Brewery and distillery tax: four taxes on one can, filed in the right order

The stack, and what triggers each layer

Federal excise duty comes first: beer duty arises at packaging, and spirits are charged under the Excise Act, 2001 by the litre of absolute ethyl alcohol, with returns filed under your licence on a fixed calendar whether or not anything sold. Ontario adds its own alcohol tax layer on top for many sales channels, with reduced treatment for smaller producers. Then comes the part that surprises new owners: HST applies to the duty-included price. Excise is a cost buried in your sticker, not a separate line the customer pays, so the 13% at the taproom till is calculated on a number that already contains federal duty. Income tax closes the stack at year-end on the T2. Four layers, four returns, one production record they all trace back to.

One sale, four filings

Which Ontario sales attract which provincial rate depends on channel, product form, and your producer status — the details move with provincial budgets, so we map your specific channels once and revisit the mapping when rules change rather than trusting last year's codes.

Small-producer rates and credits: real, but confirm before you price

The federal excise system charges smaller brewers graduated reduced rates on the lower tranches of annual production, which is why year-to-date packaged volume belongs in the tax file, not just the brewing software. Ontario has offered its own relief for eligible small beer manufacturers. We treat every one of these parameters as a check-before-you-rely item: eligibility tests, volume tiers, and rates have all shifted in recent budgets, and a forecast built on stale rates misprices your beer. The honest workflow is to confirm current-year figures against CRA's published excise duty rates and provincial guidance at planning time, then bake them into pricing — in that order. Related companies matter here too: production of associated producers can be aggregated for the volume tiers, so a second licence is not a second set of low-rate tranches.

DTC shipping, contract brewing, and the odd cases

Direct-to-consumer shipping turns the GST34 into a geography exercise: tax follows the destination, so a can shipped to a Nova Scotia customer carries that province's HST rate rather than Ontario's, and orders into non-HST provinces raise their own registration and markup questions we map before the web store launches. Contract arrangements complicate excise instead — when beer is brewed or packaged under contract, which licensee owes the duty depends on how the arrangement is structured and who holds product at packaging, so the contract gets drafted with the excise answer in mind rather than discovered afterward. Taproom food, guest ciders, and merch each carry ordinary 13% HST — simple individually, messy when one POS department hides all three.

A T2 that understands the brewhouse

The income tax return leans on production accounting. Duty accrued at packaging sits in finished-goods cost and must not double-count when cans sell; spirits resting in barrels are inventory for years, deductible only when sold, which makes a whisky program a tax-deferral question as much as a brand decision. On the capital side, brewhouse and packaging equipment used in manufacturing can qualify for the manufacturing and processing CCA classes rather than the default 20% equipment class — a meaningful difference on a canning line — and we document the use that supports the classification. Most craft producers also run loss years while the taproom ramps; non-capital losses carry forward up to twenty years, and we track them by year so they land against the first real profits. Add the small business deduction, owner compensation planning, and instalments, and the T2 becomes the fourth telling of the same production story. USD hop contracts, can tariffs, and TTB export questions live on our brewery cross-border tax page; the monthly excise accrual and channel margins that feed this return are on our brewery bookkeeping page.

Source: CRA — Excise duty rates.