The HST Quick Method: who saves money and who shouldn't use it
A legitimate CRA election that lets eligible small businesses skip input tax credit tracking and remit a flat percentage instead, keeping the difference. For low-expense service businesses it's often four figures a year. For others it's a money-loser. Here's how to tell which you are.
How the regular method works (30 seconds)
Normally you remit the difference between HST collected on sales and HST paid on expenses (input tax credits, or ITCs). Collect $23,400, pay $3,900 on your costs, remit $19,500. Every ITC needs a receipt, a valid supplier HST number, and a line in the books.
How the Quick Method changes it
On the Quick Method, you still charge clients 13% like everyone else. But instead of remitting collected-minus-ITCs, you remit a flat rate on your HST-included sales:
- 8.8% for service businesses in Ontario (selling to Ontario customers)
- 4.4% for goods-for-resale businesses (retailers, convenience stores) whose cost of goods is at least 40% of sales
In exchange, you give up ITCs on day-to-day operating expenses. Two sweeteners survive: a 1% credit on the first $30,000 of HST-included sales each fiscal year, and full ITCs still allowed on capital purchases, computers, equipment, vehicles.
The spread between the 13% you charge and the 8.8% you remit is yours to keep. That spread is meant to replace your foregone ITCs; whether it more than replaces them is the whole question.
The worked example
Want your own numbers instead of ours? The calculator does this math in two minutes.
Who's eligible, and who's excluded
- Eligibility cap: annual worldwide taxable supplies (including associates, and including the HST) of $400,000 or less. That's roughly $354,000 of pre-tax revenue. Ottawa has floated raising this limit; until legislation passes, plan on $400,000.
- Excluded professions, no matter their size: accountants and bookkeepers, lawyers, financial consultants, actuaries, listed financial institutions, charities and most public institutions. (Yes: we can't use the election we keep recommending. The irony is noted.)
- Timing: you elect on form GST74 (or online) generally by the due date of the return for the period you want it to start, and once on it you generally stay for at least a year.
Who actually wins
- Wins big: consultants, designers, agencies, IT contractors, tutors, and most brain-billing service businesses with laptop-and-software cost structures.
- Often wins: trades with customer-supplied materials, mobile services, studios with lean rent.
- Usually loses: anyone with heavy HST-bearing costs: big rent, big equipment leases, lots of taxable inputs. And goods businesses need the 4.4% math run carefully against real margins.
- Can't use it: the excluded list above, and businesses over the cap.
What to do with this
- Pull last year's numbers: taxable revenue and HST actually paid on operating costs.
- Run both methods, in the calculator or on paper. The answer is arithmetic, not opinion.
- Check the exclusion list and the $400,000 cap before electing.
- Mind the timing: the election has deadlines tied to your filing period, and switching back has rules too.