North Dakota Drives Small Businessman Out of Business

• January 31, 2008

This is such a clear example of what’s wrong in Bismarck:

Vintner’s Cellar, a make-your-own wine franchise in Grand Forks and Fargo, plans to go out of business by the end of April.
Franchise owners Tony and Judy Osowski blame the state of North Dakota for the impending business demise,

I have some relatives that are good customers of this place. Of course innovation by a local just isn’t going to be tolerated around here.

Osowski said Tuesday that the North Dakota Tax Commission plans to conduct an administrative hearing to determine if Vintner’s Cellar’s 2008 domestic winery license should be revoked.
“We want to work with him. But the bottom line is, it doesn’t qualify as a domestic winery,” said Daniel Rouse, special assistant attorney general and legal counsel to the North Dakota Office of State Tax Commissioner.
Rouse said Vintner’s Cellar failed an audit conducted by the Federal Alcohol and Tobacco Tax and Trade Bureau and the state tax commission in the fall of 2007. The audit indicated that the winery’s private-label wines failed to meet a state law requiring the majority if its ingredients – grapes, fruit or other sources – be North Dakota products.

At least this part of the problem isn’t to be blamed on the Tax Department. They’ve got to enforce the law as it’s written. Apparently in order to qualify for the domestic winery license you have to buy 50% of your ingrediants from in state producers. Maybe the rock head legislature needs to do a bit of research before they regulate a business they know nothing about. According to the owner he would buy from domestic sources if they are available but they aren’t. Maybe in Bismarck they think that we can grow grapes suitable for winemaking in North Dakota but that’s not the case. [Gilby Guy points out that we do produce some grapes for wine. But that doesn't mean we can produce the right grapes they need to produce the wines people want to make.]
I think we can blame the Tax Department for part of the problem:

The franchise also owes back taxes for 2005 and 2006, based on policy that state excise and alcoholic beverage taxes must be paid on all wine sales, including the domestic winery and the make-your-own wines operations, according to Rouse.
Osowski maintains that when he started the business, the tax commissioner’s office determined that wines sold to customers making wine for their own personal or family use were exempt from state excise and alcoholic beverage taxes.

It seems to me that helping people make their own wine is not manufacturing wine and is not subject to the tax. Apparently the tax department thought so too, until lately.
The powers that be in Bismarck sure like to talk economic development but when it comes down to it they see local businesses as a crop to be harvested so that they can afford to give money to others and take credit for it.
Economic development should be creating a favorable business climate for all businesses. What we’re seeing though is that the current leadership in Bismarck wants to support fly by night businesses, businesses that don’t need the money and those that are politically connected.
For the businesses that aren’t in that bunch the owner of the business has some advice for you:

I can’t believe the state can treat a native North Dakotan this way. I certainly wouldn’t recommend anybody move to North Dakota to start a business.”

We need a change in leadership in Bismarck.

Tags: North Dakota News

http://SayAnythingBlog.com The_Whistler_ofnd

I was going to update this. According to the Biz blog at the GF Herald the tax department decided they didn’t have to run them out of business afterall.

I guess the law didn’t mean what they said it meant.
http://SayAnythingBlog.com The_Whistler_ofnd

Don’t get me wrong. The state should work this problem out.

And I appreciate the insight and retract any “rock head” comments as it pertains to you.
http://SayAnythingBlog.com The_Whistler_ofnd

Gilby Guy, why exactly do we need to make it tough to open up a winemaking business in North Dakota.

Is there some kind of federal requirement that we can only approve a “domestic winery” and not a real one?
http://SayAnythingBlog.com The_Whistler_ofnd

But if you made your merlot at home it wouldn’t be taxed.

Is it that different for a business to offer to help someone make their own?
http://SayAnythingBlog.com The_Whistler_ofnd

Here’s basically how the process worked…

Brenarlo made his own Ripple and Boones Farm there.
drama

likwidshoe – I did give you facts – re-read the post.

Osowski states he owns the GF and Fargo Vintners. So he must not own the Bismarck Vintners. Do you ever here that owner complaining about how the state treats him? His business seems to be doing just fine. Is the state really into torturing small businesses? There are many small businesses in ND that seem to do fine. I don’t see any of them carrying on about cruel and unusual punishment. Papers love drama because it sells so if there were other businesses being treated so unfairly, they should take this opportunity to add their story. I don’t see any other wineries complaining either. Why aren’t the other wineries standing up next to Osowski and clamoring how poorly they are treated by the state?

It is a sad state when people blindly believe what they read without even thinking it through.
gilbyguy

Heh …. Oh I’ve had rock head moments, fer sure. But the legislation we worked on did effectively encourage domestic wineries. The Problem came because we did not anticipate operations like Vintner’s Celler and how they would (or should) fit in the mix.
http://www.valleydeals.com/cgi-bin/board2/YaBB.pl Kevin

Winemaking on any scale is rare, but not unknown in ND.

There IS plenty of whine making in the Nd. legislature and their constituents in the lazy, greedy education cabal!
http://ewebsmith.com/ ews48

This is an example of what’s wrong all over the country.
http://www.valleydeals.com/cgi-bin/board2/YaBB.pl Kevin

ND has contempt for small business. They’d rather have big businesses to shake down.
http://northerngleaner.blogspot.com/ Gene

Rob
This “tax anything that moves” approach is dragging the entire country down.

This is worse in ND than many states. Oh there are worse states but ND should take a look at it neigbors for clues.

SD is pretty biz friendly. MN not so much but they get biz anyway MT and WY are great.

ND is it’s own socialist republic in the middle of the north that doesn’t exist to most of the USA.

Taxing anything that moves isn’t helping much.

My tax burden in IL is less than it was in ND. Income, Sale, Use and other. When I had enterprises in ND and IL and had to file in both states I would always favor IL because the rate was almost a third less at that time. I haven’t had that for about 10 years since I sold my biz in ND.
http://SayAnythingBlog.com The_Whistler_ofnd

wind burn.
ND in MD

So, the next time the legislature meets maybe they will propose this solution. Create another government program where the state would purchase all the wine made with local ingredients that did not sell. The wineries could make the product as the state demands and when very few people buy the wine, the state would step in amd buy all the unsold wine. This template is used for other (farm) programs. It is only taxpayer’s money, right? And aren’t we just ATM machines that the state can just take money out of when they want?
http://www.kenmccracken.blogspot.com/ Ken McCracken

Whistler, just keep your head down and do whatever the commissars say.

They know far more about how to run a business (into the ground) than your average, helpless Joe on the street who needs his hand held all the time.
gilbyguy

According to the story they tried to find relief from the legislature but didn’t get it. I guess they were too busy mismanaging the budget to help.

It could be there was resistance from alcohol retailers. If I bought a merlot from Happy Harry’s, that wine would be taxed, so why wouldn’t a merlot at Vintner’s Cellar? Without the specifics, it’s hard to say, but it is disappointing that a solution couldn’t be worked out.
gilbyguy

As I remember it … (It’s been a few years) Most of it dealt with taxation and where the tax was assessed. There was also problems with distribution agreements. Manufacturers have to run their finished product through a beverage wholesaler who then sells it to a retailer.

The Marketing agreements are very limiting. For example, I believe it is illegal for a ND Bar to buy liquor from a Minnesota wholesaler.

The change we made to encourage domestic wineries was targeted to small operations (they were limited to the number of bottles they could sell in a year)that used ND crops.

Don’t get me wrong. The state should work this problem out.
http://www.valleydeals.com/cgi-bin/board2/YaBB.pl Kevin

Gosh, imagine that a winery, a product for elite liberals to sip on at
their uppity ski resorts and such, can’t make it in a redneck state like
ND.

Is having a red neck even possible in North Dakota?
brenarlo

Here’s basically how the process worked. You taste a wine there… you decide to “make” it… they give you all the ingredients right in the store… you dump them in the pot… they do the rest.

It was hardly a “make-it-yourself” wine. But, at the same time, it was still kinda fun.
http://www.valleydeals.com/cgi-bin/board2/YaBB.pl Kevin

Sounds like another one of those “unintended consequences” the legislature likes to claim.
http://SayAnythingBlog.com The_Whistler_ofnd

I posted an update with links where the government admitted they were wrong in this matter this morning.

Sorry drama, you’re all wet.
drama

We certainly wouldn’t want to let actual facts get in the way of a really good drama, would we.

Ask yourself, please: Is Osowski the only person in North Dakota who owns a business like this? Why doesn’t Vintners in Bismarck have any problems???

If one one person raises a stink, is there really a problem? Why aren’t all the other owners screaming with him? Did it ever occur to any of that you Osowski is the problem? Of course not, because we wouldn’t want to let facts get in the way of a good drama.
http://SayAnythingBlog.com The_Whistler_ofnd

That should be winemaking on this type of business. Winemaking on any scale is rare, but not unknown in ND.
http://SayAnythingBlog.com The_Whistler_ofnd

And yes, winemaking is a unique business in North Dakota. That’s not surprising when you think about it.
http://www.mormon.com/ Mittens McHuckniani

Gosh, imagine that a winery, a product for elite liberals to sip on at their uppity ski resorts and such, can’t make it in a redneck state like ND. What a shock, maybe National Geog can do a story on that, and ND can have another heart attack about how the liberal mags are trashing the poor little NDers.
http://sayanythingblog.com/ likwidshoe

drama – Did it ever occur to any of that you Osowski is the problem? Of course not, because we wouldn’t want to let facts get in the way of a good drama.

Well then – what are the facts?

You talked a good game and then failed to back it up. All you gave us was drama.
imagine

This is a very sad situation. Someone with some brains in Bismarck needs to not let this business close. I have used Vintners many many times…When I make a batch of wine…I actually make and bottle the wine..
I purchase the items, I pitch the yeast. They merely store the fermenting wine and sell me the bottles, corks, lables etc…
as a photographer I would make several batches of wine and I would give the bride and groom several bottles with a photo-lable and the date of the wedding…often times they would order more for relatives etc…it was not only a nice gesture from the photographer but it also was a money maker…

…if that is the law, then the law is an ass……
http://SayAnythingBlog.com The_Whistler_ofnd

For example, I believe it is illegal for a ND Bar to buy liquor from a Minnesota wholesaler.

I should say so! Obviously without a rule like that to there would be anarchy and chaos and looting and other terrible things that I can’t spell.

Good thing that the consumer is protected from lower prices.
http://SayAnythingBlog.com The_Whistler_ofnd

Actually there ARE grapes and other fruits raised in ND that are used to make wines.

I was aware that we had a winery or two but I assumed they had a limited offering due to our growing conditions. It seems that this type of business has to be able to offer the wine ingredients that customers want rather than what they can get from around here.

According to the story they tried to find relief from the legislature but didn’t get it. I guess they were too busy mismanaging the budget to help.

It’s interesting that the ATF audited them and found them in violation of the state law.
gilbyguy

Maybe the rock head legislature needs to do a bit of research before they regulate a business they know nothing about. According to the owner he would buy from domestic sources if they are available but they aren’t. Maybe in Bismarck they think that we can grow grapes suitable for wine making in North Dakota but that’s not the case.

Easy there …. I sponsored the bill (I think) that regulated domestic wineries. It was never envisioned to cover a place like this.

Actually there ARE grapes and other fruits raised in ND that are used to make wines.

http://www.mapleriverwinery.com/

This is the type of winery we were trying to encourage with the domestic producer provision of the alcohol tax code.

Having said that, the state should find a way to make self brew places feasible.

It would be interesting to know how much of the change in policy had to do with ATF regulations.
http://sayanythingblog.com robport

I’m not understanding why the wine made at this business needs to be taxed. Is it simply because it exists?

I’m actually getting a little tired of being told by legislators that something must be taxed simply because it is not already taxed. What we need to do is roll back to the tax code until the government gets its revenues from a small number of economic/social activities.

This “tax anything that moves” approach is dragging the entire country down.
http://sayanythingblog.com/readers/author/sparkiearbuckle sayanything-81

Osowski maintains that when he started the business, the tax commissioner’s office determined that wines sold to customers making wine for their own personal or family use were exempt from state excise and alcoholic beverage taxes.

cut and dry then. the dude provides evidence of this decision… and then it becomes a matter of whether or not the person who made that decision could in fact make those decisions.
we really do need people to pay taxes. then we can have nice roads that WE pay for that the govvy can sell to foreigners on the cheap who can then charge us tolls on the roads that we paid to build.
furthermore, we need to pay crack addicted women to put in IUDs. don’t want to have kids, the government will give you crack money for free!

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