GST quick method: rates, who qualifies and whether it saves you money

What is the GST quick method?

The GST quick method is an optional way to calculate net GST/HST. You still charge customers the normal 5%, 13%, 14% or 15%, but instead of subtracting the tax you paid on each purchase, you remit a flat percentage of your total sales including tax. The CRA explains it in guide RC4058, Quick Method of Accounting for GST/HST.

The difference between the tax you collect and the flat amount you remit stays with the business. It stands in for the input tax credits (ITCs) you would otherwise claim on operating costs such as supplies, fuel and phone bills, so the method pays off for businesses with low taxable expenses.

Who can use the quick method?

You can use the quick method if your annual worldwide taxable supplies, including GST/HST, zero-rated sales and the sales of associated businesses, are $400,000 or less. RC4058 measures this over either the first four or the last four consecutive fiscal quarters out of your most recent five.

Sales of real property, capital assets, goodwill and financial services are left out of that $400,000 total.

Businesses that cannot use it

• Bookkeeping, financial consulting, tax consulting and tax return preparation services
• Lawyers, accountants and actuaries
• Listed financial institutions
• Charities and public institutions
• Non-profit organizations with 40% or more government funding
• Municipalities, school and university authorities, and hospital authorities

Taxi operators and ride-share drivers are allowed to use it, which is why it comes up often on our GST/HST page for Uber drivers.

What are the GST quick method rates?

Your rate depends on two things: the type of business, and the province where your permanent establishment is compared with the province where you make the sale. Businesses that buy goods for resale get lower rates, but only if the cost of goods bought for resale in the previous fiscal year, including GST/HST, is at least 40% of their taxable sales including GST/HST. Everyone else uses the service rates.

Cross-border sales use different rates. An Alberta service business selling into Ontario remits 10.5% of those 13% HST sales, while an Ontario service business selling to a GST-only province remits 1.8% of those sales. RC4058 has the full grid for every combination, and our HST rates by province table shows which rate applies where.

How does the quick method work in Quebec for GST and QST?

If your business is in Quebec, Revenu Québec administers both the GST and the QST, and the QST has its own quick method with its own rates. You multiply your tax-included taxable sales made in Canada by the GST rate and your tax-included taxable sales made in Quebec by the QST rate, then subtract the 1% reduction for each tax if you qualify for it (Revenu Québec, The Quick Method of Accounting for Calculating GST and QST Remittances).

The lower rates have the same 40% test: the cost of goods bought for resale, not counting basic groceries, must be at least 40% of total annual taxable sales. Revenu Québec's list of businesses that cannot use the quick method closely matches the federal one, including bookkeeping, tax return preparation, legal, accounting and actuarial services. If you also make sales in provinces where HST applies, the rates can differ, and Revenu Québec refers you to guide RC4058.

Worked example: quick method vs regular method

The two examples below use the CRA rates above. They show why the answer to "is the quick method worth it?" depends mostly on how much GST/HST you pay on your costs.

Example 1: Alberta graphic designer (service business)

Under the quick method the designer keeps $1,276 of the GST collected. Under the regular method she would remit $4,000 minus her ITCs, so the quick method wins unless she paid more than $1,276 of GST on operating costs, which at 5% means more than $25,520 of taxable expenses. Her laptop purchase would still earn a separate ITC, because capital property is claimed outside the quick method.

Example 2: Ontario gift shop (resale business)

The shop sells $200,000 of goods before tax, collecting $26,000 of HST, for $226,000 including tax. At the 4.4% resale rate it would remit $9,944 minus the $300 credit, or $9,644. Its inventory cost $120,000 plus $15,600 HST, and rent and other costs carried $2,600 HST, so the regular method gives $26,000 minus $18,200 of ITCs, or $7,800. Here the regular method is $1,844 cheaper. (The shop does qualify for the resale rate: $135,600 of tax-included inventory is 60% of $226,000.)

How do I elect the GST quick method, and when must I stop?

You make the GST quick method election on Form GST74, Election and Application to Use the Quick Method of Accounting, or online through My Business Account or Represent a Client. The election must start on the first day of a reporting period.

• Annual filers: file the election by the first day of the second fiscal quarter of the year you want it to start.
• Monthly and quarterly filers: file it by the due date of the return for the first period it covers.

Once in, you generally stay in while you remain eligible, and you must use the method for at least a year before revoking it. If you revoke, you must wait at least one year from the date the revocation took effect before electing again.

When you have to leave the quick method

You must stop once your revenue goes over $400,000 or you start a type of business that is excluded. For annual filers the stop takes effect at the start of the next fiscal year; for monthly and quarterly filers the timing depends on which measurement period went over, as set out in RC4058.

The return itself is filed the usual way and by the usual deadline, covered in how to file a GST return and our GST/HST filing deadlines page. If your quick method remittance reaches $3,000 a year as an annual filer, the next year may bring GST/HST instalments.