The returns to Canadian federal sheep research expenditures between 1968 and 1984 are estimated using the economic surplus approach. Ex post and ex ante measures of the change in producers' surplus are compared. Regression analysis is used to estimate the lag structure of the effects of research on the national supply function, facilitating the estimation of returns on average and at the margin. The effect of the excess burden of tax collection on returns to sheep research was investigate The internal rate of return to sheep research was found to be about·25% at the margin exclusive of the effects of the excess burden. This rate of return fell to 20% when the costs of an excess burden of 20c on the dollar was assumed.