Are you paying too much HST to the CRA? You may be eligible for the Quick Method

Are you a Canadian small business owner registered for GST/HST with annual taxable sales below $400,000? Is tracking your receipts a hassle? Does your business have minimal taxable expenses? The GST/HST Quick Method (we'll call it the "Quick Method") could be the solution you need to save tax and time.

If you answered YES to all, keep reading...

What is the Quick Method

The Quick Method simplifies GST/HST remittances (payments) to CRA for eligible businesses, allowing you to remit (pay) a portion of the collected tax to the CRA instead of claiming the GST/HST paid on purchases as input tax credits. This approach is particularly beneficial for businesses with salaries as the main expense, such as:

• Physiotherapists
• Massage therapists
• Personal trainers
• Tech consultants
• Delivery companies
• Uber drivers
• Photographers and designers

How the Quick Method Works

For an Ontario-based business, the Quick Method calculates HST payments to CRA using a fixed 8.8% rate on total sales and HST, compared to the full 13% HST amount collected from customers.

Regular Method vs. Quick Method

Let's compare a business using the regular method with one using the Quick Method:

Regular Method:

• Sales = $100,000
• HST on sales = $13,000
• HST due to CRA = $13,000 (minus HST paid on business expenses)

Quick Method:

• Sales = $100,000
• HST on sales = $13,000
• Total sales including HST = $113,000
• HST due to CRA = $9,644 (8.8% of $113,000, minus a $300 input tax credit)
• Total tax savings = $3,356

With the Quick Method, a business making $100,000 could save more than $3,000 in taxes. Businesses can still claim input tax credits for capital item purchases, such as equipment and computers.

Advantages of the Quick Method

• Simplicity: The fixed 8.8% rate eliminates complex calculations.
• Lower payment rate: Retain more HST collected from customers.
• Audit proof: No need to show expense receipts in case of an HST audit.
• Time-saving: Simplify record-keeping by not tracking HST paid on business expenses.
• Capital expenses: You can still claim a credit for the HST you paid on your capital expenses, like equipment or computers.

Eligibility for the Quick Method

Not all businesses are eligible. Ineligible businesses include those providing legal, accounting, or consulting services, listed financial institutions, municipalities, public service bodies, public colleges, school authorities, hospital authorities, and charities or non-profit organizations using the Special Quick Method.

Find Out More

Consult a tax professional and review the CRA guidelines here to determine your eligibility and ensure compliance.

Taxes can be complicated, and it's essential to consult with a tax professional before making any key decisions for your business. For more information, refer to the CRA's guide RC4058 – Quick Method of Accounting for GST/HST.

Note: Rates used in this example are specific to service businesses operating in Ontario and purchasing supplies in Ontario. Different payments rates apply depending on the type of business and the province in which it operates and purchases supplies.

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