“This must be for the big guys”

A lot of small winery owners hear about California’s new packaging rules and reach the same conclusion. We’re a small, family winery. We don’t make packaging. We already pay CRV. And I only just heard about this.

It’s a reasonable reaction. And here’s the good news: winery size does matter in California’s EPR Program, because there’s a Small Producer Exemption, and many wineries will qualify for it.

The catch is that the California regulations decide what “small” means, not you. And qualifying isn’t the same as being exempt. You have to apply, and you have to be approved.

The short answer: Your winery may be exempt from California’s EPR Program if your gross sales in California were less than $1 million last calendar year. But the exemption isn’t automatic. You have to apply to CalRecycle and be approved. If you missed the June 1, 2026 deadline, apply now.

In this post, you’ll learn:

• Whether the EPR Program applies to your winery in the first place

• How California measures a “small producer”

• What counts toward the $1 million sales threshold, and what doesn’t

• How to prove your California sales

• What to do next, whether you qualify or not

If you’re brand new to the EPR Program, start with our overview, EPR for Wineries: Start Here . It covers the whole program and gives you an 8-step roadmap.

This post goes deep on the first two steps: confirming you’re a producer and applying for the exemption.

Does California’s EPR Program apply to my winery?

The biggest risk with the EPR Program is getting blindsided by rules that seem to come out of nowhere. And if you’ve started reading about it, you’ve probably found yourself buried in acronyms, definitions, and pages of regulations.

You don’t need to understand every regulation before you act.

You just need to know where your winery sits in the program, so you know what to do next.

Think of it like reading a map. You don’t memorize every road in California before you start driving. You just need to know where you are, where you’re going, and what your next turn is.

For the EPR Program, “where you are” comes down to two questions:

1. Does your winery sell products in packaging the EPR Program applies to?

2. Is your winery the business responsible for that packaging?

Once you know where you are, the path is simple:

1. Figure out whether the EPR Program applies to you.

2. If it does, figure out whether you qualify for the Small Producer Exemption.

3. Then either apply for the exemption, or start on the standard compliance steps.

What does EPR mean in plain English?

EPR stands for Extended Producer Responsibility. The regulations make it sound complicated, but the idea is simple: California is changing who pays for packaging waste.

Think of it like a trash bill changing hands. For years, local governments, taxpayers, and consumers have carried most of the cost of collecting and recycling packaging. The EPR Program shifts more of that bill to the businesses that put the packaging into the market.

In California, the law behind this is SB 54. CalRecycle runs the program, and the Circular Action Alliance (the CAA) is the organization that collects the reports and fees from producers.

Am I the “producer”?

“Producer” is one of the most confusing words in the EPR Program, because it sounds obvious. You produce wine, not packaging, right?

Under the EPR Program, “producer” is a legal term. It does not refer to the company that manufactured the bottle or the box. It refers to the business legally responsible for the packaged product being sold into the market.

For most wineries, the producer is the brand owner.

Think of a sports jersey. The team didn’t sew it. An apparel company did. But the team’s name and logo are on the front, and the team is the brand fans are buying. If that jersey were sold under an EPR Program, the team would be responsible for the jersey’s packaging, not the company that sewed it.

The EPR Program works the same way. If your winery’s name is on the label and you sell that wine in California, you’re the producer, even though you bought every piece of packaging from a supplier.

A few arrangements can complicate this, like custom crush, private labels, and licensed brands. If one of those applies to you, take a closer look at who owns the brand.

The key question isn’t “who made the packaging?” It’s “whose brand is on the packaged product?”

“But my bottles are already covered by CRV”

If you already pay CRV on your wine bottles, it’s natural to ask why there would be a second packaging program.

The answer: CRV and the EPR Program are separate programs with separate rules. Think about the DMV. Your driver’s license and your vehicle registration are both about driving, but they’re separate requirements. Having one doesn’t take care of the other.

In California’s EPR Program, your glass wine bottle is excluded because it’s already part of CRV. That exclusion is California’s alone. Other states’ EPR Programs include the glass bottle.

But the bottle isn’t the only packaging that leaves your winery. You still need to look at things like:

• Capsules

• Boxes and dividers

• Shipping boxes and protective inserts

• Tape and shrink wrap

• Gift boxes and wine club inserts

An excluded bottle doesn’t mean an exempt winery.

Most wineries still have packaging that counts as covered material in California. That’s why the Small Producer Exemption matters.

What is the Small Producer Exemption?

The phrase “Small Producer Exemption” sounds reassuring. But the question isn’t “Am I a small winery?” It’s “Do I meet California’s test?”

“Small” is subjective. You may think of your winery as small because you are still working your day job, have a handful of employees, and make a few thousand cases. California doesn’t measure any of those things.

California’s test: less than $1 million in gross sales in California in the most recent calendar year.

Two words in that sentence matter most:

• Gross means total sales, not profit.

• California means sales made in California, not necessarily all your sales everywhere.

Here’s how that plays out:

• Winery A had $800,000 in total sales, all in California. It’s under the threshold.

• Winery B had $2 million in total sales, but only $700,000 were California sales. It’s also under the threshold, as long as it can show how it got to $700,000.

What doesn’t count as California sales

Start with your total gross sales, then take out:

• Wine shipped to customers outside California (wine club, eCommerce, and other direct-to-consumer shipments)

• Sales to distributors outside California

Everything else stays in. That includes a few items that surprise people:

• Sales to California distributors count, even though the distributor resells the wine.

• CRV you collected counts.

• Shipping charges count, all of them. Shipping is a service you provide in California, so it’s California revenue even when the wine ships out of state.

A note on taxes: Excise tax and sales tax aren’t sales, so they shouldn’t be in your gross sales to begin with. But if they ended up in sales on your tax return, your California sales number includes them. Use the number as filed, and fix your books going forward.

If your winery is outside California, count only the sales you shipped into California, to DTC customers and to distributors.

If you own more than one brand and they’re all on the same tax return, add them together.

How do I prove my California sales?

If your total sales are under $1 million, this part is easy. Your tax return shows it. You are done.

If your total sales are over $1 million, you’ll need to show how much of that was California sales. Think of it as leaving a breadcrumb trail. Someone should be able to start at your total sales, follow your records, and land on the same California number you did.

The application asks for your total gross California sales “as found on the most recent calendar year’s tax returns.” So your tax return is the first breadcrumb.

Find the reports that separate California from everywhere else

• Tasting room, wine club, and eCommerce: Use the sales reports from your POS or eCommerce system. They list the “ship to” state for every order.

• Wholesale and distribution: Use QuickBooks. Your customer list shows which distributors and accounts are in California and which aren’t.

These reports are more breadcrumbs.

A caution about your CDTFA sales tax return

Your CDTFA-401 sales tax return is one of the documents CalRecycle accepts. But it only works if it clearly identifies your California sales.

• If you reported out-of-state distribution sales as out-of-state sales, your return can support your number.

• If you reported them as sales for resale, your return lumps them in with California distributors and wholesalers. It won’t show your true California sales, so you’ll need other records.

What CalRecycle accepts as proof

CalRecycle accepts several kinds of proof. These are the ones that fit a small winery:

• Any federal (IRS) or California (Franchise Tax Board) tax filing for the most recent calendar year

• Your CDTFA-401 return (see the caution above)

• Audited financial statements, if you don’t have a recent tax return

• A sales report or ledger report showing sales attributed to California

• A signed attestation or CPA letter certifying your California-only gross sales

The goal isn’t to bury CalRecycle in paperwork. It’s to make your math easy to follow: total sales, minus what wasn’t California, equals your California number.

I’m under $1 million. Now what?

This is the easiest place to make a costly assumption: “I’m under the threshold, so I’m exempt, so I don’t need to do anything.”

Think about college admissions. You might meet every requirement: the GPA, the test scores, the classes. But you aren’t a student until you apply and the school accepts you.

The Small Producer Exemption works the same way. Being under $1 million means you may qualify.

Receiving an approved exemption from CalRecycle is what actually exempts you.

Until then, California treats you like any other producer and is expecting to see your filings.

How to apply

1. Create a CalRecycle WebPass account.

2. Register as a producer in PEPRS, CalRecycle’s online reporting system.

3. Submit the Small Producer Exemption application with your supporting documents.

4. Wait for CalRecycle’s approval. You can check your PEPRS portal for updates.

What the application asks for

• Your California corporation or LLC number

• A contact person

• Your total gross California sales for the most recent calendar year, with proof (see the list above)

• Your business type (retail, wholesale, or other) and whether you sell online, in person, or both

• The kinds of products you sell in California

• How much you buy from out-of-state suppliers

• How much you own the brands or trademarks on the products you sell

Good news: the application doesn’t ask for any packaging data. You don’t need to weigh a single box to apply.

How long the exemption lasts

An approved exemption is good for 2 years, or until your California sales go over $1 million, whichever comes first.

It isn’t permanent, so put the renewal on your calendar.

What still applies, even when you’re exempt

The exemption covers most of the EPR Program’s reporting and fees, but not everything:

• Keep your registration current and re-apply on time.

• Plan for 2032. Starting January 1, 2032, all covered material sold in California must be recyclable or compostable. That applies to exempt wineries too, so it’s worth asking your suppliers about it now.

Missed the June 1, 2026 deadline? Act now.

The deadline to register, and to apply for the Small Producer Exemption, was June 1, 2026. Many small wineries missed it, often because they didn’t hear about the EPR Program until after it passed.

This deadline applies to every winery, whether you qualify for the exemption or not. If you haven’t done one of these yet, do it as soon as you can:

• Apply for the Small Producer Exemption

or

• Register with the CAA

Here’s what we know so far:

• At least one winery that registered with the CAA has received a notice about the missing reports. It wasn’t threatening, but it’s a sign that the clock is ticking.

• We don’t yet know whether wineries that haven’t registered at all will be contacted.

• Wineries are easy for the state to find. Every winery is already registered with the ABC and with CalRecycle for CRV. Not every industry is that visible.

• Penalties could be assessed for not registering and for not filing.

So don’t count on staying under the radar. Getting registered, or getting your exemption application in, puts you back on solid ground.

What if I don’t qualify?

If your California sales are $1 million or more, the question changes. It’s no longer “Can I opt out?” It’s “What do I need to organize so I can comply?”

Think of it like a fork in the road. One path is the Small Producer Exemption. The other is the standard compliance path. Taking the second road doesn’t mean you’re lost. It just means you follow a different set of signs.

The same is true if you were initially exempt and your California sales grow past $1 million. Congratulations, but the first year you go over $1 million, you will need to register with the CAA and start filing.

On the compliance path, your next steps are:

1. Confirm you’re the producer for the products you sell in California.

2. Register with the CAA.

3. Identify your packaging. For each SKU, list every packaging component, what it’s made of, and how much it weighs.

4. Organize your sales by SKU and by state, so you can report what you sold into California.

You don’t have to master every requirement overnight. Steps 3 through 8 of the roadmap in EPR for Wineries: Start Here will walk you through it in order. And our free vendor email templates make it easier to get packaging details from your suppliers.

What about other states?

California may be the reason you started paying attention to the EPR Program. But if you sell wine into other states, it may not be the only EPR Program you need to think about.

Think of driving across state lines. You’re in the same car, but once you cross the border, the speed limits and signs change.

EPR Programs work the same way:

• A California exemption doesn’t carry over. Each state has its own rules and its own thresholds.

• The glass bottle is included in other states. California’s bottle exclusion is unique to California.

• More states are coming. As of 2026, California, Colorado, Maine, Maryland, Minnesota, Oregon, and Washington have EPR Programs for packaging, and others are developing them.

If you ship to customers or sell through distributors in other EPR states, look at each one separately. We’ll cover other states later in this series.

Frequently asked questions

Is the Small Producer Exemption automatic?

No. You have to apply through CalRecycle and receive an approved exemption. Until then, California treats you like any other producer.

Does CRV count toward the $1 million?

Yes. CRV you collect counts as California sales. Excise tax and sales tax don’t, unless they’re included in sales on your tax return.

Do sales to my California distributors count?

Yes. Sales to California distributors count, even though the distributor resells the wine. Sales to distributors outside California don’t.

How long does the exemption last?

Two years, or until your California sales go over $1 million, whichever comes first. Then you re-apply or register with the CAA.

I missed the June 1, 2026 deadline. Is it too late?

No. Apply for the exemption, or register with the CAA, as soon as you can.

The 30-second recap

You don’t need to memorize every acronym or regulation today. You just need to know where your winery fits. Answer these three questions:

1. Are you the producer? Is your winery’s brand on packaged products sold in California?

2. Were your California gross sales under $1 million last calendar year? And can you show how you got that number?

3. Do you have an approved exemption from CalRecycle? If not, have you applied?

If you answered yes to the first two and no to the third, your next step is clear: apply.

Where to go next

• Get EPR updates? Sign up for our newsletter where we share EPR updates and other information useful for the small wineries.

• Ready to get it done? Our EPR for Wineries – Guide + Workbook (coming soon) translates California’s EPR rules into just what a winery needs to know, and the workbook does the math for you. With your packaging and sales data in hand, open a bottle of wine, and you will be finished in no time.

• New to the EPR Program? Read EPR for Wineries: Start Here for the full overview and the 8-step roadmap.

Coming next: What Counts as Packaging

Whether you’re exempt or not, you’ll eventually need to know what your packaging is made of. In the next post, we’ll walk through what counts as packaging for a winery, from the capsule to the shipping box, and share our free vendor email templates.

About the author: Jeanette Tan is the founder of QB Winery Solutions. She has worked exclusively with small wineries for over 15 years and has taught at Sonoma State’s Wine Business Institute.

Wait, there’s a new compliance program?

It usually starts with a conversation. You’re pouring at an event or catching up with a neighboring winery, and someone mentions a new CalRecycle program for packaging. They’ve heard it’s a big deal. They’ve heard there’s registration, reporting, and fees.

Then comes the part that makes your stomach drop: the first deadlines have already passed.

You ask around, and nobody seems to know much more. Your accountant hasn’t mentioned it. Your distributor shrugs. And you’re already juggling TTB reports, ABC renewals, excise taxes, label approvals, and everything else that comes with running a small winery. One more compliance program feels like one too many.

If that’s where you are right now, take a breath. You’re in the right place.

In the next 10 minutes, you’ll learn:

• What this program actually is

• Whether it affects your winery (spoiler: it almost certainly does)

• What to do first

• Where to go next for help

“But my wine bottles are already covered by CRV”

This is the first thing most winery owners say, and it’s a reasonable thought. Since 2024, wine bottles in California carry CRV, the California Redemption Value. You’re already paying into one recycling program. Why would a second one apply?

Here’s the catch: the EPR Program isn’t just about the bottle.

In California, your glass wine bottles are excluded because they’re already part of the CRV program. But the rest of your packaging is not. Think about everything else that leaves your winery with a bottle: the capsule, the boxes, the dividers, the shipping boxes, the inserts in your wine club shipments.

And California isn’t the only state with an EPR Program. Several other states have them too, and in those states, the glass bottles themselves are included. If you ship to customers or sell through distributors outside California, your bottles may be covered there even though they’re excluded here.

What is EPR? The picnic lunch version

Imagine a restaurant that sells picnic lunches in disposable containers. Customers carry their lunches to the park, enjoy their food, and toss the packaging in the trash. Traditionally, the city pays to collect and dispose of all those containers.

But what if the restaurant that handed out those containers had to help pay for cleaning them up?

That’s the basic idea behind Extended Producer Responsibility, or EPR. The businesses that put packaging into the marketplace help pay for what happens to it afterward.

Who’s involved in California

• SB 54. California passed the Plastic Pollution Prevention and Packaging Producer Responsibility Act (SB 54) in 2022. It authorized CalRecycle to write the regulations that make the program work.

• CalRecycle. The state agency that oversees the program.

• The PRO. Businesses can report directly to CalRecycle or through a Producer Responsibility Organization, or PRO. Smaller businesses like wineries will use the PRO.

• The Circular Action Alliance (the CAA). The CAA is the PRO for California. It’s also the PRO in Colorado, Maryland, Minnesota, Oregon, and Washington, so if you sell in several of those states, you’ll deal with the same organization. Maine runs its program differently.

• You, the producer. This is where many winery owners get tripped up.

Why you’re the “producer”

You might think, “I don’t make packaging. I buy it.” But in an EPR Program, the producer is generally the brand name on the product, not the company that manufactured the packaging. If your winery’s name is on the label, you’re the producer.

Does the EPR Program apply to my winery? A 4-question self-check

Answer yes or no:

1. Do you sell physical goods in a package?

2. Do you sell or distribute products in any of these states: California, Colorado, Maine, Maryland, Minnesota, Oregon, or Washington? (as of 2026)

3. Do you own the brand? (This doesn’t apply to retailers, distributors, or resellers.)

4. Do you have more than $1 million in California sales? (Other states have different thresholds.)

If you answered yes to all four, the rules likely apply to you in California.

If you answered yes to the first three but your California sales are under $1 million, don’t stop reading. You may qualify for the Small Producer Exemption, but it isn’t automatic. You must apply for it.

If you sell in other EPR states, check each state’s rules. Their thresholds are different, and their programs include the glass bottle.

Skipping the application doesn’t make you exempt.

What it looks like when you have the EPR Program handled

Fast forward a year. The annual report is due again, and this time it’s not a scramble.

You’ve set up a few simple internal procedures.

• You know what every piece of packaging on every SKU is made of and how much it weighs. You already had this information, but it was scattered in different Excel files. Now it’s saved in one place. Since you bought all the same materials as the previous year, you didn’t have to update it.

• Your sales records show which state every case shipped to.

• Your purchasing records show how many shipping boxes and dividers you bought.

• When the report is due, you pull the numbers from systems you already use and run them through a process that calculates the weight of each material sold or shipped to each state.

Notice what made the difference. It wasn’t a stack of new paperwork. It was a few tweaks to your system.

Today, EPR reporting feels overwhelming because the information is scattered across invoices, spec sheets, and memory. Next year, and the year after, it becomes routine because your packaging data, purchasing, and sales records are organized to answer the question before anyone asks it.

And when the fees are announced, you won’t be guessing. You’ll already have the numbers to see what the EPR Program adds to your overhead and plan for it in your budget and pricing.

Your EPR roadmap: 8 first steps

You don’t have to do everything at once. Work through these in order. Each step will link to a post or video in this series.

1. Confirm whether you’re a producer. Use the self-check above. If your brand is on the label and you sell in an EPR state, the answer is probably yes.

2. If you qualify, apply for the Small Producer Exemption. In California, this applies to wineries with less than $1 million in California sales. You must apply, and the exemption must be renewed every 2 years.

3. Register with the CAA for your home state. This is a one-time registration.

4. If you sell in other EPR states, register there too. Each state has its own rules and thresholds.

5. Document your packaging. For each primary packaging component (container, closure, capsule, label, and box), identify what it’s made of and how much it weighs. In California, also identify the weight of any plastic it contains. Do the same for your secondary and tertiary packaging, like boxes, dividers, and shipping materials.

6. Track secondary and tertiary packaging purchases. Create a simple procedure to record the quantity of boxes, dividers, and shipping materials you buy.

7. Make sure every sale records a “ship to” state. Review your sales procedures across every channel (tasting room, wine club, eCommerce, and wholesale) so you can report by state.

8. Build EPR fees into your budget and pricing. Once fees are known, add them to your overhead budget and factor them into your pricing.

Key California dates

The first round of California deadlines fell in mid-2026. If you missed them, you’re not alone. The best move now is to register with the CAA, or apply for the Small Producer Exemption if you qualify, and get your data in order.

Requirement

Data year

Due

Submit 2026 Baseline Producer Report

2023

May 31, 2026 (accepted through June 1)

Submit 2026 Annual Supply Report

2025

May 31, 2026

Submit 2026 Annual Source Reduction Report

2025

May 31, 2026

Register with the CAA

n/a

June 1, 2026

Submit Individual Source Reduction Plan

n/a

August 1, 2026

Pay California Early Fees

2025

Within 45 days of the CAA's invoice (after filing
the 2026 Annual Supply Report)

Last updated: October 2026

The 30-second recap

• The EPR Program makes wineries help pay for the recycling and waste management costs of the packaging we put into the market.

• You report the total weight of your packaging, by material, for the products we sold into each participating state.

• You pay fees based on the type of packaging material, its weight, and each state’s rules.

Where to go next

Wherever you are, there’s a next step that fits.

• Ready to start on your packaging? Download our free vendor email templates. They make it easy to ask your glass, closure, capsule, label, and box vendors for the material and weight information you'll need. You'll also get The Crush, our monthly newsletter, and we'll let you know when our EPR for Wineries – Course + Workbook and EPR Analysis Service are available.

• Want to do it yourself, with a guide? Our EPR for Wineries – Course + Workbook walks you through every step on the roadmap above, from registration to building fees into your pricing. Download the vendor templates to hear when it opens.

• Want help with the math? Send your completed workbook to our EPR Analysis Service (coming soon), and we’ll calculate the weights and plastic counts for your reports.

The EPR for Wineries series

This page is your home base. Each post below goes deeper on one part of the roadmap.

• Is Your Winery Exempt from California EPR? How to Tell If You’re a “Small Producer” — what counts toward the $1 million threshold and how to apply.

• EPR for Small Wineries: What Counts as Packaging — the packaging checklist, how to weigh it, and free vendor email templates.

• California EPR Reports for Wineries, Translated into Plain English — the four California reports and the acronyms, decoded.

• California EPR Penalties: What Happens If Your Winery Doesn’t File? — the penalties, the lawsuits, and what to do if you missed a deadline.

• How Much Will EPR Fees Cost Your Winery? — coming soon. [LINK]

About the author: Jeanette Tan is the founder of QB Winery Solutions. She has worked exclusively with small wineries for over 15 years and has taught at Sonoma State’s Wine Business Institute.

Written by Jeanette Tan | Photo by Shutterstock.com

Disclaimer: QB Winery Solutions is not a law firm or regulatory compliance company. This information is intended to be educational and is not legal advice. EPR rules and deadlines are still changing; this post reflects what we know as of the "Posted" date above. Confirm material classifications, exemptions, and reporting obligations with your attorney, compliance professional, vendors, and the applicable state program.

Why the structure under your numbers is probably wrong — and what to do about it.

If your QuickBooks file feels hard to use — the reports don't make sense, the numbers don't add up, and you're not sure who to ask — that's not a QuickBooks problem. And it's not a you problem. It's a structure problem. And it starts with a false assumption that's been passed down through the wine industry for decades.

Winery Accounting Is Not the Same as Vineyard Accounting

The assumption is that winery accounting should be simple. It makes sense when you trace it back. A lot of wineries started as vineyards — and for a vineyard that's only growing and selling grapes, the accounting really is simple. One product, one channel, straightforward books.

But a winery is a manufacturer. You're buying grapes, transforming them into wine, aging that wine over multiple years, packaging it, and selling it through several different channels — tasting room, wine club, wholesale — each with very different margins. The accounting is fundamentally more complex than a vineyard, and your books need to reflect that.

The problem is that nobody told the industry. The vineyard approach got handed down from CPA to bookkeeper to new owner until it became just "how wineries do it." So when your reports don't make sense, the instinct is to assume you're doing something wrong — when really, the structure underneath your numbers was never built for how a winery actually operates

The AMS Hangover

There's a second piece to this that explains why so many winery QuickBooks files look the way they do.

For decades, the dominant accounting software in the wine industry was a program called AMS. It was built specifically for wineries, and because it was the only real option, its workflow became the industry standard. When QuickBooks came along and small wineries made the switch, they brought their AMS habits with them.

AMS was designed more than 50 years ago, on a very different technology platform. AMS is still being used today by the larger wineries. However, the workflows that made sense inside AMS don't always translate to QuickBooks. But because everyone learned from someone who used AMS, those workflows got carried over anyway.

The result: many small wineries are running QuickBooks using processes that exist not because they're the most effective way to use the software, but because that's how it was always done.

I call this the AMS Hangover. And the easiest place to see it is in the Chart of Accounts.

What the Chart of Accounts Is Actually For

The Chart of Accounts is the backbone of your financial system. Every transaction you record in QuickBooks flows through it — and if it's built wrong, every report that comes out of it will be wrong too.

A well-built winery Chart of Accounts organizes your finances into four main areas:

Income — a single Wine Sales account, not creating separate accounts for every sales channel. This is one of the most common AMS Hangover mistakes: recreating the AMS channel structure in QuickBooks income accounts, which creates a cluttered, hard-to-read P&L. QuickBooks has a better solution which I will explain later.

Cost of Goods Sold — the cost of the wine that was actually sold. In a correctly built QuickBooks file, this number populates automatically when a sale is recorded, because the inventory items (SKUs) are set up correctly. No manual entries, no guessing. There are no winemaking accounts in this group

Overhead Expenses — all other operating costs, grouped into functional categories so the P&L stays readable. When grouped correctly, the entire report fits on one page — which matters more than it sounds. A one-page P&L is one a winery owner will actually read.

Winemaking Expenses — all winemaking costs, are in the “Other Expense” section at the bottom of all the expenses. They are not in COGS and they are not on the Balance Sheet.

The One Structural Mistake That Makes Your Numbers Meaningless

Here's where a lot of winery QuickBooks files go wrong, and it directly affects whether you can trust your net income number.

Winemaking expenses — grapes, cellar labor, packaging costs — often get dropped straight into the Cost of Goods Sold section. It seems logical. These are costs related to making wine. But it's incorrect, and here's why.

COGS should only reflect the cost of wine that was actually sold. That's what the name means: cost of goods sold. Winemaking costs, on the other hand, are components of wine that's still being made — Work in Progress inventory. Those costs are part of the inventory asset and belong on the balance sheet until the wine sells.

In a correctly built QuickBooks file, winemaking expenses sit in the Other Expense section at the bottom of the P&L. At the end of the month or year, your accountant moves the total cost to the balance sheet so that this section zeros out so they don't affect your profit from operations.

If you skip that step — if winemaking costs are sitting in COGS and never get zeroed out — your gross profit is wrong. And if your gross profit is wrong, your net income is wrong. You can't manage from a number you can't trust.

This is also where the AMS approach causes problems. In AMS, winemaking costs flow directly to the balance sheet, bypassing the P&L entirely. Some winery owners try to replicate that in QuickBooks — but when you do, you lose the ability to see your winemaking expenses on a report, compare them to budget, or track them year over year. Just because something worked in AMS doesn't mean it's the right approach in QuickBooks.

How Classes Replace the AMS Channel Structure

One of the most powerful features in QuickBooks for wineries is Classes — and it's often either underused or skipped entirely.

Instead of creating separate income accounts for each sales channel (the AMS approach), Classes let you tag every transaction with a channel — Tasting Room, Wine Club, Wholesale — and then run reports that break out revenue, COGS, and gross profit by channel automatically.

This is the structure that makes meaningful analysis possible. When your P&L is set up with one Wine Sales account and Classes turned on, you can see gross profit by channel with a single report. That's the kind of visibility that helps you make real decisions about where to focus.

If you haven't seen what that report looks like, I walk through it in the companion video on Youtube

The Simplest Fix

You don't need to start over from scratch. The most impactful structural change is straightforward:

Reorganize your Chart of Accounts to separate overhead expenses from winemaking expenses. Group those accounts into functional categories so the P&L is easier to read. Move winemaking expenses into the Other Expense section — not COGS, and not directly to the balance sheet.

Just rearranging the accounts gives you a P&L where the Net Ordinary Income line is a number you can actually manage from.

Even with the right structure in place, there are a few day-to-day entry habits that can undermine it — I cover those in a separate video.

Where to Start

If your reports don't make sense, don't start by blaming QuickBooks. Start by looking at the structure underneath it.

The Fundamental Five is a focused course for small winery owners and their bookkeeping teams. We work through setting up QuickBooks correctly for a winery — Chart of Accounts, Classes, inventory, COGS — so that your reports reflect how your business actually operates.

Learn more about the Fundamental Five here.

If your winery QuickBooks file feels like a mess, the problem probably isn't you — it's the structure underneath it. In this video I walk through exactly why so many small winery files are set up incorrectly, where that structure problem comes from, and what a well-built Chart of Accounts actually looks like inside QuickBooks.

Most winery QuickBooks files don't start out messy.

They become messy over time.

Here's how it usually happens: Back when you first set up QuickBooks, the software asked you a few setup questions and then recommended a Chart of Accounts for you.

Seems helpful. Except — QuickBooks does not have a Chart of Accounts for a winery. It created a generic chart of accounts for any small business that sells stuff. Your chart of accounts is the same as for a t-shirt shop. That means from day one, the structure underneath your numbers isn't quite right for what you actually do.

Then life happens. Your CPA suggested adding a few accounts. Your bookkeeper needed a few more to handle something unusual. Someone suggests an account to fix a tricky transaction. And before long, your file has turned into a mess.

Imagine if your barrels were unorganized. Some are not labeled, and the barrels that have labels have inconsistent information. So you spend more time hunting than working. You know what you're looking for — you just can't find it. A well-organized cellar changes everything. And a well-structured Chart of Accounts does the same thing for your financials.

In practical terms, when that happens, a few things start to break down:

• Transactions get coded inconsistently because it's not obvious which account to use

• Reports get harder to read because the structure isn't logical

• And it's genuinely unclear what the numbers are telling you — even when you're looking right at them

It's one of the most common things I see when I look at a new client's QuickBooks file. And the frustrating part? It isn't anyone's fault. Nobody designed it to be confusing. It just got that way gradually, one added account at a time.

When your Chart of Accounts is structured specifically for a small winery, everything else gets easier. Coding transactions takes less thought. Reports are actually readable. And the numbers start telling a useful story — which channels are performing, where the costs are, what the margins really look like.

The good news: this is one of the most fixable things in a QuickBooks file. You don't need to start from scratch. You just need to know what a winery-specific structure looks like and how to reorganize what you already have.

VIDEO: What a Winery-Specific Chart of Accounts Looks Like (And Why It Matters)

What this video covers:

• What a cluttered Chart of Accounts actually looks like inside QuickBooks — and what a clean, winery-specific one looks like side by side

• A quick walkthrough of the account groupings that matter most for a winery (and where most generic setups fall short)

• How to spot the top warning signs that your current structure is working against you

Getting the Chart of Accounts right is the first thing we tackle in the Fundamental Five — because when the structure is right, everything else works better.

But before we get there, I want to make sure your numbers are actually working for you, not just sitting in reports you’re not sure how to read.

That’s what I’m covering in my free webinar on May 14th: “Why Your Numbers Aren’t Helping You Make Better Decisions” — and what to do about it.

If you’re a small winery owner who looks at your financials and still isn’t sure what to do next, this is for you. We’ll talk about what your reports should actually be telling you, and why most winery financials fall short of that — not because the numbers are wrong, but because they’re not set up to answer the right questions.

… And Why It Matters More Now

Written by Jeanette Tan | Photo by Shutterstock

Costs are going up. Labor, materials, compliance, shipping — the expense side of the business keeps climbing regardless of what's happening on the revenue side.

And here's what that means in practice: every case of wine you produce needs to be accounted for correctly. Every bottle that moves — out of the tasting room, through the wine club, to a distributor — needs to land in your system the right way. Because when margins are already thin, the last thing you can afford is inventory errors quietly adding to the damage.

Which brings us to one of the most common and quietly destructive problems I see in small winery QuickBooks files: inventory errors.

The biggest myth I hear is: "QuickBooks can't really handle inventory."

It can. But if it's not set up correctly, it creates a mess that spreads far beyond inventory — into your cost of goods sold, your margins, your reports, and your ability to make decisions with any confidence.

But before we even get to setup errors — there's something more fundamental going on.

The elephant in the room is that you're probably not using the QuickBooks inventory function at all. You have spreadsheets. You have warehouse reports. You have an eCommerce program with its own inventory function. This feels normal — because it is. Almost everyone in the industry does it this way. Even your tax preparer says "just give me your inventory reports and I'll calculate your COGS for you."

But the QuickBooks inventory function isn't just for keeping a tally of your cased goods. It does something your spreadsheet can't: it calculates the cost of goods sold automatically, the moment you record a sale. Getting that number once a year, twelve months after the sale, is too late to do anything with it.

Knowing how much inventory you have on hand matters. But knowing how much money you have tied up in that inventory — and what it actually cost you when it sells — is what drives cash flow decisions and keeps the business on solid ground.

Here are the three mistakes I see most often:

1. Inconsistent sales entry. If you record wholesale and distribution sales in QuickBooks sometimes by the bottle and sometimes by the case — and record DTC sales separately in your POS or eCommerce program with its own workflow — QuickBooks can't keep up. Some owners try to solve this by running everything through their eCommerce program instead. That doesn't work either: the entries still don't match, the count starts drifting, and before long you've got a growing gap between what's in your cellar and what your system thinks is there. In a year when you need to know exactly what you have and what it's worth, that gap is a real problem.

2. Losing case goods after a bottle run. This one is sneaky. It is a longstanding tradition to give the bottling team some wine and to set aside the first-off and last-off cases. But if these cases aren't accounted for correctly after bottling, they basically disappear into a bookkeeping black hole — physically in your cellar, invisible to your accounting system. This creates phantom losses, incorrect COGS, and reports you can't rely on.

3. Not tracking samples, pours, and giveaways. Tasting room pours, distributor samples, promo bottles — all of this matters. When every case counts, untracked inventory quietly distorts your COGS and makes your reports less reliable with each passing month.

Once inventory is off, nothing downstream is right. Your cost of goods sold is off. Your margins are off. Your pricing decisions are based on numbers that don't reflect reality. And when the industry is this unforgiving, making decisions on bad data is one of the fastest ways to end up in serious trouble.

The encouraging thing: these problems are almost always traceable to a setup issue. Fix the structure, and the numbers start telling the truth again.

QuickBooks Inventory Mistakes Quietly Costing Small Wineries

What this video covers:

• Why most small wineries work around QuickBooks inventory - and why that’s costing them

• The 3 most common entry mistakes and what they do to your COGS and margins

• Why these problems almost always trace back to setup, not math

Fixing inventory is one of the first things we tackle in the Fundamental Five — because when your inventory is right, everything downstream becomes a lot more trustworthy. But first, I want to make sure your numbers are actually working for you — not just sitting in reports you open and then set aside.

That’s what I’m covering in my free webinar on May 14th: “Why Your Numbers Aren’t Helping You Make Better Decisions” — and what to do about it.

If you’re a small winery owner who looks at your financials and still isn’t sure what to do next, this is for you. We’ll talk about what your reports should actually be telling you, and why most winery financials fall short of that — not because the numbers are wrong, but because they’re not set up to answer the right questions.

Sales feel softer. Inventory is building. And the decisions that used to work… don’t feel as clear anymore.

You’re making more decisions than ever… with less confidence than ever.

This free training will show you what’s actually missing— and how to fix it.

Here’s what you’ll walk away understanding:

• Why more sales isn’t actually fixing the problem

• Where your profit is really being lost

• Why your numbers feel messy (even when they’re “done”)

• What’s missing to make confident decisions again

It’s not just that things feel harder — it’s that the numbers you rely on don’t feel clear anymore.

Register Here

If your winery financials feel confusing or useless, it's probably not you — it's the system. In this video I walk through the three most common reasons small winery financials break down: messy reports that nobody looks at, incomplete cost numbers that create false confidence, and the cash vs. profit confusion that makes owners think something is wrong when it isn't.

The wine industry has been contracting for years. Tasting room traffic is down. Wine clubs are stalling. Wineries are closing. If your financial system isn't built for this, here's what to fix first.

You probably know at least one winery that has closed in the last year or two.

Maybe more than one.

That's not a coincidence. That's a contracting industry — and the wineries that are surviving are the ones that can see their numbers clearly enough to make fast, smart decisions when it counts.

So here's the question: can you actually trust your financial numbers?

Not "do you have reports." Everyone has reports. The question is whether your reports are telling you something real — something you can act on. Or whether you open QuickBooks, look at the screen, and feel a vague sense of unease because something feels off but you can't quite put your finger on it.

If it's the latter, this is not a "you" problem. It's a system problem.

Winery bookkeeping isn't like normal bookkeeping. You're managing inventory that moves between bulk and bottle. Sales come through multiple channels — tasting room, wine club, online, wholesale — and those channels are all performing differently right now. You've got POS systems that don't always sync properly, samples and pours that need to be tracked, and wine club shipments that have to land in the right place in your system. None of that fits neatly into a generic QuickBooks setup.

Generic QuickBooks was built for generic businesses. A winery is not a generic business.

So what usually happens? You try to do it yourself and get frustrated. Or you hand it off and lose visibility. Or you end up with a system that technically functions but doesn't actually help you make decisions. You know the numbers are there — you just can't fully trust them.

In a stable, growing industry, that's a headache. In a contracting one, it's dangerous.

When your financial system isn't giving you clear answers, you can't price with confidence. You can't identify which channels are actually profitable. You can't see the problems coming early enough to do something about them. And when every dollar matters more than it did two years ago, operating with blurry numbers is a risk you can't afford.

The fix isn't to try harder. It's to build the right system — one designed around how a winery actually operates.

VIDEO: Three Things Wrong With Your Financials

What this video covers:

• Why a standard QuickBooks setup doesn't work for wineries

• The 3 most common ways winery owners end up with numbers they can't trust

• The first thing to look at when your books feel more confusing than helpful

That's exactly what the Fundamental Five is built around — a winery-specific system for getting your financial foundation right in QuickBooks. Not more complexity. Just the right structure for how your winery actually works.

The industry is harder than it's been in a long time. The wineries that make it through are going to be the ones who can see clearly. Our next cohort starts May 28th.

Messy reports, incomplete costs, cash confusion — if any of those hit close to home, this webinar is for you. Join me for Why Your Numbers Aren’t Helping You Make Better Decisions, a free training where I show you the exact steps to build a financial foundation your winery can actually grow from. Save your spot below.

30% of Wineries Won’t Survive - Will You?