Assessment Of Oak Wine Barrels



John Tuteur Assessor

 Assessment Of Oak Wine Barrels


Barrels have been used to store wine for many centuries. During the renaissance of Napa County winemaking in the 1960s aging wine in oak barrels, primarily from France and costing as much as $700 apiece, was rediscovered as a technique for improving wine quality because the wood imparts an oak flavor to the wine. Oak barrels gradually lose their ability to impart this flavor and are usually disposed of for planters or barbecue charcoal after five or six years of use. As Napa County vintners continue to focus on producing fine wines, the amount of oak cooperage has grown, reaching a total assessed value for oak wine barrels of $67.5 million for the 1999-2000 assessment year.

In 1995 the State Board of Equalization was asked to review the status of new oak wine barrels regarding sales tax liability. If an item is considered to be purchased for incorporation into a final product, that item is exempt from sales tax since the tax is collected on the final product, in this case the wine itself. After reviewing the evidence concerning the imparting of oak flavor to wine through the transmission of chemical substances known as esters, the State Board of Equalization ruled that oak barrels were part of the production process for wine and were exempt from sales tax. Later the exemption from sales tax was extended to used oak wine and oak brandy barrels.

In 1999 the State Board of Equalization was asked to review the status of oak wine barrels regarding property tax liability. If an item is considered to be inventory and to become part of the final product, it is classified as business inventory and is exempt from property taxes. Even though oak wine barrels performed a historic function as a storage medium, the State Board decided that their primary purpose was to impart an oak flavor to the wine and that therefore they were inventory and exempt from property taxes.

The rule classifying new and used oak wine barrels as inventory was adopted by the State Board on January 5, 2000. Napa County will implement the ruling for the 2000-2001 assessment season which covers the tax year beginning July 1, 2000 and ending June 30, 2001. Owners of oak wine barrels will not need to report their barrels to the assessor on the business property statements that will be mailed March 1, 2000 and are due back no later than May 7, 2000. Not having to report barrels should save barrel owners considerable time and effort in preparing their business property statements since barrels are bought and sold regularly and are difficult to track. As inventory, the assessed value of the barrels will be removed from the county assessment roll. The reduction of $67.5 million would be equal to approximately six-tenths of one percent (0.006%) of the county's 1999 total value of $11.375 billion.

Should you have any questions please contact Napa County Assessor John Tuteur at (707) 253-4459 or by e-mail at