ET/SL 32

November 29,1996

In response to many requests for clarification of the application of the Excise Tax Act to wine produced in facilities variously known as "Wine on Premises", "U Ferment" or "Ferment on Premises", the following information provides guidelines for operators of these premises with respect to their liability under the Act.

Wine on premises establishments were established based on the same concept as U-Brews whereby the patron was to use the facilities offered by the operator to manufacture wine for home consumption. The patron would do all the steps necessary to produce the final product to take home. The operator's role was to provide a facility, equipment and expertise.

The original or traditional method of operation for wine on premises establishments is where the customer buys a kit which contains wine concentrate, yeast and another ingredient such as bentonite. The customer mixes the contents of the kit with water in a pail supplied by the operators. The pail is closed and an air lock inserted. The operator is then responsible for storing, stabilizing and clearing the wine. Once fermentation stops the customer returns to bottle the wine. The operators who perform these traditional operations are not considered to be manufacturers or producers of wine for purposes of the Excise Tax Act and therefore are not required to be licensed and account for excise tax.

Some operators, however, have chosen to extend their participation in the process of making wine. In some cases, operators take credit card telephone orders from customers and perform all of the above-mentioned activities themselves, others do all of the original or traditional activities themselves including the initial mixing of the raw materials or the bottling of the final product. In so doing, the extension of their activities has brought them into the extended definition of a "manufacturer or producer" pursuant to subsection 2(1)(f) of the Excise Tax Act. Once these operators have exceeded the threshold of $50,000 in taxable sales of wine in a calendar year, they are required to be licensed and account for tax on their sales of wine produced.

The above comments represent our general views with respect to the subject matter. If operators require further information with respect to their particular operations, tax liability or licensing requirements, they should contact their local tax services office. Local addresses and telephone numbers are available in telephone directories.