When you’re deciding where to put the wine in your collection, you have a big decision to make: whether to store in-bond or out-of-bond. Neither of these options is inherently better than the other, but the costs vary depending on your collection. One collector might save hundreds of dollars on in-bond storage, whereas another might lose thousands. Take wine journalist Tom Cannavan, for instance. He says he stored a half dozen cases of late 1990s and early 2000s First Growth labels in-bond, hoping to increase the value of those bottles. However, he paid almost $110 per year to the warehouse for the privilege. After 10 years, that added up to $1,100 that Cannavan says he would rather have spent on more wine. You’ll have to consider your collecting preferences and long-term plans for your wine in order to to decide for yourself whether the cost of storing wine in-bond is worth it.
What’s the Difference?
The difference between in-bond and out-of-bond storage comes down to taxes. When you buy and store wine in-bond, you have the wine shipped directly from the winery or another bonded warehouse to the bonded warehouse of your choice. You don’t get to see your wine in person, but you pay the bonded warehouse to keep the bottles under safe storage conditions. While your bottles are under storage, you don’t have to pay taxes on them at all–no duty tax for importing the wine across different states or countries, and no VAT (value-added tax) calculated from the sale of the bottle. You only pay taxes if you remove your bottles from storage. With in-bond storage, you may also make more off your investment if you sell, since collectors will usually pay a higher price for bottles that have been stored in-bond as they know the case hasn’t been opened since leaving the winery and therefore the bottles are more likely to be authentic and stored in the best conditions.
Alternatively, when you buy wine out-of-bond, you have to pay duty and VAT costs immediately and you can’t prove provenance as easily. The benefit is that you can drink your bottles and store them wherever you’d like. You’re also not required to pay a bonded warehouse any annual storage fee. In short, the upfront costs will be higher than in-bond storage because of the added taxes, but the storage fees might be lower in the future, especially if you have a home cellar.
The Cost of Storing Wine In-Bond
To decide whether the cost of storing wine in-bond is right for your collection, you should start with a tax calculation on your upcoming bottle purchases. Taxes on wine in the U.S. are about 6 percent of the cost of sale, on average, depending on the state in which you reside. For wine that you need to ship into the U.S. from another country, add another $2 for every liter of wine; each full case will cost you about $18 in duty tax. Wine bought in the EU will cost even more in VAT, an average of 20 percent of the total sale. In this scenario, a $1,500 case of wine could cost as much as $300 more.
Once you have an estimated tax cost for your purchase, determine whether that cost is higher or lower than the cost of bonded storage. Most bonded warehouses charge anywhere from $9 to $25 per year, although this cost varies depending on the warehouse and the number of bottles you store. Generally, the more bottles you store, the lower your costs will be per bottle. First, ask for an accurate fee estimate from the bonded warehouse that you want to use, then decide how long you want to store your bottles before drinking or selling them. Multiply the annual cost of storage by the number of years you need to store your bottles, then compare that number to your estimated tax number. If the taxes are higher than the storage costs, you should store in-bond without question.
The Cost of Storing Out-of-Bond
What if your taxes are less than the cost of storing wine in-bond? You might consider out-of-bond storage instead, although that will depend on where you see your collection going over the next 10 years. Your out-of-bond storage costs will include the tax amount you calculated above, but it will also include the cost of either professional storage or home cellaring. Some of the best storage warehouses will charge you less than 1.5 percent of the total value of your bottles. The cost of this storage method is usually slightly lower than the cost of storing in a bonded warehouse. As for a home cellar, you simply pay for the cost of power and maintenance. Generally, the longer you plan on storing your bottles, the more benefit you’ll get from storing out-of-bond vs. storing in a bonded warehouse.
Picking the Right Option for You
For most collectors, taxes will be less than the cost of long term storage. In this case, the decision to store in-bond vs. out-of-bond comes down to what you plan on doing with your bottles over the next 10 years. Collectors who want to resell their bottles for a profit later would be wise to invest in bonded storage because they can avoid paying taxes entirely. As long as their bottles stay in the warehouse, and they sell those bottles under bond, they make pure profit, minus only the cost of storage. If they had chosen out-of-bond storage, they would have paid taxes plus the costs associated with out-of-bond storage or home cellars. Additionally, wine bottles usually sell for a higher price when they’re under bond because they have proof of provenance.
Collectors who plan on drinking their bottles should opt for out-of-bond storage instead. The moment a collector takes a bottle out of the bonded warehouse, he has to pay taxes. In this case, it’s better to get the taxes out of the way from the start and store with a more reasonably-priced warehouse than to spend more money on bonded storage and still pay taxes later. You’re not selling your bottles, so provenance isn’t a major concern for you. Out-of-bond storage gives you more freedom to make the choices that you want for your collection, and allows you to enjoy your bottles at your leisure.
Whether you are starting your high-end wine collection or adding to an established portfolio, Vinfolio is your partner in buying, selling, and professional storage. Contact us today to get access to the world’s best wine.