Oregon’s wineries can now sell more than just their own wines.  Oregon’s legislature has passed a short-term law that will allow wineries located on farm land to sell food and other goods and services associated with wine and to host private events on the winery premises.  This law was passed as a temporary solution to address growing pressure from many in the wine industry and other stakeholders to allow wineries to sell and provide more than just wine.  Certain portions of the law will expire on January 1, 2013.  However it is anticipated that the major stakeholders and interest groups will work over the next 2 years to formulate a new law or set of laws that will address wineries’ requests for expanded sales and uses in the wineries.

The Oregon legislature passed SB 1055 in the February special legislative session, and it was effective as of March 23, 2010.  SB 1055 allows wineries to conduct expanded commercial sales and activities on exclusive farm use properties.  In order to qualify for the expanded sales and activities under SB 1055, the winery must meet one of the two following qualifications:

• Wineries that have a maximum annual production of less than 50,000 gallons must either own an on-site vineyard of at least 15 acres, or own a contiguous vineyard of at least 15 acres, or have a long-term contract for the purchase of all of the grapes from at least 15 acres of a vineyard contiguous to the winery, or any combination of those three.

• Wineries with a maximum annual production between 50,000 gallons and 100,000 gallons must either own an on-site vineyard of at least 40 acres, or own a contiguous vineyard of at least 40 acres, or have a long-term contract for the purchase of all of the grapes from at least 40 acres of a vineyard contiguous to the winery, or any combination of those three.

Wineries that meet one of these two requirements may then sell or provide, on the winery property, the following items:

• wines produced in conjunction with the winery;
• items directly related to the sale and promotion of wine produced in conjunction with the winery and which is “incidental” to retail sale of wine on site;
• food and beverages served by a limited service restaurant (ie, individually portioned prepackaged foods prepared from an approved source);
• wine and gifts not produced in conjunction with the winery;
• services directly related to the sale and promotion of wine produced in conjunction with the winery and which are “incidental” to retail sale of wine on site; and
• private events hosted by the winery or patrons of the winery, at which wine produced in conjunction with the winery is featured.

However, the extent of sales of such products and services is limited.  The legislation provides that the gross income from the sale of such “incidental items and services” cannot exceed twenty-five percent (25%) of the gross income from “the retail sale on-site of wine produced in conjunction with the winery.”  Note that this limitation is 25% of the on-site retail sales.  Internet and off-site sale are not included.

Finally, the following types of sales and services allowed under SB 1055 will expire, or ‘sunset’, on January 1, 2013:

• the sale of wine and gifts not produced in conjunction with the winery;
• services directly related to the sale and promotion of wine produced in conjunction with the winery and which are “incidental” to retail sale of wine on site; and
• private events hosted by the winery or patrons of the winery, at which wine produced in conjunction with the winery is featured.

In addition, the 25% limitation will also expire for the sales types that remain authorized after January 1, 2013.

The legislation has raised certain concerns.  First and foremost among many wineries is the question of who will be auditing the 25% sales limitation.  Is it the Oregon Department of Revenue?  Is it the county in which the winery is located?  Many wineries, as with most businesses, would prefer not to have their books and records audited.

Further, the issue remains as to whether or not this meets the wineries needs and desires for commercial activity.  The Oregon Liquor Control Commission has long sought to make sure that alcohol was only served when and where significant food was also available.  Similarly, some wineries would welcome the opportunity to prepare and serve food on site for patrons and guests.

On the opposite side of the matter, other agricultural producers and special interest groups are concerned about the impact of these additional commercial activities will have on surrounding agricultural uses.

Interested persons should be aware that this issue is far from resolved.  Following the 2010 special session, stakeholder groups have convened to begin to work towards a resolution that will extend beyond the January 1, 2013 sunset of Senate Bill 1055.  The Oregon Farm Bureau, the Association of Oregon Counties and the Oregon Winegrowers Association are all beginning to work with their constituents to begin to draft policy and legislation that will hopefully replace Senate Bill 1055 and dictate the future of the allowed uses and activities on wineries located on exclusive farm use properties.