The Quick method of accounting for GST/HST

The Quick method of accounting for GST/HST

The quick method is a simplified accounting option available to Canadian small businesses for purposes of calculating their net sales tax(GST/HST) remittances. In this article, we discuss whether your business is eligible for the GST/HST quick method, and if so what are the implications, advantages, and pitfalls to be aware of.  As Chartered Accountants in Toronto and Mississauga, we can assist you in determining if the GST/HST Quick method is beneficial for you.

Using the GST/HST quick method does not impact the rate charged on goods and services rendered. It simply changes the reporting method to the CRA. When using the GST/HST quick method, one would charge the applicable GST/HST rate on good and services rendered and multiply the amount of your GST/HST included supplies remittance rate applicable to your company.

Who can make the Election to file for GST/HST Quick Method?

Companies that fulfill the following criteria:

a) Have been in business continuously for a full year ending immediately before your current reporting period if you are a new registrant AND their gross revenues, including GST/HST,are under $400,000 for the most recent year;

OR

New registrant for the GST/HST AND can reasonably expect their revenues for the first year of operations to be less than $400,000.

b) Are not specifically excluded as per the list below.

Who is specifically excluded from eligibility?

  1. Persons that provide legal, accounting or actuarial services in the course of the person’s professional practice;
  2. Preparation services in the course of the person’s commercial activity;
  3. Listed financial institutions;
  4. Municipalities or local authorities designated as a municipality;
  5. Public colleges, school authorities, or universities;
  6. Hospital authorities;
  7. Charities; or
  8. Non-profit organizations with at least 40% of government funding in the year (qualifying non–profit organizations).

How to file the election?

You can file your election using My Business Account or Represent a Client, or by completing and sending a Form GST74, Election and Revocation of an Election to Use the Quick Method of Accounting, to your tax services office (TSO).

The election will generally stay in effect until revoked or until your business exceeds $400,000 in annual revenues.

How to file your GST/HST return?

Companies that are eligible fall into one of two categories: resellers of goods or service providers. The applicable remittance rates for each type of company are detailed in appendices 1 and 2 respectively.

There are other considerations that may impact the rate you remit to the government such as:

  • Whether your cost of goods sold is at least 40% or more of your annual sales
  • Some of your supplies purchased exempted from the GST/HST quick method
  • If you purchase and sell goods and services in more than one province
  • Whether you qualify for special elections or are subject to specific regulations

Once you have figured out if you are eligible to use the quick method and your remittance rate, the calculation in fairly straight forward. Every small business in Toronto and throughout Canada is unique in its own way and that is why figuring out the above can be tricky. It is best to always speak with your accounting firm or to do research thoroughly before you elect to use and implement the GST/HST quick method. For more information please visit the CRA website.

Tax saving opportunities

The GST/HST quick method has several advantages: it is easier and less costly to follow and can also result in lower remittances than the regular method, thus resulting in better cash flow for your company. However, the quick method is not always the most advantageous method for a company, even if the company qualifies for it. For example, most companies in a loss position or expecting a loss would be better off using the traditional method for reporting their GST/HST remittances. Discuss with your accountant before deciding on the method to use.

For more information regarding the HST quick method please contact SRJ Chartered Accountants in Toronto or Mississauga at 647-725-2537 or info@srjca.com.  One of our tax specialists or chartered accountant business consultants will be happy to assist you.

Appendix 1
Remittance rates on or after April 1, 2013, for businesses
that purchase goods for resale
 Permanent establishment in:
 Non-participating
province
Nova ScotiaPrince Edward IslandOther participating
province
Supplies made in a
non-participating province
1.8%0% (and 4.0% credit)0% (and 3.4% credit)0% (and 2.8% credit)
Supplies made in the
participating province of Nova Scotia
10.4%5.0%5.6%6.1%
Supplies made in the
participating province of
Prince Edward Island
9.6%4.2%4.7%5.3%
Supplies made in any
other participating
province
8.8%3.3%3.9%4.4%
Appendix 2
Remittance rates on or after April 1, 2013, for businesses that provide services
 Permanent establishment in:
 Non-participating
province
Nova ScotiaPrince Edward IslandOther participating
province
Supplies made in a
non-participating province
3.6%1.4%1.6%1.8%
Supplies made in the
participating province of Nova Scotia
12.0%10.0%10.2%10.4%
Supplies made in the
participating province of
Prince Edward Island
11.3%9.2%9.4%9.6%
Supplies made in any
other participating
province
10.5%8.4%8.6%8.8%

Reference

https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/gst74.html

[i] Most recent year refers to the first four quarters of the last five fiscal quarters of the company.

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