Canadian businesses generally face stiffer taxes than those elsewhere in the world, but taxation is taken to a whole other unprecedented level for the cannabis industry. Excessive cannabis tax in Canada has limited industry revenue, forced many companies into insolvency, caused losses of many thousands of jobs, and ensured that the illicit market is flourishing.
Why are taxes so burdensome for cannabis businesses in Canada? On top of regular business taxes and sales tax, licensed producers are burdened with a cannabis excise tax that, in some cases, exceeds 100% of a farmer’s annual revenue. Yes, you read that right: cannabis excise taxes alone can wipe out a cannabis farmer’s entire income.
Combined with markups from provincial distribution boards (like the BC Liquor Distribution Board and Ontario Cannabis Store) that are actually additional taxes in disguise, the industry is drowning. At CertiCraft, we think it’s time to seriously rethink cannabis tax in Canada.
In the wise words of Dan Sutton—CEO of Tantalus Labs—during a 2021 conversation with Forbes: “No other nation or state taxes cannabis so substantially, and we do not tax any other product in Canada to this extreme.” He put it bluntly, and he speaks the truth.
So, let’s take a look at this tax burden by the numbers. According to the September 2025 CCX Canadian Bulk Wholesale Cannabis Pricing Report, the average Q3 wholesale price of dried cannabis flower was $1.32 per gram. Outdoor-grown cannabis during the same period hit highs of just $0.42 per gram.
What is the tax on cannabis in Canada? Why don’t we follow a gram of cannabis through the supply chain in British Columbia to find out where all the money goes? For simplicity, we’ll say the price of our gram of flower was $0.87 (the average of indoor and outdoor prices in September 2025).
Raw material sold from the source for just $0.87 per gram ends up selling for 591% more, with more than 35% of the final price going to the government. That’s absurd.
Who profits from the current market structure in Canada?
The government takes almost triple what the farmer earns and more than what both the processors and retailers make. And yet, the farmer is the one putting in eight months of work: planting, tending, and harvesting. Processors and retailers handle far less, and the government? Well, they’re just collecting fees.
Yet, the worst part is that the $0.87 per gram that the farmer makes from the original sale isn’t net profit. They still have to pay for labour, equipment and facility costs, electricity, and licensing fees. With this context, is it any surprise so many cannabis businesses are struggling?
If you think it's just small-scale micros who are feeling the squeeze from cannabis taxes in Canada, think again. Even established companies with huge consistent sales volumes like Tantalus Labs are being forced to shut down, entirely due to the taxation framework.
Despite economies of scale, Dan Sutton told us in episode #12 of the State of Craft that Tantalus faced a Cannabis excise tax bill that was three times the total salary of their 65-person team. This was a major factor in their insolvency filing, and they’re far from alone.
We later spoke with Jonathan Wilson of Crystal Cure in episode #42 of State of Craft. He told us about making the difficult decision to shut down his business in 2024. As he explained, it wasn’t because his passion was gone; it was because the math just didn’t work anymore. He could’ve stayed in the game and continued to lose money, but from his experience, the system was designed to fail. To the surprise of many, he made the hard call to pivot and use the story as a warning to the rest of the industry.
These are just two cases among many showing how Canada’s excessive cannabis tax system breaks businesses. The truth is that the cannabis industry’s insolvency rate is much higher than that of other sectors.
In 2022, nearly 2% of cannabis businesses went bankrupt. But, as we calculated in our white paper, The Dire State of Craft Cannabis in Canada, this rate of insolvency is stark in comparison to the broader business world which saw an insolvency rate of just 0.0004%. That’s a difference of four orders of magnitude!!!
High business failure rates mean fewer jobs, lower tax revenue, and a resurgence of the illicit market. When legal prices skyrocket because brands are buried under taxes, consumers turn to cheaper alternatives, reigniting unregulated sales.
As if excise duties weren’t bad enough, cannabis businesses also face hidden markups and fees that operate like an extra layer of cannabis tax in Canada. In the example above, that's the 15% “proprietary fee” charged by the BCLDB. And every province (except for Manitoba & Saskatchewan) have similar markup fees.
In the industry, there are strong opinions that these hidden fees breach the original agreement signed between the provinces, territories, and the federal government.
Let’s review:
The Federal-Provincial-Territorial Agreement on Cannabis Taxation was created in 2018. Its main goal was to coordinate and limit taxation as well as to prevent unfair markups. The provinces also agreed to keep their fees low, just high enough to cover reasonable costs. To quote the agreement, “where provinces and territories impose a cannabis-specific tax, margins and/or mark-ups may be applied to cover operating costs and capital expenses, and generate a normal rate of return.”
These measures were, in part, designed to keep taxes low enough that prices in the legal cannabis industry could compete against those in the illicit market. But since the agreement was signed, most provinces and territories have imposed additional cannabis-specific taxes and fees.
Back to the BC example again, the BCLDB charges a 15% proprietary fee (a tax in everything but name) for doing literally nothing, as it applies to direct delivery and farm-gate products. Should a producer want to take this on in court, this proprietary fee would almost certainly be found to be in breach of the 2018 agreement. The fee doesn’t cover operating cost or capital expenses. It is entirely a profit for the government.
So, who is to blame for this quagmire? Government-run monopolies are profiting from cannabis while making zero effort to fix their inefficient business models that hurt licensed producers. If a private company operated this way, it would go out of business. Instead, the government is driving private companies that employ thousands of Canadians out of business while making millions.
The current taxation system is crippling independent Canadian cannabis businesses while handing the government massive profits. Thousands of jobs are being lost while Canada’s illicit market thrives.
The expert panel that reviewed the Cannabis Act has already identified these taxation flaws. Now it’s time to act. Saving Canada’s cannabis industry from failure in the face of over-taxation is actually quite simple:
1. Revise the Cannabis Excise Tax in Canada to a percentage-based model. For dried cannabis flower, literally one word needs to change in the tax framework to achieve this: instead of the current “greater of $1 or 10%,” use “lesser of $1 or 10%.”
2. Require provincial distribution boards to use a “cost plus” model for markups. This means their markup would consist of the actual costs that they incurred plus a small fee (e.g. 1% of product price). This would eliminate the illegal hidden taxes currently plaguing most provinces.
It’s time for a fair, sustainable framework that allows cannabis businesses to compete, grow, and contribute meaningfully to Canada’s economy.
Ready for a deeper dive into solutions rooted in this reality? Please read our thorough white paper, The Dire State of Craft Cannabis in Canada.