The GST/HST Quick Method: Will It Save You Money in BC?

Should You Use the Quick Method? The 30 Second Test

If you are a consultant, contractor or small service business in BC collecting GST, there is a good chance you are remitting more than you need to. The Quick Method is a CRA election that lets you keep part of the tax you collect, and for a lot of low expense businesses it is worth a four figure sum every year. Answer three questions. Are your taxable sales, including GST, $400,000 or less in the year? Do you spend relatively little on GST bearing supplies and expenses?

Are you outside the excluded professions, which notably include accountants, bookkeepers, lawyers and financial consultants?

Three yeses and the Quick Method almost certainly saves you money. The businesses it helps most are service based with high margins and low input costs: consultants, coaches, designers, trades with mostly labour, IT contractors, marketing agencies. It usually does not help retailers with large inventory purchases, businesses buying a lot of equipment or materials, or anyone whose input tax credits are already large relative to the tax they collect.  

How the Quick Method Actually Works

Under the regular method, you remit the GST you collected minus the GST you paid on business purchases. That is real arithmetic every quarter, and it is where most of the errors in our list of common GST/HST mistakes happen. Under the Quick Method, you skip most of that. You take your total sales including GST, multiply by a flat remittance rate that is lower than the tax rate you charged, and send that to CRA. You still charge your customers the normal 5% GST.

The gap between what you collect and what you remit is yours to keep, and it is meant to approximate the input tax credits you are giving up. You keep claiming full input tax credits on capital purchases such as equipment, vehicles, computers and real property. You give up input tax credits on operating expenses like rent, phone, software and supplies.  

Who Is Eligible, and Which Businesses Are Excluded

Eligible if

• Annual taxable supplies, including GST and zero rated sales, are $400,000 or less over four consecutive fiscal quarters out of the last five
• You have been registered and in business long enough to establish that history, and the threshold includes associated businesses

Excluded

• Accountants, bookkeepers and tax consultants
• Lawyers and law firms
• Actuaries and financial consultants
• Listed financial institutions
• Charities, non profits, municipalities and other public service bodies

The exclusion list is the tax world quietly acknowledging that these professions have very low input costs and would benefit far too much. If you are not registered yet at all, the threshold that forces registration is a different number, covered in when you have to register for GST/HST.  

The Remittance Rates That Apply to BC Businesses

For a business in British Columbia making supplies in BC, where you charge 5% GST:

Two cautions. These rates apply to sales made in BC. If you sell to customers in HST provinces such as Ontario, you charge HST at their rate and use a different remittance rate for those sales, so businesses with a mix need to track sales by province. And the rate applies to sales including the GST you charged, not your invoice subtotal. This is the most common calculation error. GST is also not the only tax on the invoice in BC. Whether you charge PST on top is a separate question, answered in do you need to register for BC PST and, for service businesses, in BC PST on professional services.  

The 1% Credit on Your First $30,000 of Eligible Supplies

On top of the lower rate, you get a 1% credit on the first $30,000 of GST included eligible supplies each fiscal year. That is up to $300 a year, deducted from what you remit. It is small, it is easy to forget, and it applies every single year, not just your first.  

Worked Example: Quick Method vs Regular Method Side by Side

A BC marketing consultant bills $150,000 for the year plus 5% GST, so $157,500 including tax. Their GST bearing expenses are modest: about $20,000 of software, subscriptions and supplies, with $1,000 of GST paid. Regular method

Quick Method

Saving: $1,130 for the year, for the cost of filing one form once. Now change the business. A retailer with $157,500 of tax included sales buying $90,000 of inventory pays roughly $4,500 of GST on purchases. Their regular method remittance is $7,500 minus $4,500, or $3,000. The Quick Method at the 1.8% goods rate would be $2,835 less the $300 credit, or $2,535, so it still wins slightly. Push inventory costs higher, or add equipment purchases and rent, and the regular method takes over. The break even logic: the Quick Method wins when your input tax credits would be less than the difference between the tax you collect and the flat rate you remit. Run your last four quarters through both before deciding. It is a fifteen minute exercise with real money attached.  

What You Give Up, and the Input Tax Credits You Can Still Claim

If you are planning a large capital purchase, it does not disqualify you, because capital ITCs survive. If you are planning a year of unusually heavy operating spending, that is the year the Quick Method hurts.  

How to Elect: Form GST74, Deadlines and How to Revoke

To elect, file Form GST74, Election and Revocation of an Election to Use the Quick Method of Accounting, or make the election through CRA My Business Account. It is due by the due date of the GST/HST return for the first reporting period the election covers, which you can line up against the rest of your Canadian tax deadlines. Timing by filer type.

Quarterly and monthly filers elect effective from the start of a reporting period. Annual filers need to elect earlier in their fiscal year, so if you file annually do not leave this to the return. To revoke, you must have used the Quick Method for at least one year, then file the same form to revoke. After revoking, you generally wait a year before electing again. So this is not a decision to flip back and forth on each quarter.  

The Income Tax Side Effect Most Businesses Miss

Here is the part people find out about a year later. Under the Quick Method, the tax you collected but did not remit is taxable income. Reporting is done differently than under the regular method. You include your revenue with the GST collected, then deduct the GST actually remitted. The difference, that $1,130 in our example, flows through to your business income and is taxed at your marginal or corporate rate. For an unincorporated business that lands on the T2125, alongside everything else in tax filing for self employed professionals in Canada.

That does not make the Quick Method a bad deal. You are keeping money you otherwise would have sent to CRA, and paying tax on it like any other income. But it does mean the headline saving is a pre tax number, and your bookkeeping treatment has to be set up correctly from the first period or your income will be understated. This is exactly the sort of thing worth checking with your accountant before you elect rather than after. Maxpro Financials runs both methods against your actual filings for BC businesses so you can see the real, after tax difference before committing to a full year.  

FAQ: The GST/HST Quick Method

Do I still charge my customers 5% GST?

Yes. Nothing changes on your invoices. The Quick Method only changes what you remit to CRA.  

What is the Quick Method rate in BC?

3.6% for services and 1.8% for goods for resale, applied to GST included sales made in BC.  

Do I apply the rate to my subtotal or the total?

The total, including the GST you charged. Applying it to the subtotal is the most common mistake.  

Can I still claim GST on a new laptop or vehicle?

Yes. Input tax credits on capital purchases such as equipment, computers, vehicles and real property remain claimable.  

What is the eligibility threshold?

Taxable supplies of $400,000 or less, including GST and zero rated sales, over four consecutive fiscal quarters out of the last five, counting associated businesses.  

Why are accountants excluded?

The excluded list covers professions with very low input costs, where the flat rate would be far too generous. Accountants, bookkeepers, lawyers, actuaries and financial consultants are named.

How long am I locked in?

At least one year before you can revoke, and generally a year before you can re elect after revoking.  

Does the Quick Method affect my income tax?

Yes. The tax you keep is taxable business income. Your bookkeeping needs to report revenue including GST collected and deduct the GST remitted.  

What if I sell to customers in Ontario or Alberta?

You charge the rate applicable to the customer’s province and use the corresponding remittance rate for those sales. Mixed province businesses need to track sales by destination.  

Can I use the Quick Method if I am a new registrant?

Yes, if you reasonably expect to be within the threshold. Elect effective from your first reporting period rather than waiting.  

Have Us Run the Quick Method Numbers on Your Last Four Quarters