What is the Quick Method of Accounting for GST?

A registrant tracks GST collected and GST paid on expenses (called input tax credits or ITCs). This can be onerous, especially for a smaller sole proprietor.

The GST quick method is a simplified reporting option for small businesses regardless of the business structure. Instead of having to track all the GST collected on income and paid on expenses, you can elect to remit a fixed percentage of your gross revenue. The percentage is less than the total GST you might otherwise collect to consider a notional amount of ITCs instead of the actual GST on expenses.

Who is eligible for the quick method?

Only businesses with a permanent establishment in Canada qualify for the quick method. This can include your home if it is a home-based business or you have no office or storefront.

You must have less than $400,000 in annual revenues, including GST. Once you hit $400,000 in any rolling four quarters, you must use the detailed method of recording all GST collected on income and paid on expenses.

Businesses engaged in financial services, real estate property sales, or capital asset sales cannot use the quick method. Others generally not eligible for the quick method include professional service businesses like accounting, bookkeeping, legal, and actuarial practices.

Related reading: Self-employed? Here’s how to file taxes for a side hustle

Who should use the quick method?

If you want the simplest record-keeping option, the quick method may be a fit. Other businesses that may benefit financially are those with low operating costs who have few expenses and input tax credits to claim. It’s also a good choice for service businesses like consultants, advisors, or freelancers.

The quick method is probably not the best fit for businesses with a lot of inventory or high expenses like commercial rent, software, or subcontractors.

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If you are wondering if you would be better off, run the numbers, or ask your accountant. Take a look at your GST collected and GST on expenses, the net amount of which represents what you have to pay to the Canada Revenue Agency (CRA).

The quick math behind the quick method

The remittance rates for businesses that purchase goods for resale, based on the province where the permanent establishment (PE) of a business is located, is included below.

Some provinces only charge GST; others charge harmonized sales tax (HST) at 13% to 15%. Québec also has Québec sales tax (QST) implications that may apply to goods or services in the province. Here is a rundown:

PE located whereGST at 5% appliesPE located whereHST at 13% appliesPE located whereHST at 14% appliesPE located whereHST at 15% appliesSupplieswhere GST at5% applies1.8%0% (and 2.8% credit)0% (and 3.4% credit)0% (and 4.0% credit)Supplieswhere HST at13% applies8.8%4.4%3.9%3.3%Supplieswhere HST at14% applies9.6%5.3%4.7%4.2%Supplieswhere HST at15% applies10.4%6.1%5.6%5.0%

The quick method remittance rates for businesses that provide services, based on the province where the PE is located, are below:

PE located whereGST at 5% appliesPE located whereHST at 13% appliesPE located whereHST at 14% appliesPE located whereHST at 15% appliesSupplieswhere GST at5% applies3.6%1.8%1.6%1.4%Supplieswhere HST at13% applies10.5%8.8%8.6%8.4%Supplieswhere HST at14% applies11.3%9.6%9.4%9.2%Supplieswhere HST at15% applies12.0%10.4%10.2%10.0%

If you provide goods and services, there is a 40% threshold that may apply. If the cost of your goods is more than 40% of your revenue, you may be considered a goods-for-resale business.

There can be multi-province complications if you sell goods or services in different provinces. But if more than 90% of your revenue comes from one province, you can use that rate.

Some sales, especially those outside Canada or certain types of good or services, can be excluded as they may be zero-rated or exempt.