4 Robert Speck Parkway, 15th Floor, Mississauga, ON L4Z 1S1 Tel: 905.366.5016 | Fax: 905.216.6726 info@sandhudhillon.com | www.sandhudhillon.com
Chartered Accountants
THE TAX
CORNER THE QUICK METHOD OF HST The Quick Method of HST is a simplified accounting option available to small businesses in Canada. This method is advantageous as it reduces the administrative burden when calculating HST remittances. When using the Quick Method you would still charge and invoice your customers using the applicable HST rate (13% in Ontario). However, the amount remitted to the CRA would be calculated by taking the taxable sales and multiplying it by the quick method rate. In Ontario, the quick method rate for service revenue is 8.8% while the quick method rate for the sale of tangible goods is 4.4%. The lower quick method rate of 4.4% is used on the sale of tangible goods in order to compensate taxpayers for the HST paid to suppliers. Unfortunately, not everyone is eligible to use the quick method. In order to be eligible, the taxpayers must meet all of the following conditions: 1. You have been in business continuously throughout the year or you are a new registrant and you can expect your taxable sales to be $400,000 or less. 2. You have not revoked an election to use the Quick Method of HST during the year, and 3. Your annual sales (including those of any associated companies) is not more than $400,000 It should be noted that the Quick Method is not available for all taxpayers. The following taxpayers are not eligible to use the Quick Method: • • • • • •
Lawyers Accountants Actuaries Bookkeepers Financial Consultants Tax Preparers or Tax Consultants
• • • • •
Listed Financial Institutions Municipalities or Local Authorities designated as a Municipality Public Colleges, School Authorities, or Universities Hospital Authorities Charities and Certain Not for Profits
Chartered Accountants
4 Robert Speck Parkway, 15th Floor, Mississauga, ON L4Z 1S1 Tel: 905.366.5016 | Fax: 905.216.6726 info@sandhudhillon.com | www.sandhudhillon.com
THE TAX
CORNER If a taxpayer is eligible to use the Quick Method, they may be able to improve their bottom line, especially in circumstances where their small businesses have minimal expenses. To illustrate an example of when the Quick Method would be advantageous we can look at a company that has annual taxable sales of $100,000 and annual business expenses of $15,000. By remitting HST using the regular method the taxpayer would pay the following: Revenues HST Rate in Canada
100,000.00 13%
HST Collected
13,000.00
Business Expenses
15,000.00
HST ITC Rate HST ITCs Net Remittance
13% 1,950.00 11,050.00
Alternatively, if the taxpayer elected to use the Quick Method they would have reported the following remittance: Revenues Quick Method Rate Net Remittance
100,000.00 8.80% 8,800.00
In the example illustrated above, the taxpayer was able to save approximately $2,250 by electing to use the Quick Method. As you can see under the right circumstances the Quick Method of HST is a powerful tool help your business improve its bottom line. If you think that the Quick Method may be beneficial for you please feel free to contact S&D LLP for more information at 905-366-5016 or at info@sandhudhillon.com.