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The GST quick method can simplify tax reporting for small businesses—but it’s not right for everyone. Here’s who qualifies and when it can save money.
When a business hits $30,000 of revenue in four consecutive calendar quarters, it must register to collect goods and services tax (GST). Voluntary registration is also available before passing this threshold. This applies to sole proprietors and corporations.
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.
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
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.
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 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 where GST at 5% applies | PE located where HST at 13% applies | PE located where HST at 14% applies | PE located where HST at 15% applies | |
|---|---|---|---|---|
| Supplies where GST at 5% applies | 1.8% | 0% (and 2.8% credit) | 0% (and 3.4% credit) | 0% (and 4.0% credit) |
| Supplies where HST at 13% applies | 8.8% | 4.4% | 3.9% | 3.3% |
| Supplies where HST at 14% applies | 9.6% | 5.3% | 4.7% | 4.2% |
| Supplies where HST at 15% applies | 10.4% | 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 where GST at 5% applies | PE located where HST at 13% applies | PE located where HST at 14% applies | PE located where HST at 15% applies | |
|---|---|---|---|---|
| Supplies where GST at 5% applies | 3.6% | 1.8% | 1.6% | 1.4% |
| Supplies where HST at 13% applies | 10.5% | 8.8% | 8.6% | 8.4% |
| Supplies where HST at 14% applies | 11.3% | 9.6% | 9.4% | 9.2% |
| Supplies where HST at 15% applies | 12.0% | 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.
If you are a new registrant, you must elect by the due date of your first GST return filing.
If you are an existing registrant and you qualify based on the residency, income, and business type criteria, you can switch to the quick method. If you revoke your quick method election, you generally cannot elect to use the quick method again for at least one year.
The quick method can be an easy option for a new GST registrant or a qualifying existing registrant. Whether or not you will save tax is highly fact-specific, but it usually works best for service-based businesses with low expenses and poorly for expense-heavy businesses.
Run the numbers. It may be well worth your time.
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