The federal excise tax on sparkling wine is $3.40 per wine gallon, the highest rate in the wine category. Artificially carbonated wine is taxed at $3.30, and most still wine at $1.07. Credits under the Craft Beverage Modernization Act reduce what producers and importers actually pay, cutting the first 30,000 gallons by $1.00 per gallon, but sparkling wine still costs more than twice what still wine does after every credit is applied.1Office of the Law Revision Counsel. 26 USC 5041 – Imposition and Rate of Tax
What Counts as Sparkling Wine
Classification turns on one number. Wine with no more than 0.392 grams of carbon dioxide per 100 milliliters is still wine. Anything above that is either sparkling wine or artificially carbonated wine, and which one depends on how the CO₂ got there.1Office of the Law Revision Counsel. 26 USC 5041 – Imposition and Rate of Tax
If the carbonation comes from natural fermentation, the wine is sparkling. If CO₂ is injected or mechanically added, it’s artificially carbonated. The two rates are close, but the gap between either of them and still wine is what stings. A producer who moves from still to sparkling production sees the per-gallon tax roughly triple.
The Three Rates
- Sparkling wine (naturally occurring CO₂ above 0.392 g/100 mL): $3.40 per wine gallon
- Artificially carbonated wine (injected CO₂ above 0.392 g/100 mL): $3.30 per wine gallon
- Still wine, 16% ABV and under: $1.07 per wine gallon
Every gallon a winery produces is measured against the 0.392-gram threshold to determine which rate applies.2Alcohol and Tobacco Tax and Trade Bureau. Tax Rates
Craft Beverage Modernization Act Credits
The Craft Beverage Modernization Act layers a tiered credit on top of the statutory rate. The credit applies to all wine, including sparkling, based on annual production or import volume:
- First 30,000 wine gallons: $1.00 per gallon
- Next 100,000 wine gallons: $0.90 per gallon
- Next 620,000 wine gallons: $0.535 per gallon
For a domestic sparkling wine producer, that puts the effective federal excise tax at $2.40 per gallon on the first 30,000 gallons and $2.50 on the next 100,000. Meaningful savings, but still well above the effective rate on still wine.1Office of the Law Revision Counsel. 26 USC 5041 – Imposition and Rate of Tax
Credits on Imported Sparkling Wine
Foreign producers can assign their CBMA benefits to U.S. importers, and the credit tiers match the domestic ones: $1.00 on the first 30,000 gallons, $0.90 on the next 100,000, and $0.535 on the next 620,000. The foreign producer must first obtain a Foreign Producer ID from the TTB and submit the assignment electronically, naming the importer, the product classification, the credit tier, and the quantity.3Federal Register. Implementation of Refund Procedures for Craft Beverage Modernization Act Federal Excise Tax Benefits
Assignments can be submitted as early as October 1 of the prior year and must be filed by March 31 of the year following the calendar year the benefits cover. Once made, an assignment cannot be revoked unless the importer rejects it. Foreign and domestic producers under common ownership are grouped together against the volume limits, so a corporate group can’t multiply credits across subsidiaries.4eCFR. 27 CFR 27.262 – Foreign Producers Assignment of CBMA Tax Benefits
Hard Cider Is Taxed Separately
A fizzy product does not automatically pay the sparkling wine rate. Hard cider qualifies for its own, much lower rate if it stays under 8.5% alcohol by volume and no more than 0.64 grams of CO₂ per 100 milliliters.5Alcohol and Tobacco Tax and Trade Bureau. Cider FAQs That carbonation ceiling sits above the still wine threshold but below what most sparkling wines carry.6eCFR. 27 CFR Part 24 Subpart P – Eligibility for the Hard Cider Tax Rate
Cross either the 0.64-gram CO₂ line or the 8.5% ABV limit and the product jumps straight to the full sparkling wine rate. Cider makers working near those numbers need tight controls to avoid an unexpected reclassification.
When the Tax Is Triggered
For domestic sparkling wine, tax attaches when bottles are removed from a bonded wine cellar or winery for sale or consumption. Wine still in tanks, cellars, or resting on lees inside the bonded premises has no tax liability yet. For imported wine, the tax is assessed at the point of entry into the United States.
Wine Lost in Bond
Sparkling wine breaks. Secondary fermentation puts real pressure on bottles, and federal regulations let producers claim tax relief on wine lost, destroyed, or damaged while still in bond rather than paying excise tax on product that will never be sold. Losses from fire, theft, or other extraordinary events must be reported immediately; routine breakage and evaporation are reported with regular bonded premises operations.7eCFR. 27 CFR 24.65 – Claims for Wine or Spirits Lost or Destroyed in Bond
A claim must state the cause, the original volume, the tax class, and the quantity lost. Theft claims carry a heavier burden: the producer has to show the loss did not result from negligence or collusion by the proprietor, employees, or anyone else in the chain of custody. Any insurance or indemnification received for the loss must also be disclosed.
Exports Leave Tax-Free
Sparkling wine removed from bond for export leaves without federal excise tax attached. The same treatment covers use on vessels and aircraft, transfer to a customs bonded warehouse, and deposit in a foreign-trade zone pending export.8eCFR. 27 CFR Part 24 Subpart N – Removal, Return and Receipt of Wine
If the tax has already been paid before the wine ships out, the exporter can claim a drawback on TTB Form 5120.24. The claim requires a Certificate of Tax Determination showing the original payment plus proof of exportation. Any filer other than a bonded wine cellar proprietor needs a Wholesaler’s Basic Permit, and containers must be marked “Export” before removal.9Alcohol and Tobacco Tax and Trade Bureau. Wholesalers Exporting Tax-Paid Wine
Filing and Payment
Excise taxes are reported on TTB Form 5000.24. Filing frequency depends on total annual tax liability across all alcohol categories:
- Annual filing: liability of $1,000 or less in the current and preceding calendar year
- Quarterly filing: liability of $50,000 or less in the current and preceding calendar year
- Semi-monthly filing: liability above $50,000
Producers owing $5 million or more in a calendar year must pay by electronic funds transfer. Most other filers use Pay.gov. Returns are due even when no tax is owed for the period.10Alcohol and Tobacco Tax and Trade Bureau. Due Dates for Tax Returns
Penalties for Getting It Wrong
Consequences depend on intent. Fraudulent violations, where a producer deliberately tries to avoid the tax, carry fines up to $5,000, imprisonment up to five years, or both, plus forfeiture of the products and materials involved. Non-fraudulent violations, such as filing errors or missed deadlines without intent to defraud, carry fines up to $1,000, imprisonment up to one year, or both.11Office of the Law Revision Counsel. 26 USC 5661 – Penalty and Forfeiture for Violation of Laws and Regulations Relating to Wine
For sparkling wine producers, carbonation records are the pressure point. A filing error is one problem; a pattern of understating CO₂ levels to pay the still wine rate on sparkling product is another. Persistent noncompliance can also cost you your TTB operating permit, which ends production entirely.