Engine 8 Opening Delayed Again. This Time, it’s Discrepancies in the Law

This story was updated after publication to reflect information provided by the Nevada Department of Taxation.

Months of construction and city planning delays had thwarted the grand opening last fall of Engine 8 Urban Winery. Half a year later, owners Mike and Wendi Rawson were preparing for a March 16 opening day when the state threw them a curve.

A week before opening day, an officer from the Nevada Department of Taxation showed up to conduct a surprise inspection. The department ordered the Rawsons to return a shipment of wine they’d accepted 24 hours earlier, and to relinquish their on-premise license to the City of Sparks.

The couple believed they’d done everything by the book. But they learned this week that Nevada’s winery statute leaves room for interpretation. Their pre-opening snafu has also revealed flaws in the system of multi-jurisdictional licensing the state’s wineries must navigate.

“It’s very vague and misleading,” Rawson said of the state law. Story continues below…

On Thursday, Engine 8 accepted a bond-to-bond transfer of wine in bottles. Bond-to-bond means that both entities – the point of origin and the destination – are legally approved to store a taxable alcoholic beverage, and account for quantity that was transferred. Believing they could legally take possession of the wine, the Rawsons put it into a bonded storage area inside the winery.

“Because otherwise, it would be sitting out in the parking lot,” Wendi Rawson said.

The couple expected the bottled wine would fill the gap between opening day and the day they’ll be ready to offer wine made on site. Engine 8 has not yet made wine because its city and state manufacturing licenses are pending.

On Friday, an inspector from the Department of Taxation appeared at the winery and threatened to confiscate the wine shipment. In subsequent phone conversations with taxation officials, Mike Rawson learned that the state’s reading of Nevada’s winery statute differs from the Rawsons’ reading.

There would likely be no disagreement if the shipment had been delivered in barrels, rather than bottles. Rawson says he believed Engine 8 could legally cellar the wine and age it in the bottles. Taxation officials say the law allows the winery to receive bulk wine, then finish the manufacturing process and bottle the wine. But the statute does not specify the kind of container, or the size of the container the winery may receive.

“It’s a gray zone,” Wendi Rawson said.

A Department of Taxation spokesperson told Grape Basin News that state law does not permit wineries to sell wine made elsewhere, but confirmed that the winery could have accepted the shipment if it had arrived in barrels.

Complicating the transaction, the Texas supplier of the wine lacks a certificate of compliance required to ship wine to Nevada, and can’t legally do business with Engine 8.

The illegal wine shipment is not the only problem. Engine 8 was also instructed to return its license to sell alcohol on-premise to the City of Sparks, because it was issued incorrectly, Mike Rawson says.

The Sparks license raises additional questions about what, in fact, Nevada’s urban wineries are legally allowed to do. Sparks has only one license option
for wineries. It permits the sale of both wine and beer. State law, however, prohibits the urban wineries from selling beer.

Engine 8 applied to Sparks for a deli permit, Rawson said, because the winery will sell meat and cheese platters. The city has no classification for a winery with food, an apparent oversight by its business licensing department, he said.

The City of Sparks did not immediately respond to a request for clarification.

At the state level, the beer question is more vexing. Rawson would like to see the Nevada winery law amended.

“We can’t sell beer, but a brew pub can sell wine, liquor, whatever they want,” he said. “How can we be competitive with them? If a husband doesn’t want to drink wine (and the wife does), they’re not coming to our store.”

Wendi Rawson points to other confusing discrepancies that seemingly arise from Nevada’s 3-tier distribution system.

“I’m baffled,” she said. “The city manufacturing license says we can’t sell wine by the glass. But you can retail your own wine by the glass according to the state.”

The Rawsons say Nevada has acknowledged that when it comes to wineries, its jurisdictions are not on the same page. It’s been expensive and inconvenient to serve as the guinea pig, but Mike Rawson says he’s glad he could bring these problems to the surface.

“We did expose something that’s wrong, and now the Nevada Department of Taxation knows there’s some issues there,” he said. “It’s a victory.”

The couple is heartened that the Department of Taxation will expedite the process to get Engine 8 open. The Rawsons say the City of Sparks is likewise acting quickly fix the local license.

“Tomorrow, I’m sending the wine back on a truck,” Mike Rawson said. “I’m giving the bill of lading to the State of Nevada. They’re going to issue our manufacturing license. They’re going to issue Dave (the Texas supplier) a compliance license. Dave will be licensed to sell to us in about two or three days.”

“Dave” is Dave Besgrove, the principal at Winery Developers, which provides guidance and products to wineries — Mike Rawson says the company can be loosely compared to a franchisor. When the wine is received in Texas, it will be poured into bulk containers and shipped back to Engine 8, where it legally can be bottled and labeled in the winery.

“Bottom line is we could be open in 3 weeks.” Rawson said. Engine 8 will allow the public in on Saturday from 12-6, to have a look at the winery.

This is a developing story. Great Basin News will update as events unfold.