Is the Quick Method of Reporting GST/HST & QST the Right Choice for your Small Business

If you are self employed or a small business with annual sales between $30,000 and $200,000, it might make sense to select the Quick Method of reporting your GST/HST and QST (note that if your sales are less than $30,000 you are not required to collect sales taxes).  While regular reporting of sales taxes requires that you calculate all amounts collected and paid on eligible expenses, the quick method requires the application of a single rate to your sales.  The key details of the Quick Method and its suitability for your business are discussed below:

Eligibility/Conditions/Details 

  • For GST purposes, annual taxable sales must be less than $200,000.  QST requires that annual taxable sales be less than $217,000.
  • If 40% ormore of your sales are from goods that were purchased for resale e.g. All objects or things that may be perceived by the senses and are movable at the time of supply: a vehicle, animals, furniture, etc. is 1.8% and the QST rate is 3.0% for a total of 4.8%
  • If your cost of goods sold are less than 40% than the GST rate is 3.6% and the QST rate is 6.0% for a total of 9.6%
  • For QST purposes, annual taxable sales must be less than $217,000
  • If 40% ormore of your sales are from goods that were purchased for resale (see definition above)  the QST rate is 3.0%. 
  • If less than 40% than the QST rate is 6.0%

Once the increase in the QST rate to 9.5% takes effect in 2012, the limit on revenues from taxable supplies will be increased to $219,000, and the prescribed rate will be increased to 3.4% for vendors of corporeal movable property and 6.6% for other businesses.

  • The Quick method does not affect how GST and QST rates charged which are 5% and 8.5% respectively
  • Since the quick method implicitly reflects input tax credits i.e. taxes paid on expenses, no separate calculation is required (or allowed).
  • However, taxes paid on capital purchases like a car, computer or real property are claimable
  • To use the Quick Method,you must complete form FP-2074-V, Election Respecting the Quick Method of Accounting for Small Businesses, and file it with Revenu Québec. Your election will be confirmed in writing.
  • The effective date you indicate on the form is the date on which you may begin using the Quick Method; however, the date must correspond to the first day of your GST/HST and QST reporting period.
  • There are exceptions to businesses that are permitted to use the Quick Method.  The following types onf business cannot  use the Quick Method 
    • Accountants/Auditors/Tax Consultants
    • Lawyers
    • Financial Consultants
    • Municipalities,Colleges and Universities and Charities.
    • See the full list of exceptions
  • For GST purposes you are eligible for a 1% credit on your first $30,000 of sales 

When to Use the Quick Method:

Since the Quick Method is simpler than the regular method of reporting GST/HST and QST, it can be an great way to fulfill your tax reporting obligations while simplifying your accounting system. 

Depending on how much GST-QST you pay on purchases (Input tax credits), the use of the Quick Method can save you money.  For example if you have $50,000 in sales and $5,000 in eligible purchases , your sales taxes collected and ITCs would be $2,500 and $250 respectively.  Under the regular method you would pay the government $2,250, however under the Quick Method the amount payable is $1,200 ($50,000 X 3% less $30,000 X1%).  You are actually saving $1,050 if you use the Quick method. 

It is important to determine the level of your input tax credits prior to making the election.  Although you can revoke the election if you find that you would be paying less under the regular method,  you have to wait for a full year to apply to reverse the revocation.