Why the Trump Administration Is Going to War with the Wine Industry

The Treasury Department is going after US businesses that both import and export wine. Buckle up and hoard the pinot.

Aug 10 2018, 4:00pm

Photo via Flickr user Eli Christman

If you didn't already know, Donald Trump doesn't drink. Which might be admirable to some, until you realize that for every boneheaded move he's made as President (See: railing against North Korea’s “Rocket Man,” enacting trade policies against China and, you know, dismantling what's left of the environment), he's been stone cold sober. Remember when he believed Vladimir Putin over his own intelligence team? Yeah. He was not, in fact, blackout drunk. Surprising, we know.

But it appears that his own teetotalism wasn't enough for old Donny boy—now he's coming after the entire US wine industry.

Last week, the administration’s Treasury Department announced that it would be going after US businesses that both import and export wine, seeking to reverse a tax benefit that generally nets the wine industry about $50 million per year. According to the statement published in last Thursday’s Federal Register, the benefit is unfair to the beer and spirits industry, which, currently, is exempt from the tax break.

Established in 2004 by the Customs and Border Control office in San Francisco, the benefit allows US importers of foreign wines—who must pay an “excise tax” on those wines when they cross the border—to offset those expenses by claiming a refund when the company exports US wines to the foreign market. According to the 2004 decision, even wine exporters who don’t pay an excise tax are allowed to make the claims on their exports. Now, government officials claim that San Francisco decision was made in error, which their proposed legislation seeks to correct.

“This proposal would correct an improper practice that has allowed firms to import foreign wine excise tax-free, even though all US-made wine sold here is subject to excise tax,” Tony Sayegh, a Treasury spokesman, told the Newspaper of the New York State Society of Certified Public Accountants. “The proposed rule would end a transfer of US taxpayer dollars to foreign producers.”

Initial reports have suggested that the wine industry is preparing for a fight, but the situation is actually more nuanced. Because the tax break only benefits wine companies that both import and export, its reversal might actually be a boon to US wine importers who have been excluded from reaping those benefits.

Vine Street Imports, a New Jersey-based importer with a portfolio that includes wines from Australia, South Africa and Italy, is one company that stands to benefit from a reversal of the 2004 legislation. While the small importer wouldn’t earn any additional income as a result of the change, it might help them compete against some of the country’s largest importer-exporters, like E. & J. Gallo.

“From a competitive standpoint, it could be good for us,” said Lori Sanders, Vine Street’s chief financial officer. “It could maybe level the playing field.”

Michael Kaiser, vice president of Wine America, an advocacy group for domestic wines, agreed, saying that removing a tax break that’s exclusive to exporters could benefit US winemakers.

“This is something that a lot of domestic producers have brought up with past administrations,” he said. “So I wasn’t surprised to see that it’s come up again. I’ll be interested to see how it all plays out.”

Some of the country’s larger importer-exporters are likely to be less enthused about the proposal—but mum’s the word. MUNCHIES reached out to a few, including Southern Glazer’s Wine & Spirits and Young’s Market Company, who declined to comment for this piece. Perhaps they know that like Taylor Swift’s list of ex-lovers, Trump’s list of enemies is long—and they’re not too keen on adding their names.