Quick Method Or Regular Method For GST HST Which One Actually Saves You Money

Most small business owners just default to whatever method their accounting software picked for them the first year and never revisit it. That's usually a mistake. The quick method and the regular method for calculating GST HST remittances can produce genuinely different results depending on your business type and nobody explains the difference in plain language often enough.

Here's the basic mechanic. Under the regular method you collect GST HST on sales and deduct the GST HST you paid on business expenses called input tax credits then remit the difference. Under the quick method you still collect the full tax on sales but instead of tracking every input tax credit you remit a smaller flat percentage of your total sales including tax and keep the rest. It sounds almost too simple and that's exactly why people distrust it at first.

Who The Quick Method Actually Benefits

Service based businesses with low expenses tend to come out ahead on the quick method. Think consultants freelancers and small agencies where the biggest cost is your own time rather than inventory or equipment. Since you're not claiming much in input tax credits anyway under the regular method the quick method's flat remittance rate often works out lower than what you'd owe after doing the full calculation properly.

Businesses with large expense loads usually lose money switching to the quick method. If you're buying a lot of inventory or equipment with GST HST attached those input tax credits under the regular method can genuinely outweigh what the quick method saves you. A retail business carrying heavy stock almost always does worse under the quick method even though the paperwork is lighter.

Something Unrelated That Happened At A Client Meeting

A client showed up to a meeting last month with his dog because his usual sitter cancelled last minute and the dog spent the entire hour asleep under the boardroom table completely unbothered by any of it. Meanwhile the client himself was visibly stressed about switching remittance methods mid year. Funny how the least anxious creature in the room was the one with zero stake in the GST HST decision. We got through the numbers fine. The dog never even woke up.

The Election You Have To File And The Rule Everyone Forgets

Switching to the quick method isn't automatic. You have to file an election form and there's a revenue threshold that disqualifies larger businesses from using it at all. Once you're in it you also can't just bounce back and forth year to year chasing whichever method looks better on paper. There's a minimum commitment period before you can switch back which catches people off guard when they try to reverse course too quickly after a bad year.

There's also a common misconception that the quick method means you stop charging tax properly on invoices. That's not true at all. You still charge and collect the full GST HST rate from customers exactly the same way. The quick method only changes how much of that collected tax you actually remit versus keep. Getting that distinction wrong on an invoice is a mistake we still see surprisingly often.

Why This Decision Deserves An Actual Calculation Not A Guess

The only real way to know which method wins for your specific business is running last year's numbers both ways and comparing the outcome. A rough gut feeling based on what a friend's business did isn't reliable because expense ratios vary so much between industries. We do this exact comparison for clients over at Rauf Hameed pretty regularly and it's not unusual to find a business has been leaving a few thousand dollars a year on the table simply by staying on the default method nobody ever questioned.

Frequently Asked Questions

Can I switch between the quick method and regular method whenever I want?
No there's a minimum period you have to stay on the quick method once elected before you're allowed to switch back to the regular method.

Does the quick method affect how much GST HST I charge customers?
No you still charge the full applicable rate on every invoice. The quick method only changes the remittance calculation not the collection.

Is there a revenue limit for using the quick method?
Yes businesses above a certain annual taxable supply threshold are not eligible to elect the quick method regardless of expense structure.

Our Take

Defaulting to whatever method your first accountant or software chose without ever running the comparison is a quiet way to lose money every single year without noticing. The quick method isn't automatically better and neither is the regular method. It genuinely depends on your expense ratio and running the actual numbers takes maybe twenty minutes. That twenty minutes is worth more than most people assume.