When a business earns $30,000 or more in revenue in four consecutive calendar quarters, it must register to collect the goods and services tax (GST). Businesses can also choose to register voluntarily before reaching this threshold. This rule applies to both sole proprietors and corporations.
Once registered, a business must track the GST it collects on sales and the GST it pays on purchases (called input tax credits, or ITCs). For many small businesses, maintaining those detailed records can be time-consuming and administratively heavy.
The GST quick method is a simplified accounting option available to qualifying small businesses in Canada. Instead of recording the GST collected and the GST paid on every transaction, eligible businesses can elect to remit a fixed percentage of their gross revenue. Those fixed percentages are designed to approximate the net GST owing after considering ITCs, so you do not need to claim actual input tax credits on most purchases.
Who is eligible for the quick method?
To use the quick method, a business must have a permanent establishment in Canada. A home-based business or a business without a separate office or storefront can meet this requirement if the owner’s primary business location is in Canada.
Annual revenues (including GST) must be less than $400,000. If your business exceeds $400,000 in revenues in any rolling four-quarter period, you must switch to the standard method of recording all GST collected and all ITCs claimed.
Certain types of businesses are ineligible. These typically include businesses engaged primarily in financial services, the sale of real estate, or the sale of capital assets. Some professional service practices—such as accounting, bookkeeping, legal, and actuarial firms—are also commonly excluded from using the quick method.
Related reading: Self-employed? Here’s how to file taxes for a side hustle
Who should use the quick method?
The quick method suits businesses that want to reduce bookkeeping time and complexity. It often benefits service-based businesses with relatively low operating costs and few purchases that would otherwise generate significant ITCs—examples include consultants, freelancers, and advisors.
Businesses with high expenses, substantial inventory, or large costs such as commercial rent, software subscriptions, or frequent subcontractor fees are less likely to benefit from the quick method. For those operations, claiming actual ITCs under the standard method typically results in a lower net remittance to the Canada Revenue Agency (CRA).
If you’re unsure which approach is better, compare the numbers: total GST collected minus GST paid (ITCs) under the detailed method versus the fixed percentage remittance under the quick method. If helpful, consult your accountant for a tailored comparison.
The quick math behind the quick method
Remittance rates under the quick method vary by the type of supply (goods for resale or services) and by the province where your business’s permanent establishment is located. Some provinces charge federal GST at 5% only, while others use a harmonized sales tax (HST) that combines federal and provincial portions and ranges from 13% to 15%. Québec also applies Québec sales tax (QST) that may affect certain transactions in that province.
| 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% |
For businesses that primarily provide services, the applicable quick method remittance rates are different. These rates also depend on the location of the permanent establishment and on whether the supply is subject to GST only or to HST.
| 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 a business both sells goods and provides services, the CRA applies a 40% threshold test: if the cost of goods sold is more than 40% of total revenue, the business may be treated as a goods-for-resale operation for quick method purposes. This classification affects which remittance rate applies to your revenue.
Selling across multiple provinces can complicate the calculation. If more than 90% of your revenue comes from a single province, you are generally permitted to use the remittance rate for that province’s tax regime. Certain sales, including some exports or zero-rated supplies, are excluded from quick method calculations because they are zero-rated or exempt under GST/HST rules.
How to choose or change to the quick method
New registrants who want to use the quick method must elect it by the due date of their first GST return. Existing registrants who meet the eligibility criteria for residency, revenue, and business type can switch to the quick method by filing the appropriate election with the CRA.
If you decide to revoke the quick method election, note that you generally cannot re-elect to use the quick method for at least one year after revocation, so consider the timing and financial impact before changing methods.
Summary
The GST quick method offers a simpler way to handle GST remittances for many small Canadian businesses. It reduces bookkeeping by replacing detailed ITC tracking with a fixed-percentage remittance based on gross revenue. The method tends to be most advantageous for service-oriented businesses with low input costs and less beneficial for operations with significant expenses or large inventories.
To determine whether the quick method will save you time and money, calculate the difference between what you would remit under the standard method (GST collected minus ITCs) and what you would remit using the quick method rates. If you need help, a professional accountant or tax advisor can quickly model the two approaches for your specific situation.
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