see slightly lower prices at winery tasting rooms or direct purchases from small wineries, as those wineries may pass some savings on to customers.
- State agencies (Liquor and Cannabis Board, Washington Wine Commission) — The Washington State Liquor and Cannabis Board and the Washington Wine Commission will adjust tax collection and reporting processes to accommodate the new exemption and track compliance.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
Small wineries (those selling <20,000 gallons/year) will pay a reduced tax rate of $0.0528 per liter on their first 20,000 gallons—down from $0.2025/liter for wine and $0.0359/liter for cider—potentially preserving or creating jobs in rural communities where small wineries are major employers.
Business & EmploymentPeopleRef: Sec. 1(1)(d)(i)By exempting small wineries from other wine taxes (e.g., the 23.44¢/liter additional tax, the wine commission assessment still applies), the bill lowers compliance and operational costs for micro-businesses, many of which operate at thin margins and are vulnerable to economic shocks.
Business & EmploymentPeopleRef: Sec. 1(1)(d)(ii)The policy is explicitly designed to help small wineries recover from climate-related disruptions (e.g., wildfire smoke taint, extreme weather), which have disproportionately harmed small producers unable to absorb supply shocks or retool quickly.
Business & EmploymentPeopleRef: Sec. 1(1)(d)(i)The bill includes a legislative review and sunset clause tied to measurable outcomes (increased winery count, jobs, or tax revenue), creating accountability and a built-in mechanism to extend or adjust the benefit if it succeeds—reducing long-term fiscal risk.
Business & EmploymentPeopleRef: Sec. 1(1)(d)(ii)Revenue from the reduced tax is directed to WSU for wine research and promotion, supporting innovation and market development that benefits small producers who lack resources for R&D or marketing—e.g., improving resilience to climate stressors or expanding niche markets.
Business & EmploymentPeopleRef: Sec. 1(1)(d)(ii)
Potential Concerns (3)
The bill reduces state tax revenue by an estimated $1.2 million over 2025–27, which may reduce funding for public services that benefit low- and middle-income Washingtonians—especially education, healthcare, and housing—though the impact is modest given the small dollar amount relative to the state budget.
FinancialPeopleRef: Sec. 1(1)(d)(ii)The exemption applies only to domestic (in-state) wineries and excludes out-of-state wineries shipping directly to Washington consumers, which may disadvantage Washington consumers seeking variety and could distort market competition—but the effect on employment or consumer choice is minor given the small scale of direct-to-consumer out-of-state sales relative to in-state production.
Business & EmploymentLean peopleRef: Sec. 1(1)(d)(ii)Local governments may see reduced sales tax revenue if small wineries pass savings to consumers who then spend less elsewhere, though this is speculative and likely negligible given the narrow scope of the exemption.
Local GovernmentLean peopleRef: Sec. 1(1)(d)(ii)
Who Is Most Affected
Small wineries (≤20,000 gal/year) are the primary beneficiaries: they gain direct tax savings, lower operating costs, and enhanced resilience to climate and economic shocks. Many are sole proprietorships or family-run operations in rural areas where alternatives are scarce.
Workers at small wineries—including harvest laborers, tasting room staff, and production crews—benefit from job stability and potential growth. These are often lower- and middle-income positions in regions with limited employment options.
Large in-state and out-of-state wineries are unaffected by the exemption but may face indirect competitive pressure if small wineries gain market share. However, since the exemption applies only to the first 20,000 gallons, large wineries lose no revenue and face no compliance changes.
Consumers buying directly from small wineries may see modest price reductions or improved service, but the effect is likely small since many small wineries operate at high margins and may not fully pass savings through. Broader market effects are negligible.
The state loses $1.2M over two years in excise tax revenue, which could reduce funding for public services. However, this is a small fraction of the state budget and may be offset by long-term growth in the sector. The allocation to WSU partially mitigates the fiscal impact.