I too contacted the CSA and am awaiting a reply. I live in CA but nowhere near SF. Like I said earlier it seems like such a great way to get homebrew to the people and enable us to brew more. Like most homebrewers I have a ton of recipes/styles that I want to try, not to mention refining favorite recipes. I really do enjoy brewing beer more than drinking beer. I thought I read on one of the brewing law blogs that homebrewing has never been litigated. Does that mean that no one has ever been fined/arrested for violation of homebrewing laws?
As to the tax issue: yes, you have to report bartering, but that is up to you to do and not the corporate entity helping you engage in bartering. If the entity is a true non-profit, it is exempt from taxation. And the “income” you gain from an exchange like this is likely no greater than the cost, which would mean you wouldn’t actually have to pay any additional taxes.
As to the likelihood of the CSA being prosecuted: San Francisco doesn’t have resources to prosecute this kind of thing, as far as I know - and it would be a hugely unpopular move for the police or the DA to go after a CSA of any kind, or homebrewers, for that matter. The SFPD condones obvious illegal and even underaged drinking in Dolores Park for this reason. “Illegal” on the books just doesn’t always mean illegal in San Francisco.
I haven’t done a complete read-through of the IRS regulations on the subject however I believe that unless the barter exchange meets certain exemption criteria they do need to file a 1099-B information return with the IRS, whether they are a for-profit or not-for-profit entity.
Also, bartering income would technically reported based on the fair value of services received, not the net profit on the transaction. You would be paying taxes on the fair value, not the net.
If anyone wants to take the time to read through everything the IRS has on it here’s a good resource:
http://www.irs.gov/businesses/small/article/0,,id=187920,00.html
This was something I wrote in the article on the homebrewing exemption statute for Pint of Law. It doesn’t mean that no one has ever been fined/arrested for engaging in conduct outside the scope of the exemption benefit. What it means is that if anyone has ever been fined/arrested, they have not challenged those penalties in court. I have no information regarding whether and how frequently the TTB or state agencies have actually targeted homebrewers.
There is a certain Pro-Brewer who has told the story of years back making 1.5 barrels at a time, and having a group that would “buy” the beer (not sure what he said the payment scheme was). He was having fun until the Cease and Desist letter came from the BATF, also asking for back taxes to be paid. He decided to go Pro then, and be legit.
If you get big enough, you will draw attention.
There was a guy in AL last year who was busted and prosecuted for homebrewing.
I remember that one. He also did distillation, right?
Edit - There was also the guy from Huntsville that was in the LA Times article. He was visited by the authorities and had to sign some sort of documnet saying he would stop, if I remember right.
Yes, you have to file something, but you are still basically exempt from taxation in the end.
Your income reported is the amount of services received, but you can deduct your tax basis (essentially the same as cost) in the transaction. So you are reporting everything as your income, but you are only paying tax on (essentially) the net income. It is not fundamentally different than exchanging money for items of value. AIt’s like when an individual person sells his used car, he has to report the money he makes on the deal as income, but he can also deduct the cost of that car (less depreciation, which he may have been deducting all along).
But this is all beside the point. The fact that there are potential tax consequences of trading homebrew for ingredients and feedback does not necessarily make it “liquor sales.” You give them a recipe, they give you ingredients. Then you give them beer and they give you back other peoples’ beer. I don’t think the transactions described by this “donations not required” CSA would be considered a sale in California. My biggest concern would be that the system would eventually be unable to sustain itself because of too many free riders.
Here is an article I posted earlier today about legal issues I believe would affect the homebrewing CSA model.
Nice article. I think that pretty much sums it up. I’d like to see the laws regarding this relaxed but I’m not holding my breath. Maybe once the AHA finishes up the state by state war to completely legalize homebrewing this might be a good issue to devote some supportive resources to.
It was an excellent article! However I hope the Homebrew CSA’s continue to gain steam despite them probably being illegal. Sometime the only way for laws to change is to show that everyone is all ready doing it and that no one is really interested in enforcing current law. I can equate it to the federal highway speed limit increase from 55 to 65 a few years ago. They did it because nobody was driving 55 and everybody was driving 65. The cops weren’t busting people for driving 60, or even 65 mph. Likewise with homebrewing in Alabama…does anybody really believe that there aren’t homebrewers in AL because it is illegal?
It appears the money they would get out of you has to be more, or at least close, to the expense of going after you.
I do live in SF, and this is an interesting turn of events, because SF is a case of a city that does not have a homebrew club and yet has many homebrewers. (There was a club, once upon a time, but it seems to have disappeared.) This CSA feels like an interesting way to meet other brewers; it feels, in fact, like a homebrew club in many ways, except less emphasis on the meeting and more on the sharing. I really liked the homebrew club I briefly belonged to in Florida before we suddenly moved back to CA, and I miss the camaraderie, advice, beer-tasting, etc. The Bay Area has some very good homebrew clubs, but SF proper doesn’t, and if you live in the area you know that traffic and bridges make a seemingly short distance pretty challenging to get to.
I won’t comment on the legality (I even have an IANAL button somewhere), except to note that the first homebrew I ever had was shared with me on the dunes of SF’s Ocean Beach several years before homebrewing became legal… I didn’t know at the time that it was illegal, but I do have to note that it was hardly the only illegal activity known to happen in SF at the time; if anything, in those days beer was considered kind of “square.”
That’s not really how law enforcement works.
Question, with the usual IANAL, YANAL disclaimers: if the “CSA” reorganized where there was no cash involved except for membership dues, and it focused on sharing beer among homebrewers, would that meet the standards of a homebrew club?
I don’t know that they want to do that or have considered doing that (I did write them to say I homebrew and am interested in participating), but to me the big appeal is connecting with other homebrewers, not sharing my homebrew with people who don’t homebrew at all. I’m just curious why they went to the step of creating a “CSA” rather than a club primarily by and for homebrewers.
It’s funny because that it is NOT a homebrew club is exactly what is so appealing to me. I belong to a homebrew club and it’s great but c’mon I will be the first to admit that we geek out! Get us together and we start talking about keezers, yeast pitching rates, hop varietals, etc. The funny thing is that my club is waaaaay laid back compared to some clubs that I have heard about. I actually enjoy sharing my beer more with non-homebrewers. They are always surprised…“Wow!! you brewed this yourself?” kind of thing. I also believe that if you only share your beer with other homebrewers you are just “preaching to the choir”. That is why I LOVE the CSA model. It gets homebrewed beer into the hands of the public who might have never had a handcrafted homebrewed beer before.