The GST/HST quick method: who it pays and who it penalizes

The quick method lets you charge clients the full GST/HST, remit a lower flat percentage of your tax-included sales to the CRA, and keep the difference. What you give up is input tax credits — the GST/HST you paid on your own purchases, normally recoverable — on almost everything except capital purchases. That trade is free money for a consultant whose largest business cost is a laptop, and an expensive mistake for anyone whose costs show up on supplier invoices with tax already on them.

It is an election, not a filing status. Nobody at the CRA will tell you that you are on the wrong side of it.

What the election actually changes

Nothing changes on the invoice. You stay registered, you charge the full rate that applies to where the supply is made, you show it on the bill, and you file the same returns on the same dates as before. The change is one line on the return: instead of tax collected minus credits claimed, you apply a flat remittance rate to your total tax-included revenue and send that.

The remittance rate is set by the CRA and varies by province and by whether your business mainly supplies services or resells goods. It is always lower than the rate you charged, which is the entire point. It is also the number most often quoted stale on the internet, so it is not quoted here.

The credits you surrender are the ones on operating costs — rent, software subscriptions, phone, professional fees, materials, inventory. The ones you generally keep are on capital purchases, which surprises most people who assume the election is all-or-nothing. Buy a computer or a piece of equipment and you claim the tax on it the ordinary way. There is also a 1% credit that applies to the first tranche of eligible supplies each fiscal year, which sweetens the arithmetic modestly at low revenue.

Who can elect, and who is shut out

Two gates. The first is size: your annual taxable supplies have to stay under a legislated ceiling, measured across associated businesses rather than one company at a time, and tested on the current period as well as the one before it. That ceiling has been raised by legislation before, so the figure someone repeated to you in 2019 is worth re-checking rather than trusting.

The second gate is what you do. A specific list of businesses cannot elect at all, and it is not a short list — accountants, bookkeepers, lawyers, financial consultants and tax preparers are on it, along with several other categories. Cadence cannot use the quick method either. If your corporation sits anywhere near one of those descriptions, confirm before you file the election rather than after.

The arithmetic, on numbers that are not real

Illustrative only. The two rates below were chosen because they divide cleanly: no province charges 10%, and no quick-method remittance rate is exactly 7%. The shape of the result is what transfers, not the amounts.

A consultant bills C$200,000 to Canadian clients in a year, December 31 year-end. Charging 10%, she collects C$20,000, so C$220,000 lands in the bank. Her taxable operating costs run C$20,000 for the year and carry C$2,000 of recoverable tax. Under the regular method she remits C$20,000 less C$2,000 in credits, so C$18,000 goes to the CRA. Under the quick method she remits 7% of the full C$220,000, or C$15,400. She keeps C$2,600, before the 1% credit.

That C$2,600 is not tax-free. It is business income, so the corporation pays tax on it at 9% federally on the first C$500,000 of active business income for an eligible CCPC in 2026, plus the provincial rate where she operates. Call it a raise, not a windfall.

Now change one fact and watch it reverse. Same C$200,000 of billings, but she is a contractor and C$100,000 of that revenue goes straight back out on materials carrying C$10,000 of recoverable tax. Regular method: C$20,000 collected, less C$10,000 on materials, less C$2,000 on overhead, remit C$8,000. Quick method: still C$15,400, because the materials now buy no credit at all. The election costs her C$7,400. The election did not get worse — her cost structure did, and the election has no way to notice.

Businesses that mainly resell goods qualify for a lower remittance rate, which narrows that gap. It rarely closes it. If a meaningful share of your revenue leaves again as inventory, materials or subcontracted supply carrying tax, the regular method is usually paying you to keep the receipts.

Exported revenue is where this quietly turns

The businesses that look most like winners on paper are often the worst fit. An IT consultancy or dev shop billing US clients is generally making zero-rated supplies: it charges 0% and, under the regular method, still claims the credits on the Canadian costs behind that revenue, which is why some of these companies receive a refund most quarters rather than making a payment. A zero-rated sale produces no spread to keep under the quick method, and the operating credits behind it go away with the election. Any business that regularly files for a GST/HST refund should test the election hard before making it, not after.

How you elect, and when it starts

You file Form GST74, and the deadline follows your filing frequency:

• Annual filers elect by the first day of the second fiscal quarter of the year the election is to apply to — April 1 for a December 31 year-end.
• Monthly and quarterly filers elect by the due date of the return for the first reporting period the election is to cover, which is generally one month after that period ends. The deadline list has the filing dates themselves.

It does not apply retroactively, and you generally have to stay on it for at least a year before revoking, using the same form. The practical consequence is that this is an annual test rather than a decision you make once. The year you hire a subcontractor, start carrying stock, or buy a truck is the year the answer can flip.

What Cadence does

We test the election at onboarding on every engagement, using three numbers from your own last twelve months: total taxable sales, how much of your cost base carries recoverable tax, and how much of your revenue is zero-rated. If it wins, we file the GST74 and put the election date on your filing calendar. If it loses, we say so and keep claiming credits the ordinary way. The year-end re-run is the part that matters over time, because the businesses the election suits — consultants and agencies with light cost bases — are exactly the ones whose cost base changes the year they grow. That re-run sits inside tax planning and advice and is included in the year-round packages; the returns it changes are GST/HST and payroll work, scoped at the estimate.