Quick Accounting Software

[Raelene Heersink]

Thisguide explains how to use the quick method of accounting. It does not apply to qualifying non-profit organizations, municipalities, hospital authorities, charities, and most universities, public colleges and school authorities. If your organization is one of these, see Special quick method of accounting for public service bodies.

Associated person, for GST/HST purposes, means a person that is generally associated with another person where one controls the other. Associated persons (referred to generally as "associates") may include:

Capital asset generally means property that is, or would be, capital property under the Income Tax Act, and includes property that, before January 1, 2017, was, or would have been, eligible capital property for income tax purposes.

Eligible capital property generally means property that does not physically exist but that gives you a lasting economic benefit. Some examples are goodwill, or franchises, concessions, or licenses for an unlimited period. As of January 1, 2017, see the definition of capital asset instead. The term capital assets includes property that would have been considered eligible capital property or capital property prior to that date.

Participating province means a province that has harmonized its provincial sales tax with the GST to implement the harmonized sales tax (HST). Participating provinces include New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island, but do not include the Nova Scotia offshore area or the Newfoundland offshore area except to the extent that offshore activities, as defined in subsection 123(1) of the Excise Tax Act, are carried on in that area.

Place of business means any premises, facility, or installation used to carry on business, whether or not it is used exclusively for that purpose. Premises, facilities, or installations may be considered to be a place of business whether they are owned or rented, or, in some cases, where they are simply available to the business.

Zero-rated supplies are supplies of property and services that are taxable at the rate of 0%. This means there is no GST/HST charged on these supplies, but GST/HST registrants may be eligible to claim input tax credits (ITCs) for the GST/HST paid or payable on property and services acquired to provide these supplies.

The quick method is another accounting option available to help small businesses calculate their net tax for GST/HST purposes. This method reduces paperwork and makes it easier to calculate GST/HST remittances and file GST/HST returns because it eliminates the need to report the actual GST/HST paid or payable on most purchases.

When using the quick method, you still charge the GST at the rate of 5% or the HST at the applicable rate on your taxable supplies of property and services. For the list of applicable GST/HST rates, go to GST/HST calculator (and rates). To calculate the amount of GST/HST to remit, multiply the revenue from your supplies (including the GST/HST) for the reporting period by the quick method remittance rate, or rates, that apply to your situation.

The remittance rates of the quick method are less than the applicable rates of GST/HST that you charge. This means that you remit only a part of the tax that you collect, or that is collectible. Since you cannot claim ITCs on most of your purchases when you use this method, the part of the tax that you keep accounts for the approximate value of the ITCs you would otherwise have claimed. For more information, see Quick method remittance rates

You must have a permanent establishment in Canada to use the quick method. Certain registrants cannot use the quick method, including lawyers (or law offices), accountants, bookkeepers, financial consultants, and listed financial institutions.

A special quick method is available to certain qualifying non-profit organizations, selected public service bodies, specified facility operators and designated charities. For more information, see Special quick method of accounting for public service bodies.

ABC Shoe Store is a GST/HST registrant located in Calgary, Alberta, where it has operated for the last five years and makes all of its supplies. It files quarterly GST/HST returns and has always used the regular method to calculate its net tax. ABC Shoe Store is not a type of business listed under Exceptions above. They would like to use the quick method beginning April 1, 2023.

Since at least one of the periods of four consecutive fiscal quarters out of the five most recent fiscal quarters has GST/HST-included sales that are not more than $400,000, ABC Shoe Store can elect to start using the quick method on April 1, 2023.

If you have not been in business continuously for the past year but you are an eligible type of business, you may be eligible to use the quick method. You can elect to use the quick method if, in your first full year of business, you can reasonably expect your revenues from worldwide taxable supplies, and those of your associates, to be $400,000 or less.

If you file annual GST/HST returns, you have to make the election by the first day of your second fiscal quarter. If you are a new registrant filing your first return for a reporting period that is not a full fiscal year, you have to make your election by the due date of the return.

If you previously elected to use the quick method and have revoked that election, you have to wait at least one year from the date the revocation became effective before you can elect to use the quick method again.

Generally, the election stays in effect as long as the total annual revenue (including the GST/HST) from your worldwide taxable supplies (including zero-rated supplies), and those of your associates, does not exceed $400,000, or until you become a person that cannot use the quick method because of the type of business you carry on, see Exceptions.

Do not include revenues from supplies of financial services and sales of real property, capital assets, goodwill from the sale of a business, and, before January 1, 2017, eligible capital property.

At the end of each fiscal year, make sure that your business is still eligible to use the quick method for the following year. Also make sure that the same category of rates applies to your business. Base your calculations on supplies made in the fiscal year that just ended.

XYZ Clothing Store is a quarterly filer and used the quick method throughout 2022. To see how long its election would stay in effect, the store had to review its taxable sales (including the GST/HST) for the previous fiscal year. Since its worldwide taxable sales for 2022 were more than $400,000, it had to stop using the quick method at the end of the first fiscal quarter of 2023. This means it had to start calculating its GST/HST remittance using the regular method on April 1, 2023.

If you stop using the quick method, you cannot claim ITCs for any tax paid or payable on purchases you made while using it, other than the ITCs you would have been entitled to claim, but did not claim, while you were using the quick method.

When you fill out your GST/HST return using the quick method, you do not have to indicate the actual GST/HST that you charged on most of your taxable supplies or the GST/HST paid or payable on most of your business purchases. However, you still have to keep all books and records related to your business purchases and your supplies for six years from the end of the year to which they relate. However, we may ask you to keep the invoices longer than six years. If you want to destroy your records earlier, you have to send us a written request and wait for our written approval to do so. For more information, see GST/HST Memorandum 15.1, General Requirements for Books and Records.

When you use the quick method, you still charge the GST at 5% or the HST at the applicable rate on your supplies of taxable property and services (other than zero-rated supplies), but you remit only a portion of that tax.

The net tax you have to remit is calculated using the applicable quick method remittance rates. Usually only one of these rates will apply to your business. For more information, see Quick method remittance rates

You cannot claim ITCs for most of your purchases when you use the quick method. This is because the part of the tax that you keep accounts for the approximate value of the ITCs you would otherwise have claimed. For more information, see Claiming input tax credits.

The quick method calculation applies to most of your supplies of property and services. However, certain supplies you make are not eligible for this calculation. If you make a supply that is not eligible, you do not use a remittance rate to calculate how much tax you have to remit. Instead, you have to account for such a supply the same way you would if the election were not in effect. For example, if you make a supply that is not eligible and you charge 5% GST, you have to report the full amount of tax charged instead of using a quick method remittance rate.

Most businesses use only one remittance rate. The rate that applies depends on whether you make taxable supplies of property or services in a participating or non-participating province, and whether you make the supplies through a permanent establishment that is located in a participating or non-participating province. The type of business you are involved in is also a factor. For example, a business that provides mostly services generally has to use a different remittance rate than a business that is involved mostly in purchasing goods for resale.

In some cases, a business may have to use more than one remittance rate. For example, if a business makes supplies in both participating and non-participating provinces, more than one rate may apply. For more information, see GST/HST quick method remittance rates for businesses that purchase goods for resale, based on the province where the permanent establishment (PE) of a business is located.

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