The HST Quick Method Explained: Who Should Use It and How the Math Works
- Targeted Accounting
- Business
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A Simpler Way to Remit, If You Qualify
Most registrants calculate GST/HST the long way: add up every dollar of tax collected, subtract every dollar of tax paid on business purchases, and remit the difference. That works, but it means tracking an input tax credit on every receipt. The Quick Method replaces the second half of that job with a single percentage.
Under the Quick Method you still charge your customers the full rate, 13% in Ontario, 5% in Alberta, and so on. What changes is what you send to the CRA. Instead of remitting everything you collected less your credits, you remit a fixed percentage of your tax-included sales and keep the rest. The percentage is set below the rate you charge, and the gap is meant to approximate the credits you would otherwise have claimed.
For a service business with few taxable purchases, the gap is usually bigger than the credits it replaces. That difference is real money, and it is taxable income. This article, a companion to our complete GST/HST guide, walks through eligibility, the rates, a worked example and how to decide. If you just want the answer for your own numbers, use our free HST quick method calculator.
Key Takeaways
- Available if your annual taxable sales, including GST/HST, are $400,000 or less. Accountants, bookkeepers, lawyers, financial consultants and a few other professions are excluded.
- You charge the normal rate but remit a lower flat percentage of tax-included sales, for example 8.8% for an Ontario service business.
- A 1% credit applies to the first $30,000 of eligible sales each fiscal year.
- You give up input tax credits on operating expenses but keep them on capital purchases such as equipment and vehicles.
- It pays off for low-overhead service businesses and costs money for anyone with heavy taxable inputs. Run both methods on a real year before electing.
Who Can Use It
The Quick Method is open to most small businesses whose worldwide annual taxable supplies, including GST/HST and including any associated businesses, are $400,000 or less. The test looks at the four fiscal quarters before the one in which you make the election, or any four consecutive quarters in the last five.
The CRA excludes a specific list of businesses regardless of size. You cannot use the Quick Method if you provide legal, accounting or actuarial services, or if you are a bookkeeper, financial consultant, tax preparer or tax consultant. Charities, public institutions, non-profits with substantial government funding, municipalities, universities, hospitals and listed financial institutions are excluded as well. If you are in one of these groups, the regular method is your only option.
Everyone else, from consultants and designers to trades, cleaners, restaurants and small retailers, can elect in.
The Remittance Rates
The rate you remit depends on two things: whether you mainly sell services or goods, and which province your business and your customers are in. The CRA publishes the full grid in guide RC4058, but the common cases look like this:
| Business location and where you sell | Mainly services | Mainly goods for resale |
|---|---|---|
| Ontario, selling in Ontario (13% HST) | 8.8% | 4.4% |
| Nova Scotia, New Brunswick, PEI, Newfoundland (15% HST) | 10% | 5% |
| Alberta, BC, Manitoba, Saskatchewan, territories (5% GST) | 3.6% | 1.8% |
The rates are applied to your tax-included sales, so an Ontario consultant who invoices $10,000 plus $1,300 HST multiplies $11,300 by 8.8%, not $10,000.
“Mainly goods” means purchases of goods for resale, plus their freight, were at least 40% of your annual taxable sales. Most service businesses will not meet that and use the higher rate. If you sell into other provinces you may need more than one rate; your bookkeeping software can handle that, but it needs to be set up deliberately.
On top of the rate, you receive a credit equal to 1% of the first $30,000 of tax-included sales in each fiscal year. That is worth up to $300 a year and it is applied on your first return of the year.
A Worked Example
Take an Ontario marketing consultant with $120,000 in annual sales to Ontario clients and $8,000 of taxable operating expenses such as software, phone, a coworking desk and a laptop.
Regular method. She collects 13% on $120,000, which is $15,600. She paid 13% on $8,000 of expenses, giving input tax credits of $1,040. She remits $14,560.
Quick Method. Her tax-included sales are $135,600. At 8.8% that is $11,933. Subtract the 1% credit on the first $30,000, which is $300. She remits $11,633.
The Quick Method leaves her $2,927 better off for the year. That amount is added to her income for tax purposes, so the after-tax benefit is smaller, but it is still well over $2,000 for no extra work.
Now change one assumption. If her taxable expenses were $30,000 instead of $8,000, perhaps because she subcontracts a lot of the work, her regular-method credits would be $3,900 and she would remit $11,700 under the regular method. At that point the two methods are within $70 of each other, and above that level of spending the regular method wins.
The break-even for a 13% service business is roughly taxable expenses equal to a quarter of sales. Below that, the Quick Method usually wins. Above it, it usually loses.
What You Give Up
The trade is straightforward: you stop claiming input tax credits on operating expenses. Rent, software, subcontractors, supplies, advertising, professional fees, all of it. The flat rate is meant to compensate you for that, and for many businesses it does more than compensate.
Capital purchases are the exception. You can still claim the full credit on equipment, computers, vehicles and other capital property, and on improvements to them. If you are about to buy a $40,000 truck, you do not lose the $5,200 of HST on it by being on the Quick Method.
The other thing you give up is simplicity of a different kind. Your invoices still show the full tax and your customers still claim it, but your own return no longer reconciles to “collected minus paid.” Your bookkeeper needs to know you have elected, and your accounting software needs the Quick Method rate configured, or your return will be wrong in the CRA’s favour.
How to Elect and When It Takes Effect
You elect by filing Form GST74 or through your CRA business account. The election generally takes effect at the start of a reporting period, and it has to be filed by the due date of the return for that period. Annual filers therefore have a wide window; monthly and quarterly filers need to plan a period ahead.
Once you are in, you must stay on the Quick Method for at least one year before you can revoke it, unless you become ineligible. If your sales cross the $400,000 threshold, the election stops applying from the start of the next fiscal year.
A practical note: the election is per business, not per owner. If you run two registered businesses, each one needs its own decision and its own form.
Not Sure Which Method Is Cheaper for You?
Start with the quick method calculator to see which side you land on. Then send us a year of sales and expenses and we will run both calculations on your actual figures, tell you the difference in dollars, and file the election if it makes sense. It usually takes a day.
