U.S. wine sales taxes are usually lower than they are in European countries, but wine prices depend entirely on the quality of the wine. Photo Credit: Flickr CC user David Dugdale
If you’ve ever traveled to another state or another country, you’ll find that the wine prices vary dramatically. Living in a state like Oregon, you’ll be used to paying zero sales tax on wines, but when you take a trip down to California for the weekend, you might find that those same wine bottles cost about 8 percent more. What determines wine prices around the world? It depends on tax laws, the cost of shipping and the quality of the wine. Some U.S. wines will be cheaper than global wine prices, while others will be more expensive. However, one thing never changes: the finest wines will almost always cost more than their low-quality peers, regardless of the country of origin.
Consider Distribution
To understand the difference between global wine prices and U.S. wine prices, you need to learn about the distribution system. Many wineries around the world focus only on growing the grapes, not shipping wine out to buyers. Wine distributors handle all of the complicated shipping costs and other marketing decisions after the wine has been bottled. First, distributors buy wine from a winemaker at a set price, which is usually about half of what the bottle will sell for on the market later. Next, distributors sell these wines to stores or retailers for a slight price markup. If the distributor bought a bottle for $25, they might sell it to a retailer for $30 or $35 to make a profit. From here, it’s up to the retailer to determine a price for the wine. High-end stores dealing in rare wines might double the price, while other retailers might keep the price close to wholesale value. Stores like Costco, that make additional money from membership fees, are able to charge lower prices for wine, but none of these wines are particularly rare or collectible.
Consider Shipping Costs
Wines being made and shipped within the U.S. are generally cheaper than those being imported from other countries, however, it depends on the wine shipping laws in your state. Buying wine from a state like Utah will mean dealing with stricter alcohol shipping laws, whereas buying a wine in California is easier, because the state has a huge wine market.
By contrast, global wine prices change when the wine is shipped to the U.S. Exporting wines from Europe to the U.S. can cost at least $11 per bottle, on average. For this reason, the cost of the wine is driven up by the time it gets to a U.S. retailer. A wine that would have cost you $30 in Spain will now cost you more than $40 to pay for the shipping fees. In general, global wines being sold in the U.S. will cost more than they would in their native countries, and vice versa for U.S. wines being sold globally.
Consider Wine Tax Laws
Knowing that it costs more for retailers to ship wine from other countries into the U.S., you might be tempted to buy wine directly from the country of origin when you visit on vacation. However, be aware that tax laws impact the price of the wine, even if you buy it directly from a winery in-person. When you buy wine in another country, you can take a certain amount of it with you in your baggage, but you’ll need to pay anywhere from $25 to $50 in duty taxes on those bottles, depending on their original worth. Having wine shipped via a shipping company will cost you as much as $200 per case, making the baggage option the cheapest.
Taxes don’t just apply to shipping duties either; state sales taxes impact both U.S. wine prices and global wine prices. In the EU, the excise rate for wines sold in EU countries is about 20 percent of the wine’s original cost across the board. Some countries charge slightly more or less, but all stay within that 15 to 20 percent range. In the U.S., the sales tax rate depends on the state in which you buy the wine. On average, taxes range by state from about 4 percent to 7 percent of the wine’s sale. Some states, like Oregon and Montana, don’t charge a sales tax at all, while others, like Kansas, charge as much as 8 percent. Overall, U.S. wine sales taxes are lower than they are in Europe, but the final cost of the wine still depends on exporting fees and quality. The cheapest wines for U.S. citizens to buy are usually U.S.-made wines from states that have low sales tax rates. The most expensive wines for U.S. citizens are those that have been exported from Europe under high tax rates.
Consider Quality
There’s a reason why Lafite wines sell for thousands of dollars, while Two Buck Chuck sells for less than $5, and it has everything to do with the soil. The maker of Two Buck Chuck, Bronco Wine Company, produces 18 million cases of wine every year from vineyards in California’s Central Valley. The wines are so common that they’re worth next to nothing on the market. By contrast, France’s Lafite produces less than 100,000 cases of wine every year, focusing on the soil and high-quality production above quantity.
How do U.S. wine prices stack up against global wine prices in terms of quality? In recent decades, fine wines made in California’s Napa Valley cost just as much as some of the top estates in French regions like Bordeaux because many Napa Valley winemakers focus on low-yield, high-quality wines. In the past, all U.S.-made wines were far cheaper at the wholesale level than wines from Europe, especially France. Today, with the rise of California cult wines and Oregon Pinot Noir, U.S. wines are on par, price-wise, with some of the finest wineries around the world. Region is important when it comes to cost; wines from Napa Valley sell for about 61 percent more, on average, than wines from other regions in California, which is why Napa Valley wines cost about as much as wines from Bordeaux or Burgundy. How much you pay for a wine will largely depend on its quality and rarity above all else.
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