How to Start a Distillery in Canada

The short answer

A distillery is a licensed manufacturing business that happens to sell spirits. The licences come before the spirits: a federal spirits licence from the Canada Revenue Agency, a provincial manufacturer licence from the provincial liquor regulator, and zoning and municipal permission for the exact site. The stills, the store, and the sales channels come after. A distillery that starts producing before the licences arrive, or that signs a lease before the licences are in hand, is spending money it cannot earn back. Get the federal licence, the provincial licence, and the site permission in that order, then produce. This guide covers the licensing process only. It gives no production advice beyond the licensing steps, and it is not legal advice: the regional excise office and the provincial regulator are the sources for an application.

Step 1: Get the federal spirits licence first

This step is an administrative process, not legal advice. Under the Excise Act, 2001, the Minister may issue a spirits licence authorizing a person to produce or package spirits, and producing or packaging spirits without one is prohibited, subject to the narrow exceptions for bottle-your-own packaging and production for analysis. Apply on form L63A, Application for an Alcohol Licence or Registration. A new application asks for a business overview describing the business, locations, and activities, and an operating plan describing day-to-day operations, plus a description of the premises on form E110. The form also asks whether the eligibility criteria in the Regulations Respecting Excise Licences and Registrations are met. Answer that eligibility check honestly before filing: a licence application that fails it goes nowhere.

Financial security comes with this licence and with no other alcohol licence in the same way. Security is required for a spirits licence only, and it must be provided before the licence is issued. The Canada Revenue Agency states that most licensees must provide security of at least $5,000. The form points applicants to memorandum EDM2-2-2 for the calculation, and the exact amount turns on the operation. Treat the $5,000 figure as a floor. Budget the security only after the regional excise office confirms the calculation for the planned production, and keep the security in place for as long as the licence runs.

A spirits licence is effective for the period stated in the licence, to a maximum of two years. It will not be renewed automatically. A renewal application must be sent at least 30 days before the expiry date. Note that date at the same time the licence issues: a lapsed licence stops production, and a renewal filed late leaves a gap no sales channel can fill. Licensees file excise duty returns on form B266, Excise Duty Return, Spirits Licensee, and must keep the production and inventory records the returns rest on.

Step 2: Get the provincial manufacturer licence second

The provincial licence authorizes keeping and selling spirits under provincial liquor law. In Ontario, it comes from the Alcohol and Gaming Commission of Ontario. The Commission lists three manufacturer licences to sell: winery, brewery, and distillery. A distillery licence allows a manufacturer to keep spirits with the intent to sell, or sell spirits according to the regulations. The Commission states plainly that a person cannot make alcohol with a manufacturer's licence, and that an excise licence from the Canada Revenue Agency is needed to produce or package alcohol in Canada. That is why the federal step comes first: the Ontario application asks for a copy of the federal excise licence, and a file without it is incomplete.

To be eligible in Ontario, an applicant must be 19 years of age or older, financially responsible, and conduct the business within the law and with integrity and honesty, which may include police records checks. Applicants are generally not allowed any direct or indirect financial ownership in a business holding a liquor sales licence, such as a licensed restaurant or bar. The licence is issued for a specific location, and the licensee is in charge of maintaining it.

The Ontario application is filed through the iAGCO portal. It asks for a tax compliance verification number and attestation through the Ministry of Finance portal, a summary of the business plan with a full description of the products to be manufactured on site, floor plans showing the complete layout of the manufacturing facility including equipment and any proposed retail store at the production site, and how the product will be sold, a copy of the federal excise licence, written proof of Liquor Control Board of Ontario product testing, a copy of the business name registration, and entity and personal disclosure, including anyone holding 10 percent or more of the shares. The distillery licence fee in Ontario is $2,520 for two years and $5,040 for four years. Other provinces use their own liquor regulators with their own classes, fees, and conditions, so get the current requirements for the province where the distillery will sit in writing.

Step 3: Clear zoning and municipal rules for the exact site

A distillery is an industrial use, a storage use, and, with a store on site, a retail use, all on one site. Check zoning for manufacturing and for retail sales, building and fire permits for the stills, tanks, and storage, and municipal licence rules for the store. Ask about deliveries, truck access, wastewater, odour, noise, and hours, because distilling produces steam, spent grain or wash, and truck traffic, and neighbours notice all three. A site that allows manufacturing but not retail sales cannot host a store, and a site that allows retail but not manufacturing cannot host a still. Get the zoning and municipal answers in writing for the exact address before signing a lease or ordering equipment. A lease signed on a verbal assurance is a cost with no revenue behind it if the written answer goes the other way.

Step 4: Register the business and set up excise duty and tax accounts

Register the business name in the province where the distillery sits. Get a Canada Revenue Agency business number through Business Registration Online, which now requires sign-in through a CRA account, and open the program accounts the business needs. Register for GST/HST when taxable supplies pass $30,000 over four consecutive calendar quarters, or $30,000 in a single calendar quarter. If the threshold is passed in a single quarter, GST/HST must be charged on the supply that crossed the line, and registration is due within 29 days of the effective date of registration. Voluntary registration before the threshold is allowed for businesses making taxable supplies. If the distillery operates in Quebec, it also deals with QST.

Keep three money streams apart from the start. Excise duty is payable, generally, when spirits are packaged, at the rates in Schedule 4 to the Excise Act, 2001. From April 1, 2026, spirits containing more than 7% absolute ethyl alcohol by volume carry duty of $14.117 per litre of absolute ethyl alcohol, and spirits containing not more than 7% carry $0.358 per litre of spirits, with the rates adjusting each April 1 with the Consumer Price Index. GST/HST is sales tax on taxable supplies, filed on its own return. The provincial manufacturer licence fee is a licence cost, not a tax. A bookkeeping system that mixes excise duty, sales tax, and licence fees will produce a return that no auditor can follow, and the audit examines ledgers, invoices, production records, and inventory records.

Insurance is not optional in practice. Liability coverage for the premises and any store, property coverage for the stills, tanks, and stock, product liability coverage for spirits sold to customers and trade buyers, and liquor liability coverage where spirits are served on site are the baseline, and a leased site will usually require the landlord to be named on the policy.

Step 5: Fit out the premises and set up excise records

Size the premises to the sales channels, not to ambition. A distillery that produces more than its trade buyers and store can sell ties up cash in stock that is also carrying excise duty, and a distillery too small for a provincial liquor board listing cannot fill the order. Fit out production, storage, and packaging areas, with drainage and ventilation built for wet, steamy work, and keep the layout consistent with the floor plans filed with the provincial regulator. Changes to the layout that move production or storage should be checked against the licence conditions before they are made, not after.

Set up the excise record routine from the first batch: production volumes, inventory, packaging, sales, and returns, with the records kept where an auditor can follow them. The licence application already asked for premises details and an operating plan, and the returns filed as a spirits licensee rest on those records. A distillery that treats excise records as an afterthought will struggle at the first audit. This guide gives no advice on how to make spirits, on recipes, or on running a still: those are production matters outside the licensing process, and the licensing record is the part of the business this guide exists to get right.

Step 6: Plan sales through licensed channels

Sales run through the channels the provincial regulator allows. In Ontario, manufacturers can generally distribute their own product to people who have bought it from the Liquor Control Board of Ontario or someone else allowed to sell liquor, and a retail store at the production site carries its own endorsement and conditions. Off-site warehouses cannot be used to promote, take orders, or sell liquor, or to service deliveries to consumers, and records must be kept for any off-site storage places that store liquor. Other provinces set their own rules for liquor board listings, private retail, bars and restaurants, online sales, and export. Written proof of Liquor Control Board of Ontario product testing is part of the Ontario application, so testing and listing timelines belong in the launch plan from the start, not as an afterthought once spirits are packaged.

Plan at least two channels from the start: a store at the production site for margin and direct customer contact, where the regulator endorses one, and trade sales through licensed bars, restaurants, or the provincial board for volume. Each channel has its own ordering, pricing, labelling, and record rules, so price each channel from its own costs, not from a single average. A distillery that depends on one buyer, one board listing, or one store weekend is exposed when that channel slows.

Related guides:

How to Start a Brewery Business in Canada, How to Get a Business Number in Canada: the CRA BN Explained, How to Register for GST/HST in Canada, and How to Register a Business in Ontario: Business Name Registration Explained.

Figures this guide leaves out

Two figures were cut rather than stated. First, the upper limit on financial security for a spirits licence: secondary legal commentary puts it at $2,000,000, but no official page states that ceiling, and the governing memorandum's replacement version could not be verified, so no ceiling is stated here. The verified floor is at least $5,000, and the exact amount must be confirmed with the regional excise office. Second, any licence fee for the federal spirits licence itself: no fee amount appears on the application form or the official pages, so none is stated. The Ontario manufacturer licence fees, the excise duty rates, and the $30,000 GST/HST threshold are each stated on the official page cited for them. No production figure, timeline for approval, or processing time is stated anywhere in this guide, because no official page gives one.

Sources

• Canada Revenue Agency, Application for an Alcohol Licence or Registration, form L63A — spirits licence to produce or package spirits, licence maximum two years, renewal at least 30 days before expiry, financial security required before issue for a spirits licence —
• Excise Act, 2001, Part 2 — Minister may issue a spirits licence authorizing the person to produce or package spirits —
• Canada Revenue Agency, Excise taxes, excise duties, air travellers security charge and fuel charge — duty generally payable at packaging for spirits, all manufacturers must be licensed, most licensees must provide security of at least $5,000 —
• Canada Revenue Agency, Excise duty rates — spirits rates from April 1, 2026, $14.117 and $0.358, annual April 1 Consumer Price Index adjustment, special duty $0.12 —
• Alcohol and Gaming Commission of Ontario, Apply for a manufacturer's licence — distillery licence $2,520 for two years, $5,040 for four years, eligibility, excise licence requirement, application contents —
• Canada Revenue Agency, When to register for and start charging the GST/HST — $30,000 threshold over four consecutive calendar quarters or in a single calendar quarter, 29 days to register —
• Canada Revenue Agency, EDM2-2-2, Financial security requirement — publication cancelled as of April 15, 2026 and replaced with a memorandum of the same title, which the L63A form names for the security calculation —