Our friends at Kinsip Distillery in Prince Edward County and the Ontario Craft Distillery’s association are working to reduce the taxes on craft spirits in Ontario. To support their efforts, I thought I would write about Dairy Distillery’s experience and how a tax relief would help us grow even faster.

When I started Diary Distillery, I was prepared for a long road to profitability. While the retail price of a bottle of spirits looks attractive, once you remove the excise tax and LCBO markup, there’s not much left.  A $36 bottle of Vodkow (750ml) sold at the LCBO gets us $9.34. From that, we have to cover the cost of ingredients, manufacturing, packaging and marketing. I was encouraged when in 2017, the Ontario government allowed distillers to sell from their distillery retail stores.  Rather than applying the LCBO markup, the government introduced a new Spirits Tax. While the Spirits Tax is an eye watering 61.5%, it allows us to keep $17.09 from a $36 bottle of Vodkow we sell from our distillery.  

When compared to the taxes paid by Ontario VQA wineries, the new Spirits Tax puts an unjust burden on Ontario craft distillers.  We pay $10.51 of Spirits Tax on $36 bottle of Vodkow sold from our distillery. That’s $35.03 per liter of absolute alcohol. To compare apples-to-apples, we must use the amount of absolute alcohol in a bottle.  That’s the “sin” being taxed. A $36 bottle of Vodkow has 300ml of alcohol. That’s $120 per liter of absolute alcohol. A 750ml bottle of wine has 90ml of alcohol. To have the same alcohol cost as a bottle of Vodkow, we need to price the bottle of wine at $10.81.  The provincial wine tax on a $10.51 bottle of VQA wine is $0.52 or $5.78 per litre of absolute alcohol. 


Bottle Volume


Volume alcohol

Tax / Litre of alcohol

Ontario VQA Wine





Ontario Spirits





The tax per litre of alcohol in spirits is 7X more than VQA wine.  While a bottle of spirits has more alcohol than a bottle of wine, it’s recommended serving size has the same amount (i.e. the alcohol in a 5oz glass of wine is equivalent to 1.5 oz of spirits). So it would be logical that the tax rate on the absolute alcohol in a bottle of wine or spirits be the same. 

The Ontario Craft Distillers Association is advocating tax parity with VQA wine.  I suggest being more specific and updating the Ontario Spirits Tax to tax the absolute alcohol in spirits.  Like the Federal excise tax, spirits with a higher alcohol content would be taxed more than those with less (i.e. a vodka vs a cream liquor).  To be fair to distillers, the provincial tax rate on absolute alcohol should match that of VQA wine (i.e. $5.78 per litre of absolute ethyl alcohol).  

Tax parity with VQA wine would make Dairy Distillery profitable 18-months ahead of plan. This would allow us to add 7 new full-time staff to expand more quickly. Tax relief for craft distilleries has created a boom in employment in the United States where craft alcohol generated the third largest number of manufacturing jobs last year. Craft distilleries don’t have the scale of industrial producers so we employ a lot more people per bottle produced.  Providing craft distillers tax parity with VQA wine would spur job creation. Just like small businesses are tax less than large ones, craft distilleries should be taxed less than large industrial ones 

Dairy Distillery and I support the Ontario Craft Distillers efforts to seek fair taxation for our industry.  If you would like to support us and Ontario Craft Distilleries, please sign this petition:


Thank you,

Omid McDonald


Dairy Distillery


  • David McDonald said:

    Ontario taxes are out of line with other provinces and the USA. Lower taxes would allow great ideas like the Dairy Distillery to get traction before some US competitor copies it and pushes it out of the market.

    February 20, 2020

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