How the GST/HST Quick Method Can Save You Time And Money
April 1, 2022 Andrew AdolphAudits
What Is the Quick Method?
Under the normal GST/HST filing rules, a company would deduct the GST it pays on items used in its business from the GST it collects on customer sales and remit the difference to the CRA.
Recognizing that this is too complicated for a lot of smaller operators, the CRA offers a simpler system called the Quick Method.
What Are the Benefits of Using the GST/HST Quick Method?
The Quick Method offers some helpful benefits:
- It’s easier to file GST/HST returns and calculate net tax owing because it removes the need to track GST on your purchases.
- Calculating tax payable is as easy as multiplying revenue by the applicable quick method remittance rate.
- Most businesses qualify for a 1% credit on their first $30,000 revenue earned in each fiscal year.
- The Quick Method is faster and simpler than the general method, and GST/HST audits are also easier.
Who Is Eligible (And Not Eligible) To Use the Quick Method?
To be eligible for the Quick Method, you and your associate’s total worldwide revenues must not exceed $400,000 in the four fiscal quarters.
The following entities are NOT eligible to use the Quick Method:
- Persons that provide bookkeeping
- Financial consultants
- Tax consulting, or tax return preparation services in the course of the person’s commercial activity
- Persons that provide legal, accounting, or actuarial services in the course of their professional practice
- Financial institutions
- Most public institutions, schools, and government-run bodies
- Certain non–profit organizations.
The Disadvantages of Using the Quick Method
You will probably lose out on some input tax credits by accepting the CRA’s remittance rates. Also, once you elect for the Quick Method, you must use it for at least one year. If you decide to convert back, you must remember to revoke your original election. Failing to do so can lead to unexpected tax assessments, so make sure your accountant knows you are using this method.
What Supplies Are Not Eligible With the Quick Method?
While the quick method calculation applies to most supplies of property and services, some sales and supplies are not eligible. These include:
- Supplies made outside Canada
- Zero-rated supplies
- Certain supplies to First Nations people
- Places where the customer does not have to pay the tax
- Supplies made as an agent or auctioneer in which the tax paid must be accounted for
- Supplies of property or services made to shareholders or employees
- Supplies of property, other than capital property, or services in which you had to assess tax on your own because you appropriated property or services for your personal benefit. Examples could be a partner, beneficiary, a member of your organization, or any other related person
- Supplies of property or services in which you had to assess tax on your own because you collected a reimbursement under warranty for property or services you acquired and were qualified to claim a rebate or ITC
- Capital assets, eligible capital property sales, and real property.
How Does the Quick Method Work?
With the quick method, GST will be charged to customers based on their location.
|5% (GST)||Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Quebec, Saskatchewan, and Yukon.|
|15% (HST)||New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island.|
There are two remittance schedules. Generally, retailers and wholesalers who purchase goods for resale use the first schedule. The second rate group is for businesses that provide services. Remember! You must remit based on the full sales price, including sales tax.
The GST/HST quick method offers several advantages, such as less paperwork and less time calculating the net tax for GST/HST purposes. However, once your business reaches a certain size, you should consider reverting to the general method to secure all input tax credit entitlements.
Andrew Adolph is a CPA and former CRA auditor with 25 Years of experience. He helps businesses to not par any more in sales taxs than the law says they must and acts as an advocate for you if you are being audited, so you can fous on your business.