Two models, two very different economics. Here's how to choose the right processing arrangement for your operation — and what questions to ask before signing anything.

If you're a licensed Minnesota cannabis cultivator looking to convert your biomass into high-value extracts, you'll quickly encounter two different business models from extraction facilities: toll processing and full extraction services. On the surface they look similar — you send biomass, you receive extract. But the economics, risk profile, and operational implications are very different.

Understanding the distinction can save you significant money, protect your margins, and determine whether you retain ownership of your product throughout the process. Here's a clear breakdown of both models.

What Is Toll Processing?

Toll processing is a fee-for-service model. You, the cultivator, retain ownership of your biomass and the resulting extract throughout the entire process. You pay the extraction facility a processing fee — the "toll" — in exchange for their labor, equipment, and expertise.

Under a toll processing arrangement:

You own the input biomass. You own the output extract. You pay a flat fee or per-pound rate for processing. The extractor never takes ownership of your material. You decide what to do with the finished extract — sell it wholesale, manufacture products, or further refine it.

Toll processing is ideal for cultivators who want to maintain full control of their supply chain, have established wholesale or retail relationships for their extract, or are building a branded product line. It's also the preferred model for cultivators who have high-quality biomass and want to capture the full value of their harvest rather than selling raw biomass at commodity prices.

What Are Full Extraction Services?

Full extraction services — sometimes called a revenue-share or split model — work differently. The extraction facility processes your biomass and takes a percentage of the resulting extract as their compensation. You receive the remainder.

Under a split or revenue-share arrangement:

You deliver biomass. The extractor processes it and keeps, say, 30–40% of the output. You receive the remaining 60–70% of extract. No cash changes hands at the time of processing. You sell your portion of the extract to recoup value.

This model is attractive to cultivators who are cash-constrained and cannot afford upfront processing fees. It's also common early in a cultivator's operation, before they have predictable revenue from extract sales.

The Real Economics: Which Model Costs More?

This is where cultivators often make expensive mistakes. On the surface, a split model looks "free" — no cash outlay. But the math often tells a different story.

Consider a cultivator with 500 pounds of biomass at 15% THC. A toll processing arrangement might charge $0.50–$1.00 per gram of crude output. A split arrangement might take 35% of all extract.

At commercial-scale extraction, 500 lbs of 15% biomass yields roughly 25–35 lbs of crude oil. At $3,000/lb wholesale for crude, that's $75,000–$105,000 in extract value. A 35% split costs you $26,250–$36,750 in extract. A $0.75/gram toll fee on approximately 12,700 grams of crude costs roughly $9,500.

The toll processing model saves this cultivator $17,000–$27,000 on a single run — assuming they have the cash to pay the processing fee upfront. The math shifts depending on extract prices, processing rates, and biomass quality, but the principle holds: cultivators with strong biomass quality almost always do better on toll processing.

When a Split Model Makes Sense

Despite the generally better economics of toll processing for established cultivators, split models have legitimate uses. If you are in your first season with unpredictable harvest quality, a split arrangement transfers some of the yield risk to the processor. If your cash flow cannot absorb a processing invoice before extract revenue arrives, a split avoids the timing mismatch. If your biomass quality is uncertain or variable, some extractors price this risk into their split percentage in ways that protect you from a bad run.

The key is to model out the numbers for your specific situation before committing to either model.

Questions to Ask Any Minnesota Extraction Facility

Regardless of which model you pursue, ask these questions before signing a processing agreement with any Minnesota cannabis extractor:

Are you OCM licensed? Only licensed Minnesota cannabis manufacturers can legally process adult-use cannabis biomass. Verify license status directly with the OCM registry.

What is your chain-of-custody process? Your biomass must be tracked from delivery through processing under OCM seed-to-sale tracking requirements. Ask for documentation of their custody procedures.

What extraction method do you use? Cryo-ethanol, hydrocarbon, and solventless each produce different products. Make sure their capabilities match your target output.

Who provides COA testing? Under toll processing, you typically arrange testing. Under some split agreements, the extractor handles it. Clarify who submits samples and who pays for testing.

What is your minimum batch size? Some facilities have minimums that may not suit smaller cultivators.

What is your turnaround time? Given Minnesota's testing backlog, ask about total time from biomass delivery to finished, tested extract in your hands.

BSD Labs: Both Models, One OCM-Licensed Facility

BSD Labs in Waseca, MN offers both toll processing and split arrangements for licensed Minnesota cannabis cultivators. We work with you to model out the economics of both options for your specific biomass quality, volume, and cash flow situation before you commit to anything.

Our commercial-scale facility handles cryo-ethanol extraction, full winterization and filtration, distillation, and vape cart manufacturing — so whether you're converting biomass to crude, crude to distillate, or distillate to finished vape cartridges, we can handle the full production chain under one roof.

Ready to discuss your 2026 processing needs? Contact BSD Labs to schedule a consultation.