Quick Method vs Regular Method HST Savings Calculator
The quick method remits a flat percentage of what you billed including the HST, instead of the tax you collected less the tax you paid. Work out the net HST under each method, the annual saving or loss, whether the corporation is even eligible, and the date the GST74 election has to be in.
a year before tax
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The Two Methods Side by Side
| Item | Regular Method | Quick Method |
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Where the Quick Method Figure Comes From
| Step | Basis | Amount |
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Eligibility and the GST74 Election
| Test | What You Entered | Result |
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Points That Decide This
What to Do Next
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Disclaimer: The quick method of accounting is elected under subsection 227(1) of the Excise Tax Act, and the remittance rates, the eligibility conditions and the reduction on the first slice of eligible supplies in a fiscal year are prescribed by the Streamlined Accounting (GST/HST) Regulations made under that Act. The election and its revocation are made on form GST74, Election and Revocation of an Election to Use the Quick Method of Accounting, and subsection 227(4) governs when a revocation takes effect, which is why an election generally has to run for a minimum period before it can be given up. Tax is imposed on a taxable supply made in a participating province at the rate in section 165 as adjusted by Schedule VIII, and input tax credits are claimed under section 169, with the restriction on operating expenses for a quick method registrant coming from the Regulations rather than from section 169 itself. Reporting periods and filing due dates follow sections 245 to 251 and section 238, and instalments for a registrant with an annual reporting period follow section 237. The remittance rates, the taxable supplies threshold, the amount of eligible supplies the reduction applies to and the rate of that reduction all change from time to time and differ between provinces and between service providers and resellers, so every rate and threshold on this page is an editable input that you should replace with the figure the Canada Revenue Agency currently publishes for your own situation before relying on the result. The election deadline shown is computed from the reporting period and fiscal year you entered and is indicative only, because the rule differs for an annual filer and for a registrant changing reporting periods, so please confirm the date before filing. The HST retained under the quick method is income for purposes of section 9 of the Income Tax Act and expenses are recorded inclusive of the tax that is no longer recoverable, so the saving shown here is a pre-tax figure. This page is general information, not tax advice.
What the Quick Method Actually Does
Under the regular method you remit the HST you collected less the HST you paid on your purchases. Under the quick method you remit a flat percentage of what you billed, and you give up the input tax credits on your ordinary operating expenses in exchange. You still charge your customers the full rate, and they still recover it in the usual way. Nothing about your invoices changes.
The trade is simple to state. A business with very little HST on its costs hands over less under the quick method than it would under the regular one, and keeps the difference. A business with heavy taxable costs hands over more. That is the whole comparison, and for a service company working out of a home office with a laptop and a phone bill, the gap is usually worth several thousand dollars a year.
Our fuller written guide to the GST/HST quick method in Canada covers the background in prose. This page is the arithmetic.
| Feature | Regular Method | Quick Method |
|---|---|---|
| Tax charged to customers | The full rate | The full rate, unchanged |
| What you remit | Tax collected less credits | A flat rate on sales including the tax |
| Credits on operating expenses | Claimable | Not claimable |
| Credits on capital assets | Claimable | Still claimable |
| Bookkeeping burden | Every purchase tracked for credits | Sales, plus capital purchases only |
| Income tax effect | Revenue and expenses net of tax | Tax retained is income, expenses gross |
| Election required | None, it is the default | Form GST74, with a deadline |
The Gross-Up That Most Calculations Get Wrong
The remittance rate is applied to your taxable supplies including the GST or HST you collected on them, not to your sales net of tax. This single point is where most spreadsheet comparisons go wrong, and it always goes wrong in the same direction: the quick method looks better than it is.
Take a service business in Ontario that invoices $265,487 before tax. It collects $34,513 of HST, so it billed $300,000 in total. The remittance rate is applied to the $300,000, not to the $265,487, and at 8.8 per cent that difference is about $3,000 of extra remittance every year. A comparison that misses it will tell you the quick method saves money when it does not.
Read the rate as a rate on gross billings, not on revenue. A rate of 8.8 per cent applied to sales including 13 per cent tax works out to roughly 9.9 per cent of your net revenue. The calculator shows both figures so you can see what you are really handing over.
Ontario Rates and Why Business Type Changes Them
The remittance rate is not one number. It depends on the province where you make the supply and on whether you are supplying services or reselling goods you bought. A reseller has already paid tax on its inventory and cannot claim it back under the quick method, so the rate it remits is set lower to compensate. A service provider has little in the way of taxable inputs, so its rate is higher.
The calculator is pre-filled with 8.8 per cent for an Ontario service provider and 4.4 per cent for an Ontario reseller of goods, which are the figures in common use for supplies made in Ontario. Both are editable, and both should be checked against the table the Canada Revenue Agency currently publishes before you rely on a result, because these rates have been changed before and they differ in every other province.
| What Drives the Rate | Effect |
|---|---|
| Province where the supply is made | A different rate applies in each province, because the tax rate differs |
| Services rather than goods | A higher rate, because inputs carry less tax |
| Reselling goods you purchased | A lower rate, because inventory carried tax you cannot recover |
| Permanent establishments in more than one province | Rates by province of supply, which this calculator does not handle |
| The first slice of eligible supplies in the year | A further reduction, applied once per fiscal year |
If you supply into more than one province, stop here. Where a business has a permanent establishment in more than one province, or supplies into provinces with different rates, the rates are applied supply by supply rather than to one annual total, and a single rate on a single number will be wrong. Please take advice on the allocation before electing.
The One Per Cent Credit on the First $30,000
A registrant on the quick method takes a further one per cent reduction on the first $30,000 of eligible supplies in each fiscal year. On the pre-filled figures that is worth $300 a year, which is small but free, and it is routinely missed on returns prepared by people who have not done many of them.
Two things about it catch people out. It is an annual entitlement, not a quarterly one, so a quarterly filer claims it against the first return of the fiscal year and not once in every return. And it runs on eligible supplies for the year, so a business well past $30,000 in the first quarter gets the whole reduction in that first quarter and nothing afterwards.
Who Cannot Use the Quick Method
Two separate tests have to be passed. The first is a dollar threshold on annual worldwide taxable supplies, which includes the supplies of associated businesses and is measured including the tax. The calculator is set to $400,000, which is the figure this page targets, and you should confirm the current amount before filing because it has moved in the past.
The second test is the one that actually catches people, because it has nothing to do with size. A list of businesses and professions is excluded from the quick method outright, however small they are.
| Business | Position |
|---|---|
| Accountants and bookkeepers | Excluded |
| Financial consultants | Excluded |
| Lawyers and law practices | Excluded |
| Notaries and actuaries | Excluded |
| Listed financial institutions | Excluded |
| Charities and certain public service bodies | Excluded from this method, other special methods may apply |
| Most other service businesses under the threshold | Generally eligible |
A bookkeeping business cannot elect the quick method, and neither can we. The exclusion is drawn by reference to the nature of the business, not the wording on the invoice, so renaming the service does not get around it. If your corporation sits close to one of these descriptions, please have the point settled before the election goes in rather than after a review.
Making the Election on Form GST74
The election is made on form GST74 and it has a deadline tied to the reporting period it is to apply to. For a monthly or quarterly filer the election is broadly due by the date the return for the first reporting period it applies to would be due. For an annual filer the deadline falls earlier, within the fiscal year itself rather than after it, which is the rule most often missed by a small corporation that decides in the spring that it would rather have elected from January.
The calculator produces a concrete date from the reporting period and fiscal year you entered so you have something to work to. Treat it as indicative and confirm it, because the precise rule differs between filers and a late election simply does not take effect for the year you wanted.
Once made, the election generally has to remain in place for a minimum period before it can be revoked, so it is not a decision to reverse in the middle of a year that turns out differently. If your returns are behind, the election will not fix them and the catch-up work has to come first.
The election is only worth making if the returns behind it are right. Our GST/HST return filing service covers the election, the remittance rate applied to the correct base, the annual reduction and the capital asset credits that survive the election.
What the Quick Method Does to Your Income Tax
The saving is not free money. Under the quick method the tax you collected but did not remit is income, and your expenses are recorded inclusive of the HST you can no longer recover. The net effect on the corporation’s income statement is an increase equal to the HST saving, taxed at the corporation’s rate.
At a small business rate of a little over twelve per cent, a saving of $5,000 is worth roughly $4,400 after tax. That is still worth having, but it is not what the headline number says, and a corporation that budgets the gross saving will be short at year end. The calculator shows both figures for that reason.
There is a bookkeeping consequence as well. Revenue is recorded including the tax billed, with the remittance shown as a deduction, and purchases go in at their full cost. Software set up for the regular method will not do this on its own, and a year of mixed treatment is unpleasant to unwind.
What This Calculator Does Not Cover
- Permanent establishments in more than one province, where remittance rates are applied by province of supply rather than to one annual total
- A mix of zero-rated and exempt supplies, which are treated differently again and can make the quick method a poor fit even below the threshold
- The simplified method for input tax credits, which is a third option that keeps the regular method while cutting the bookkeeping
- The special quick method for public service bodies, which has its own rates, its own eligibility and its own election
- Instalments for annual filers, which are still payable during the year and are calculated on the net tax the method produces
- Real property purchases and sales, self-assessment and the recapture rules that can sit alongside a quick method election
- Imports, exports and supplies to non-residents, where the base the remittance rate applies to is not simply total billings
- A change of reporting period in the same year as the election, which affects both the deadline and the first return
Four thousand dollars a year is worth ten minutes of arithmetic. Send us a year of sales and a year of expenses and we will tell you whether the election is worth making, whether the corporation qualifies, and what date the GST74 has to be in by.
Frequently Asked Questions
The quick method, the Ontario remittance rates and form GST74.
Related Calculators and Guides
More tools for GST/HST registration, elections and filing.
The Election Is Worth Money, If You Qualify and the Date Is Met
Tell us what the corporation bills, what it spends and when its fiscal year ends. We will confirm eligibility, work the comparison on the correct base, file the GST74 by the deadline and set the bookkeeping up so the returns come out right.