Reference Toolbox – Vineyards Business & Financial
Vineyards - Business & Financial
GRAPE SOURCING AND CONTRACTING
Positive business interactions between growers and wineries are an important cornerstone of our industry's success. There are some steps growers and wineries can take to help ensure relationships are positive and mutually beneficial.
Davis Wright Tremaine has created a resource document and a webinar on the Top 10 Tips for Grower Contracts, Communications and Collections. These resources provide growers and wineries with tools to help ensure positive business interactions, including communications tips and sample contract language.
OWA worked with our legal team, with the input of other industry members, to give insight into best practices and talking points for growers and wineries related to smoke exposure. These best practices and talking points are intended to provide some helpful background for consideration, but do not constitute legal advice.
An winegrower who delivers their crop to an Oregon purchaser has a lien for the contract price of that product. Normally, this lien expires 45 days after the payment is due, but the due date may be extended to 225 days by filing a notice of Agricultural Produce Lien with the Oregon Secretary of State. This extension gives the filer more time to collect.
The Perishable Agricultural Commodities Act (PACA) was enacted at the request of the fruit and vegetable industry to promote fair trade in the industry. PACA protects businesses dealing in fresh and frozen fruits and vegetables by establishing and enforcing a code of fair business practices and by helping companies resolve business disputes. The PACA license is the only license required by the Department of Agriculture (USDA) for you to operate in the produce industry.
The PACA trust provisions put sellers of fresh and frozen fruits and vegetables in a priority status in the event their buyers become insolvent or file for bankruptcy protection. PACA requires bonds to be posted by a licensee where the firm or one of its principals has been involved in bankruptcy or when a PACA licensee employs an individual who is under PACA employment restrictions. The purpose of the bond is to provide assurance that the licensee’s business will be conducted in accordance with the PACA and that it will pay any reparation order issued against the firm.
The employment bond table lists those firms who have posted a bond in order to employ an individual that is currently under employment restrictions. It also lists firms that have posted a surety bond in order to obtain a PACA license. Learn the bond requirements for reparation complaints during dispute resolution.
Oregon, Washington and Idaho have a reciprocity agreement exempting farmers and their employees driving farm vehicles from the Commercial Driver’s License (CDL) requirement, even when traveling across borders, subject to certain limitations.
By law, the following types of drivers don’t need a commercial driver license (CDL) in Washington:
-Farmers transporting farm equipment, supplies, or products to or from a farm in a farm vehicle are exempt if the vehicle is:
- Operated by the farmer or a farm employee.
- Not used in the operation of a common or contract motor carrier.
- Used within 150 miles of the farm (in an air-mile radius).
If farmers meet all requirements of the farm exemption, they may operate farm-exempt vehicles between the states of Idaho and Oregon.
Oregon follows the same rules as above, and also has a farm endorsement for regular Class C (non-commercial) licenses, which authorizes the operation of a commercial motor vehicle without a CDL.
TAXATION
Land may qualify for a special assessment as farm use property where the value of the land is set at a lower amount than it might otherwise. Land within an exclusive farm use (EFU) zone automatically qualifies for the farm use special assessment if there is an active bona fide farm use with an intent to make a profit from farming as defined under ORS 308A.056. A landowner in an EFU zone using the land exclusively for farm use does not need to take any action since county assessors are required to value the land at its farming value. Whether land is eligible for a special assessment is usually determined on Jan. 1 of each year. For lands located outside an EFU zone, the landowner must file an application with the county assessor on or before Apr. 15 of the first year in which the assessment is desired. Contact the Department of Revenue with general questions.
A $25/ton tax is imposed on the sale or use of agricultural products used in a winery for making wine. In the case of vinifera or hybrid grape products harvested in this state, $12.50/ton of the tax shall be levied and assessed against the person selling or providing the grape products to the winery and, except as provided in ORS 473.046 (Exemption for grapes used for wine produced in certain viticultural areas), $12.50 per ton shall be levied and assessed against the winery purchasing the grape products.
If the purchasing winery is licensed under ORS chapter 471 or holds a wine self-distribution permit, direct shipper permit or certificate of approval, the purchasing winery shall pay the $25 per ton tax and deduct $12.50 per ton from the price paid to the person selling or providing the grape products to the winery. If the purchasing winery is not licensed under ORS chapter 471 and does not hold a wine self-distribution permit, direct shipper permit or certificate of approval, the person selling or providing the grape products to the winery shall report the sale on forms provided by the Oregon Liquor and Cannabis Commission and pay $12.50 per ton as a tax directly to the OLCC.
The statute also requires vineyard owners that sell grapes out of state to retain harvest and sales records for inspection or audit by the OLCC. A grower failing to report sales to the OLCC, and/or failing to satisfy the corresponding tax liability, is subject to charge with a Class C misdemeanor.
Reports for the calendar year are due on Dec. 31 of that year. Half of the assessment obligation for the year must be paid on or before Dec. 31. The remaining half is due on June 30 of the following year. Use the OLCC's Oregon Privilege Tax Online system.
The Oregon Legislature enacted HB 4002 putting into placed overtime pay for agricultural workers. The bill allows employers to claim a tax credit equal to a percentage of the overtime pay. The credit covers a percentage of overtime wages, starting in 2023, and decreases incrementally through 2028. Total tax credits permitted are capped at $55 million per calendar year for all eligible taxpayers combined. If applications exceed that amount, allowances will be proportionally reduced among all qualifying applicants. To claim tax credits, employers must file applications with the Department of Revenue by January 31, 2024, based on overtime paid in 2023.
The tax credit is not available to farm labor contractors (FLCs). However, an employer using the services of a licensed FLC may apply for the tax credit. Each agricultural employer’s share of the overtime paid for actual hours worked will be determined between the employer and the FLC. See examples here.
To offset financial hardships posed by delayed credits and proportional allowances, the Oregon legislature also provided a one-time allocation of $10 million. These funds establish a grant, loan, or lending program designed to offer financial assistance for agricultural employers impacted by increased wage costs related to new overtime pay regulations. Apply here.
Business owners must notify the Oregon Employment Department and the Oregon Department of Revenue when changes are made in the organization, or the status of their business. The following are examples of changes that you need to report on the Business Change in Status (Form 013):
- Sale or lease of business
- Dissolution of a partnership
- Formation of a new partnership
- Dissolution of a corporation
- Formation of a new corporation
- Death of an owner or partner
- Any other changes in the legal standing of a business
If the address of your business changes, you will need to notify the Oregon Employment Department on the Business Contact Change Form.
INSURANCE & DISASTER ASSISTANCE
Crop Insurance
Through the Farm Bill Oregon vineyards can obtain crop insurance at a subsidized rate of 38-67% depending on the scope of the policy. The program is administered by the USDA Risk Management Agency (RMA) and the insurance is sold and delivered solely through private crop insurance agents. A list of crop insurance agents is available at all USDA Service Centers and online with the RMA Agent Locator. Producers can use the RMA Cost Estimator to get a premium amount estimate of their insurance needs online.
Grapevine Insurance
USDA RMA announced a new grapevine insurance policy in August 2023 that provides coverage for loss of grafted vines caused by natural perils such as freeze or fire. The new program also will complement the grape crop insurance program that covers the fruit growing on the vine. It is classified as a “mortality policy,” paying losses when the vine is dead or so badly damaged it will not recover in the following 12 months. The deadline for signing up for insurance is Nov. 1, 2023.
Congress can appropriate funds to mitigate the impacts of natural disasters. This funding must be approved for specific years and events. The Wildfire and Hurricane Indemnity Program (WHIP+) was replaced by the Emergency Relief Program (ERP) in 2021. It included $10 billion in assistance to agricultural producers impacted by wildfires, droughts, hurricanes, winter storms, and other eligible
disasters experienced during calendar years 2020 and 2021. The funding was provided in two phases: first for those who participated in the crop insurance program followed by those who did not. All producers who receive payments under the ERP are required to purchase crop insurance for the next two available crop years. This is a standard requirement for disaster assistance payments.