Winery accountant in Kelowna

The excise licence and the returns that come with it

Making wine for sale is a licensed activity federally. A winery producing wine needs a licence from the CRA under the Excise Act, 2001, and once licensed it keeps production and inventory records and files excise returns on the schedule the CRA sets. Excise duty generally becomes payable when wine is packaged, so the bottling line is also a tax event. That federal licence is separate from provincial liquor licensing for the tasting room, and both sit beside the ordinary GST, PST and payroll accounts.

The excise records and the general ledger describe the same wine from two angles: litres produced, packaged and removed on one side, cost and revenue on the other. We reconcile the two, because a production volume that does not agree with inventory in the books is the first question an excise audit asks and the first sign of a costing error.

The vineyard is a farm; the winery is not

Growing grapes is farming, and farming income has its own rules. It can be reported on the cash method, and qualified farm property can be eligible for the lifetime capital gains exemption and for intergenerational rollovers, which matters for vineyard land that has been in a family for decades. Turning grapes into wine is manufacturing, which does not share those rules. Where the vineyard and the winemaking run in the same company, the books need to separate them: a price for the grapes moving from the vineyard to the cellar, and costs split between the two activities. Where they run in separate companies, the transfer price between them has to be defensible and the two companies usually share one small-business limit.

Many Okanagan wineries also buy grapes from other growers in the valley. Those purchases are straightforward cost of production, but they need to be recorded by vintage so the inventory cost of each wine is right. Agriculture accounting covers the farming side in more depth.

Wine that ages for years before it is sold

A red that spends time in barrel and then in bottle before release can sit in inventory for several years. Every year it sits there it carries cost: the grapes, the cellar labour, the barrels as they wear out, the energy for temperature control and a share of the winery’s overhead. That cost stays on the balance sheet until the wine is sold. Expensing it as it is incurred makes the vintage years look like losses and the release years look like windfalls, and it misstates tax in both.

We set up costing by vintage and by stage, from bulk wine to bottled and labelled cases, and value it consistently from year to year at cost, or at market where that is lower. A count at year-end confirms the volumes. Lenders read these numbers closely, because inventory is often a winery’s largest asset and its main security. Inventory accounting in BC explains the valuation rules.

Tasting room, wine club and online sales

Revenue comes in through several doors. Bottles sold at the tasting room carry GST and PST. Tasting fees, glassware, merchandise, food and event tickets each need their own tax treatment in the point-of-sale system. Wine-club memberships are often paid ahead of the shipments they cover, so the payment is a deposit until the wine goes out. Online orders shipped to customers in other provinces fall under the place-of-supply rules, which can mean charging that province’s HST instead of GST and PST. Getting each category mapped once, at setup, is far cheaper than reconstructing a year of returns. The BC PST guide covers registration; place-of-supply rules covers shipments out of province.

A tourist season and a harvest season, back to back

The tasting room is busiest in July and August. Harvest and crush follow in September and October, when the labour bill peaks and the cash is going into next year’s wine rather than coming out of this year’s. Then winter is quiet on both fronts. That pattern shapes the payroll, the GST and PST cash that has to be set aside through the summer, and the choice of fiscal year-end. A year-end after crush and before the next release usually gives the cleanest count and the most useful statements. The Kelowna payroll page covers the seasonal staff.

Passing the vineyard to the next generation

Family wineries in the valley are often planning a transfer, and the farm rules help. Qualified farm property can move to a child under an intergenerational rollover and can be eligible for the lifetime capital gains exemption on a sale, but only if the property and the way it has been used meet the tests. The winery business on top of the land may qualify differently from the vineyard beneath it. The planning is worth starting years before the transfer, because some of the tests look back over time. Farm succession and rollovers sets out the framework.

What EverStone handles for you

One CPA, one fixed fee quoted up front, everything below covered:

• T2 corporate tax return and year-end financial statements
• Excise records reconciled to the general ledger
• Inventory costed by vintage and stage, with year-end counts
• Vineyard and winery activities separated in the books
• GST and PST across the tasting room, wine club and online sales
• Seasonal payroll for vineyard, cellar and hospitality staff

Fixed fees, fully online

EverStone is an Abbotsford CPA firm, and every Kelowna engagement runs online — video calls, e-signature and a secure upload link, so nobody loses a day in harvest to an office visit. There is no Kelowna office. You are not billed by the hour or the phone call: your fee is a fixed amount agreed before any work starts, so you can ask a question in August without watching a meter. The same CPA handles your file all year, which means the person who prepares your return is the person who answers when you call. See what it costs or book a free, no-obligation consult and leave with a clear written quote.