Guide
Should a small business use the GST/HST Quick Method?
How the CRA's Quick Method of accounting for GST/HST works, who can use it, when it saves money, and why you still need receipts for capital purchases.
Last reviewed 5 min readRead as Markdown
The Quick Method lets a GST/HST registrant with no more than $400,000 of annual taxable sales, including tax, remit a fixed percentage of its tax-included sales instead of tracking input tax credits on everyday expenses. You still charge customers the normal rate. It suits service businesses with low expenses, and it adds a 1% credit on the first $30,000 of eligible sales each year. Accountants, bookkeepers, lawyers and financial consultants cannot use it. Capital purchases still earn input tax credits.
- Sales limit
- $400,000 a year, including GST/HST
- What you charge
- The normal GST/HST rate
- What you remit
- A set percentage of tax-included sales
- Bonus
- 1% credit on the first $30,000 of eligible sales
- Input tax credits
- Only on capital purchases
- How to elect
- Form GST74, or online
How does the Quick Method work?
Under the regular method, you remit the GST/HST you collected minus the GST/HST you paid on business purchases, which means tracking the tax on every receipt. Under the Quick Method, you still charge customers the normal rate, but you remit a fixed percentage of your tax-included sales and give up input tax credits on day-to-day expenses. The difference between what you collect and what you remit is yours to keep, and it stands in for the credits you are no longer claiming.
The remittance percentage depends on the province you sell in and on whether you mainly resell goods or mainly provide services. Service businesses get a higher rate than resellers, because their purchases are usually a smaller share of revenue. The CRA publishes the full table in guide RC4058.
Who can use the Quick Method?
- Your annual worldwide taxable sales, including those of associated businesses and including the GST/HST, are $400,000 or less in any four consecutive fiscal quarters of the last five.
- You are not providing legal, accounting, bookkeeping, actuarial, financial consulting or tax return preparation services.
- You are not a listed financial institution or a charity using the special public service body method.
You elect by filing Form GST74, or through the CRA's online services, and you must generally stay on the method for at least a year. If sales pass $400,000 in a fiscal year, you move back to the regular method at the start of the next one.
When does the Quick Method save money?
When your business spends little on taxable purchases relative to its sales. A consultant, designer or developer whose main cost is their own time pays little GST/HST on expenses, so the input tax credits they give up are small, and the fixed remittance rate plus the 1% credit usually comes out ahead.
| Your business | Quick Method is likely to |
|---|---|
| Service business, few taxable expenses | Save money and time |
| Reseller with thin margins | Cost money — the credits given up are large |
| Business buying a lot of equipment this year | Still work, since capital purchases keep their credits |
| Business with mostly zero-rated or exempt purchases | Save money, since there were few credits to lose |
The only reliable way to decide is to run last year both ways: total the GST/HST you actually paid on expenses, and compare the regular net tax against the Quick Method remittance less the 1% credit. That is a ten-minute job if the tax on every receipt is already recorded as its own number, and a weekend if it is not.
Do I still need to keep receipts on the Quick Method?
Yes. Every expense still supports your income tax deductions on the T2125, which the Quick Method does not change, and capital purchases such as computers, vehicles and equipment still earn GST/HST input tax credits. The CRA's six-year record-keeping rule applies in full.
SimpleLoonie records the GST/HST on every scanned receipt as a separate amount, which serves either choice: under the regular method the column is your input tax credit total, and under the Quick Method the same data lets you check once a year whether the election is still paying off. It does not choose a method or file the return for you.
Frequently asked questions
Do I charge less GST/HST on the Quick Method?
No. You charge customers exactly the same rate as under the regular method. The Quick Method only changes how you calculate what you remit to the CRA, not what appears on your invoices.
Can I claim input tax credits on the Quick Method?
Only on capital purchases, such as equipment, vehicles, computers and real property. Input tax credits on ordinary operating expenses are replaced by the reduced remittance rate, so you do not claim them separately.
Who is not allowed to use the Quick Method?
Businesses with more than $400,000 in annual taxable sales including tax, and anyone providing legal, accounting, bookkeeping, actuarial, financial consulting or tax preparation services. Listed financial institutions and some public service bodies are also excluded.
How do I switch to the Quick Method?
File Form GST74 or make the election through the CRA's online business services, before the due date of the first return for which you want to use it. Once elected, you generally have to stay on the method for at least one year.
Is the Quick Method the same as the simplified method for ITCs?
No. The simplified method is a way to calculate input tax credits without tracking the tax on each purchase individually. The Quick Method replaces most input tax credits with a reduced remittance rate. They solve different problems and have different eligibility rules.
Sources
- Canada Revenue Agency — RC4058, Quick Method of Accounting for GST/HST
- Canada Revenue Agency — GST74, Election to use the Quick Method
- Canada Revenue Agency — Claim input tax credits
This page is general information about Canadian tax administration, not tax advice, and it was last reviewed on . Rules and rates change. For a decision that matters to your business, check the source above or talk to an accountant.