Surviving the Excise Floor

Canada built a cannabis excise tax for a market that no longer exists. It was written when wholesale flower sold for about ten dollars a gram. At that price, the headline rate — the greater of one dollar a gram or ten percent of the selling price — meant the dollar and the ten percent were the same thing. The tax was, in effect, ten percent.

Then the price of flower collapsed. The tax did not move. And that single unchanged dollar is now quietly breaking the Canadian industry.

The floor, and why it hits the cheap gram hardest

The duty on dried flower is a floor: you pay the greater of about one dollar a gram or ten percent of your selling price. When flower was ten dollars, ten percent won, and the dollar never bit. As wholesale fell — from roughly $5.81 a gram in early 2019 to a weighted average near $1.51 by 2025, with a spot low around $1.22 — the ten-percent side shrank with it, but the flat dollar did not. So the dollar took over.

Run the arithmetic at today’s prices. A gram of commodity flower at three dollars wholesale owes the greater of one dollar or thirty cents — so it owes the dollar. That is a third of the sale price gone to excise before packaging, testing, shipping, or a single other cost. At the ~$1.51 weighted average it is two-thirds; at the ~$1.22 autumn-2025 low it is over eighty percent. The cheaper your flower, the harder the floor lands — which is exactly backwards from how a tax meant to scale with value should behave.

This is not a rough patch. It is the structure.

The numbers downstream of that floor are no longer subtle. Excise now consumes roughly a quarter of licensed-producer net revenue — about 24% in 2024, up from around 11% in 2019 — and closer to a third measured on production alone. Only about one in seven licensed producers actually turns a profit. Licensees owe the Canada Revenue Agency hundreds of millions of dollars in excise, with tens of millions already deemed uncollectible. In 2026 the insolvency wave became impossible to ignore: six cannabis companies entered creditor protection in the first half of the year, versus three in all of 2025 — CanadaBis, THC BioMed, and the Simply Solventless group among the operators seeking protection while owing excise they could never pay.

None of this is a failure of effort. It is a tax that takes its cut off the top of every gram regardless of whether the gram made money — and at commodity prices, most grams do not.

And it is not an oversight waiting to be fixed. The federal government reviewed the flat floor and, in Budget 2025, left it exactly where it is — no easing, no move to a percentage-only rate. The structure is not a rough patch. It is the settled design, and it is working as designed on the cheap gram.

The way out is not more cheap grams. It is a different gram.

Here is the trap inside the trap: the instinct under margin pressure is to sell more volume. But every additional commodity gram carries the same flat dollar. The floor can be escaped only by changing what the gram becomes. Take the same trim and biomass that would have left the door as cheap flower and refine it into premium solventless concentrate. Two things change at once.

First, the tax basis changes. Cannabis extracts — hash, rosin, oils — are not taxed on the flat per-gram-flower floor at all; they are taxed on a different basis, a rate per milligram of THC. The specific mechanism that punishes the cheap flower gram simply does not apply to the concentrate.

Second, and larger: premium solventless sells for a multiple of commodity flower — on the order of four to five times a commodity gram in the domestic market, and well beyond that into medical and European export, where the commodity floor is collapsing while premium supply still commands its price. Whatever duty the concentrate carries is a small slice of a far larger sale. The gram the floor was eating becomes the gram that pays for the operation.

Why this has been out of reach — and why it isn’t now

If the answer were simply “make premium hash,” everyone drowning under the floor would already be doing it. The reason they aren’t is that the conventional route to solventless — ice, bags, long manual runs, skilled hands, and the capital to build a wash room — is its own cost centre, and it scales sideways: more output means more people and more ice, never a lower cost per gram. Trading the excise trap for a labour trap is no rescue.

That is the barrier Abzu removes. Abzu Refinery turns trim and biomass into graded, documented solventless concentrate in a closed, no-ice, no-bag, single-operator process — roughly 60% less labour and 75% less water than the bag method, recovering better than 90% of available trichome, with no capital required to add the line as a service on an existing licence. It makes the high-value-per-gram product class reachable for exactly the commodity producer the floor is crushing. The biomass that loses money as flower becomes the concentrate that escapes the floor — without trading one trap for another.

The excise floor punishes low value per gram. The entire point of refinement is to raise it.

How this is figured. The duty described is the combined federal and provincial excise on dried flower — the greater of roughly $1.00 a gram or 10% of the selling price (Excise Act, 2001; canada.ca). Cannabis extracts are taxed on a different basis, a rate per milligram of total THC, so the comparison above is about value per gram, not a like-for-like duty rate. Wholesale price points and industry figures are public market data (StratCann / Canadian Cannabis Exchange; Deloitte, 2025; StratCann from federal OSB CCAA records) and illustrate the commodity-flower trap specifically; confirm your own position against your excise filings. This is industry analysis, not tax advice.