The quick method beats regular input-tax-credit accounting only when a business's taxable purchases are small next to its revenue: under about 25% of fees for an Ontario consultant billing $120,000 before HST, and under about 65% of sales for an Alberta art and craft shop selling $200,000 before GST at the goods rate. Above those lines, the regular method remits less.
Both methods start from the same invoices. The consultant charges 13% HST on $120,000 of fees and collects $15,600. The regular method sends the CRA that amount minus the HST paid on purchases. The quick method sends 8.8% of the tax-included total of $135,600, which is $11,932.80, less a 1% credit of $300, and the business keeps the rest. Before the credit that leaves $3,667.20 in the consultant's hands. The regular method would leave the same sum only if purchases carried $3,667.20 of HST, which means $28,209.23 of taxable purchases, or 23.5% of fees. Add the credit and the line moves to 25.4%.
The CRA's guide to the method, RC4058 (Rev. 25, page dated July 21, 2025), does not pretend to settle which side a given business lands on. Its note reads, in full:
Whether the quick method will be more beneficial for you to use than the regular method depends on your specific situation.
The arithmetic below applies the published rates to stated inputs. Which side a business lands on turns on four things: how much of what it buys carries GST or HST that it could claim back, its rate group, its province and, through the credit, its revenue.
What the quick method replaces
Under the regular method a registrant adds up the GST/HST it charged in the period, adds up the GST/HST it paid on eligible purchases, and remits the difference. The second figure needs a tax amount on every purchase invoice or, for a business with taxable sales of $1 million or less and taxable purchases of $4 million or less, the simplified method in RC4022, which totals tax-included purchases and multiplies by the fractions 5/105, 13/113, 14/114 or 15/115. Either way, the credits are earned from the purchases, and the purchases have to be tracked.
The quick method drops that second figure. The business still charges the full GST or HST on its taxable supplies. To remit, it multiplies tax-included revenue for the reporting period by the remittance rate that applies. Those rates are lower than the tax charged, so the business remits only part of what it collects, and RC4058 gives the reason: "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."
Customers see no difference. The invoice still carries the full 13% or 5%, and a registered customer can still support its own ITC claim with it. Only the supplier's remittance changes. In Ontario the HST fraction of a tax-included amount is 13/113, or 11.504%. The services rate of 8.8% is 76.5% of that, so the consultant remits about three-quarters of the HST it collects and keeps 23.5%. That kept share is the whole story of the break-even: if the HST the business would recover on its purchases is a smaller share of the HST it collected, the quick method pays; if it is larger, the regular method pays.
Two formulas carry the rest of the page. Both use tax-included amounts, t is the combined GST/HST rate in percent (13 for 13%), and the remittance rate is a decimal (0.088 for 8.8%).
Regular method net tax = (revenue x t / (100 + t)) minus (taxable purchases x t / (100 + t))
Quick method net tax = (tax-included revenue x remittance rate) minus the 1% credit
The remittance rate applies to revenue including the tax, not to pre-tax fees. For the consultant, 8.8% of $120,000 would be $10,560.00, which understates the correct $11,932.80 by $1,372.80. For line 101 RC4058 says to add revenues from taxable supplies ("include the GST/HST at the rate that applied at that time") and to round the total to the nearest dollar. The GST/HST calculator adds the tax to a pre-tax amount or backs it out of a tax-included total for any province. Stated against pre-tax fees, 8.8% of tax-included revenue is 9.944% of fees.
Who can elect
The election has five conditions and a list of excluded businesses. RC4058, in its section "Determine if you can make this election" (checked November 3, 2026), requires all five of these:
- The business has been in operation continuously through the 365 days before the current reporting period (a new registrant follows the separate rule for new registrants, covered below).
- It did not revoke a quick method or simplified-method election during those 365 days.
- It is not one of the business types listed under "Exceptions".
- Its revenue including GST/HST from worldwide taxable supplies, with zero-rated supplies and its associates' supplies counted, is not more than $400,000 for either the first four or the last four of its last five fiscal quarters. Revenue from financial services and from sales of real property, capital assets and goodwill on the sale of a business is left out of that count.
- It has a permanent establishment in Canada.
The exceptions are where a consultant needs to look first. RC4058 lists the types of business that "cannot use the quick method", and the first entry reads "persons that provide book keeping, financial consulting, tax consulting or tax return preparation services in the course of their commercial activities". The rest are persons who provide legal, accounting or actuarial services in their professional practice; listed financial institutions; charities; public institutions; non-profit organizations with at least 40% government funding in the year; municipalities and local authorities designated as municipalities; public colleges, school authorities and universities that are established and operated other than for profit; and hospital authorities, facility operators and external suppliers. RC4058 also notes a separate special quick method for certain qualifying non-profit organizations, public service bodies, specified facility operators and designated charities.
That is why the Ontario example here is an IT consultant. A bookkeeper, a tax preparer, a financial consultant, a lawyer, an accountant or an actuary cannot make the election at all, whatever the arithmetic says. Engineering, design, software, marketing and trades businesses are not named in the list above. RC4058 does not define "financial consulting", so a business near that boundary can ask the CRA for a ruling; the guide notes that the GST/HST rulings and interpretations service is free.
The $400,000 test is a test on tax-included revenue, and it looks at two overlapping windows of four quarters out of the last five. Passing either window is enough. RC4058 works an example of an Alberta shoe store whose last five quarters were $78,000, $118,000, $128,000, $70,000 and $86,000. The first four add to $394,000 and the last four to $402,000. The earlier window is under the limit, so the store may elect from April 1, 2025. The count includes zero-rated sales such as exports and the revenue of associated businesses, and leaves out financial services and sales of real property, capital assets and goodwill. A second RC4058 example, a Winnipeg clothing store, had quarters of $92,000, $98,000, $103,000 and $123,000, a year of $416,000. It used the quick method through that year, so its election ended and it had to return to the regular method at the end of the first quarter of 2025.
A new registrant can elect if it can reasonably expect revenue from worldwide taxable supplies, with associates, of $400,000 or less in its first full year. Quebec businesses generally file with Revenu Québec, and RC4058's table of applicable rates has no Quebec row, so the tables below leave Quebec out.
The rate tables, province by province
RC4058 prints two grids of remittance rates, one for businesses that buy goods for resale and one for businesses that provide services. Each grid is read the same way. Pick the column from the province of the business's permanent establishment, then pick the row from the tax rate on the particular supply, since a business can sell into provinces other than its own. The first grid is the goods group.
Quick method remittance rates, goods group (RC4058, Rev. 25)
| PE where GST at 5% applies (Column 1) | PE where HST at 13% applies (Column 2) | PE where HST at 14% applies (Column 3) | PE where HST at 15% applies (Column 4) | |
|---|---|---|---|---|
| Supplies where GST at 5% applies | 1.8% | 0% (and 2.8% credit) | 0% (and 3.4% credit) | 0% (and 4.0% credit) |
| Supplies where HST at 13% applies | 8.8% | 4.4% | 3.9% | 3.3% |
| Supplies where HST at 14% applies | 9.6% | 5.3% | 4.7% | 4.2% |
| Supplies where HST at 15% applies | 10.4% | 6.1% | 5.6% | 5.0% |
The services group has no 0% cells:
Quick method remittance rates, services group (RC4058, Rev. 25)
| PE where GST at 5% applies (Column 1) | PE where HST at 13% applies (Column 2) | PE where HST at 14% applies (Column 3) | PE where HST at 15% applies (Column 4) | |
|---|---|---|---|---|
| Supplies where GST at 5% applies | 3.6% | 1.8% | 1.6% | 1.4% |
| Supplies where HST at 13% applies | 10.5% | 8.8% | 8.6% | 8.4% |
| Supplies where HST at 14% applies | 11.3% | 9.6% | 9.4% | 9.2% |
| Supplies where HST at 15% applies | 12.0% | 10.4% | 10.2% | 10.0% |
The column for each jurisdiction comes from a third table in RC4058, reproduced here with its dates:
| Permanent establishment in | Period | Column |
|---|---|---|
| Alberta | On or after January 1, 2008 | 1 |
| British Columbia | On or after January 1, 2008, and before July 1, 2010; and on or after April 1, 2013 | 1 |
| Manitoba | On or after January 1, 2008 | 1 |
| New Brunswick | On or after July 1, 2016 | 4 |
| Newfoundland and Labrador | On or after July 1, 2016 | 4 |
| Northwest Territories | On or after January 1, 2008 | 1 |
| Nova Scotia | On or after April 1, 2025 | 3 |
| Nova Scotia | Between July 1, 2010, and March 31, 2025 | 4 |
| Nunavut | On or after January 1, 2008 | 1 |
| Ontario | On or after July 1, 2010 | 2 |
| Prince Edward Island | On or after October 1, 2016 | 4 |
| Saskatchewan | On or after January 1, 2008 | 1 |
| Yukon | On or after January 1, 2008 | 1 |
Nova Scotia is the row that changed recently. The province cut its HST from 15% to 14% on April 1, 2025, and RC4058 moved Nova Scotia businesses from Column 4 to Column 3, so a Nova Scotia business selling services at 14% now remits 9.4% where it used to remit 10.0% on sales at 15%. The CRA's GST/HST rate table, last modified April 1, 2025, shows 5% in Alberta, British Columbia, Manitoba, the Northwest Territories, Nunavut, Saskatchewan and Yukon, 13% in Ontario, 14% in Nova Scotia and 15% in New Brunswick, Newfoundland and Labrador and Prince Edward Island. British Columbia's entry in the applicable-rates table has no column for July 1, 2010 to March 31, 2013.
The "0%" cells in the goods grid are not a free pass. In those cells the business remits nothing on the sale and instead claims the stated credit on line 106 of the return. RC4058's line 106 instructions say to add the applicable credit for those supplies, including the GST, to the ITC total on that line. An Ontario retailer selling goods to a Manitoba customer at 5% GST collects GST equal to 4.8% of the tax-included price, remits none of it, and also claims a credit of 2.8% of that price.
A business that gives a point-of-sale rebate on qualifying publications in participating provinces has its own rule: the goods rate of 1.8% for those sales when the 40% test below is met, and the services rate of 3.6% otherwise. RC4058 defines qualifying publications as printed books and their updates, audio recordings that are 90% or more a spoken reading of a printed book, and printed scripture of any religion.
When a business sells into both participating and non-participating provinces, more than one rate may apply. RC4058 sets a 90% simplification, summarised here with every branch kept:
| Share of the period's eligible supplies made through the permanent establishment | Rate to use |
|---|---|
| 90% or more in a participating province | Only the rate that would apply if all eligible supplies were made in the participating province |
| 90% or more in non-participating provinces | Only the rate that would apply if all eligible supplies were made in a non-participating province |
| Neither | More than one rate may be needed, unless 90% or more were made in participating provinces that have the same HST rate |
Goods rates, services rates and the 40% line
Which grid a business uses is decided by what it spent the previous year, not by what it sells. In RC4058's section on remittance rates for businesses that purchase goods for resale, the test is that "the cost (including the GST/HST) of goods you purchased in your previous fiscal year for resale, or to use in goods you produce or manufacture for sale, must be at least 40% of your total revenue from annual taxable supplies (including the GST/HST) for that fiscal year". Three clarifications follow in the same section. The supplies of associates are not counted in the calculation. A business that began using the quick method in its current fiscal year bases the test on either the first four or the last four of the previous five quarters. And the cost-of-goods figure leaves out basic groceries and purchases on which no tax is payable, while the revenue figure leaves out basic groceries, financial services, sales of real property, capital assets and goodwill from the sale of a business, and goods sold by auction on someone else's behalf, though it includes sales made by an auctioneer on the business's behalf.
A business under 40% uses the services grid, which RC4058 describes as the next group of remittance rates, for businesses that do not qualify for the first group and, generally, for small businesses that provide services. The test counts goods bought for resale, or for use in goods the business produces, and nothing else. Utilities and advertising are taxable purchases, but they do not count toward the 40%.
The two rate groups differ by a factor of two in the diagonal cells: 1.8% against 3.6% for 5% GST, 4.4% against 8.8% in Ontario, 5.0% against 10.0% at 15% HST. A shop that crosses 40% therefore changes its remittance in half. The Alberta shop used later in this guide has sales of $200,000 before GST ($210,000 with it) and $24,000 of taxable purchases other than stock. Holding those fixed and varying only the cost of goods bought:
| Cost of goods bought, % of pre-tax sales | Goods share of tax-included sales | Rate group | Rate | Quick method net tax | Regular method net tax | Lower of the two |
|---|---|---|---|---|---|---|
| 30% | 30.0% | Services group | 3.6% | $7,260.00 | $5,800.00 | Regular method |
| 35% | 35.0% | Services group | 3.6% | $7,260.00 | $5,300.00 | Regular method |
| 39% | 39.0% | Services group | 3.6% | $7,260.00 | $4,900.00 | Regular method |
| 40% | 40.0% | Goods group | 1.8% | $3,480.00 | $4,800.00 | Quick method |
| 45% | 45.0% | Goods group | 1.8% | $3,480.00 | $4,300.00 | Quick method |
| 50% | 50.0% | Goods group | 1.8% | $3,480.00 | $3,800.00 | Quick method |
At 39% the shop remits $7,260.00 under the quick method; at 40% it remits $3,480.00. A single percentage point of stock moves the bill by $3,780.00. Below the line the regular method is lower in all three rows shown, because the services rate lets the shop keep only 24.4% of the tax collected. Above it, the quick method is lower in all three. The prior year's purchases decide the rate for the current year. RC4058 separately requires a business whose nature changes, by adding a new service, buying another firm's operations or significantly changing its product lines or sales patterns, to work out again which rates apply.
RC4058 lists the sort of business that may use each group. Goods group: antique dealers, grocery and convenience stores, art and craft shops, boutiques and novelty stores, and gas service stations. Services group: auto repair shops, campgrounds, caterers, delicatessens, delivery service, dry cleaners, fast-food outlets, house-cleaning services, painting contractors, photographers, small manufacturers, taxi drivers and travel agencies. The lists are examples introduced by "may", and the 40% test is what applies.
The 1% credit and its $300 ceiling
The credit is the one part of the quick method that does not scale with revenue. RC4058 gives it its own section, "Credit of 1% on the first $30,000 of revenue from your eligible supplies" (checked November 3, 2026), and says "you are entitled to a 1% credit on the first $30,000 of revenue from your eligible supplies (including the GST/HST)" on which the business must collect GST at 5% or HST at the applicable rate, in each fiscal year. The section adds four conditions. The election must be in effect at the beginning of the fiscal year or, for a new registrant, on the day it became a registrant. A monthly or quarterly filer applies the credit to the first reporting period of a fiscal year and the following ones until the $30,000 is reached or the year ends, and an annual filer applies it to the first $30,000 of eligible revenue in the year. A business whose sales fall in a 0% remittance cell gets the 1% credit in addition to the credit built into that cell. And an unused part of the credit cannot be carried forward to a later fiscal year.
The ceiling is $300 a year, and the credit recurs every fiscal year in which the election was in effect on the first day. Two consequences follow from the wording. A business that elects in the middle of a year gets no credit for that year, because the election was not in effect at the start, and gets it from the next fiscal year on. And the credit is the same $300 whether the business sells $30,000 or $400,000, so it matters most at small revenues. For the consultant it is 2.5% of the pre-credit remittance. For a business remitting 8.8% on a tax-included $30,000 it would be 11% of the bill.
Which purchases still earn credits
The quick method does not turn ITCs off entirely. RC4058's section "Claiming input tax credits" (checked November 3, 2026) says a quick-method business can "claim any ITCs to which you are entitled for the following only", and the list is short: purchases of real property and improvements to real property; purchases of capital assets other than real property, such as computers and vehicles, and improvements to them; purchases on which the GST/HST became payable before the election took effect, if the time limit to claim has not expired; goods sold by an auctioneer or agent on the business's behalf where that person has to account for the tax; and goods that a non-resident who is not registered transferred to the business after paying tax on them, where the business provided a commercial service on the goods and sold them as the non-resident's agent, collecting the GST/HST.
The list has no row for operating costs, inventory, or purchases made to supply zero-rated services. For the Ontario consultant, a $3,000 laptop earns a $390.00 ITC under either method, so it drops out of the comparison. Software subscriptions, phone and internet, advertising and bookkeeping fees do not. RC4058 repeats the point for line 106: "The quick method remittance rates already take into account the ITCs for operating expenses and inventory purchases. Do not include any GST/HST paid or payable on these types of costs." Commercial rent is not named in RC4058. The CRA's input tax credit page (modified October 14, 2026, checked November 3, 2026) says "If you use the quick method of accounting, you cannot claim ITCs for your operating expenses", and names purchases of land and purchases on which capital cost allowance can be claimed, such as computers, vehicles and large equipment, as examples of purchases that may still earn credits. That page does not mention rent either. A lease payment is a periodic charge for using a property, not a purchase of land and not property on which capital cost allowance is claimed, so the natural reading of the CRA's sentence is that a tenant gets no ITC on rent under the quick method and that rent belongs in the purchase ratio next to utilities and advertising. That is a reading and not a CRA statement about rent, and a business whose lease is a close call can ask the CRA. The worked examples below leave rent out, so a tenant adds its pre-tax rent to taxable purchases before reading the tables.
The regular method has its own limits, and they matter because the break-even counts only the ITCs a business could actually claim. RC4022 (Rev. 25, page dated January 7, 2026) says a registrant cannot generally claim ITCs on certain capital property, on taxable purchases used to make exempt supplies, on membership fees or dues to a club whose main purpose is recreation, dining or sporting facilities, or on property or services bought for personal use, and that the expense must be reasonable in quality, nature and cost for the business. On meals and entertainment it allows 50% of the GST/HST where the income tax deduction is limited to 50%. The CRA's simplified-method instructions, which list what to leave out of a purchases total, name the expenses that carry no GST/HST: employees' salaries, insurance payments, interest, exempt or zero-rated purchases, and purchases from a non-registrant.
| Purchase | In the break-even ratio? | Why |
|---|---|---|
| Software, phone, advertising or bookkeeping fees from a registrant | Yes, in full | Taxable, used in the business, ITC only under the regular method |
| Inventory bought for resale from a registrant | Yes, in full | Same; this is the goods-group cost |
| Wages and pay to individuals who charge no tax | No | No GST/HST paid, so no ITC under either method |
| Insurance premiums, bank interest | No | RC4022 lists them among expenses without GST/HST |
| Purchases from a supplier who is not registered | No | RC4022 lists purchases from a non-registrant among purchases without GST/HST |
| Purchases from a vendor registered under the CRA's simplified regime for non-resident digital businesses | No | T4002 says GST/HST paid on purchases from these businesses is not eligible for ITCs |
| Commercial rent from a registered landlord | Likely yes | The CRA's ITC page says quick-method users cannot claim ITCs for operating expenses and does not name rent; confirm with the CRA |
| Business meals | Half | ITC limited to 50% |
| Laptop, equipment, vehicle (capital property) | No | ITC allowed under both methods, so it nets out |
| Personal-use share of any purchase | No | No ITC under either method |
Where the break-even sits
With sales and purchases taxed at the same rate, the algebra is short. Let q be the remittance rate as a decimal (0.088 for 8.8%), t the tax rate in percent (13 for 13%) and c the credit as a decimal share of revenue. Regular method tax is R x t/(100 + t) minus P x t/(100 + t); quick method tax is R x q minus c x R. Setting them equal and solving for the purchase ratio gives:
Break-even P/R = 1 minus (q minus c) x (100 + t) / t
P is taxable, ITC-eligible purchases and R is eligible revenue. Because both sides carry the same (100 + t), the ratio is the same whether measured before tax or after, so a business can use either its pre-tax invoices or its tax-included totals. Without the credit, the ratio equals the share of collected tax the quick method lets the business keep, which for Ontario services is 23.5%.
Two tables follow, one per group, with the break-even before the credit and then at five levels of tax-included revenue. Each row is a business selling in its own province at its own rate, which is where most small businesses sit. Cross-province sales use other cells of RC4058's grids, and the break-even for those depends on the rate the business paid on its purchases, so the lumber yard example below handles that case with a real return. In every row, a purchase ratio below the figure means the quick method remits less; above it, the regular method does.
Services group: break-even taxable purchases as a share of revenue
| Business located in | Remittance rate | Before the 1% credit | At $30,000 | At $50,000 | At $100,000 | At $200,000 | At $400,000 |
|---|---|---|---|---|---|---|---|
| 5% GST (AB, BC, MB, SK, NT, NU, YT) | 3.6% | 24.4% | 45.4% | 37.0% | 30.7% | 27.6% | 26.0% |
| 13% HST (Ontario) | 8.8% | 23.5% | 32.2% | 28.7% | 26.1% | 24.8% | 24.2% |
| 14% HST (Nova Scotia, from April 1, 2025) | 9.4% | 23.5% | 31.6% | 28.3% | 25.9% | 24.7% | 24.1% |
| 15% HST (NB, NL, PEI) | 10.0% | 23.3% | 31.0% | 27.9% | 25.6% | 24.5% | 23.9% |
Goods group: break-even taxable purchases as a share of revenue
| Business located in | Remittance rate | Before the 1% credit | At $30,000 | At $50,000 | At $100,000 | At $200,000 | At $400,000 |
|---|---|---|---|---|---|---|---|
| 5% GST (AB, BC, MB, SK, NT, NU, YT) | 1.8% | 62.2% | 83.2% | 74.8% | 68.5% | 65.4% | 63.8% |
| 13% HST (Ontario) | 4.4% | 61.8% | 70.4% | 67.0% | 64.4% | 63.1% | 62.4% |
| 14% HST (Nova Scotia, from April 1, 2025) | 4.7% | 61.7% | 69.9% | 66.6% | 64.2% | 62.9% | 62.3% |
| 15% HST (NB, NL, PEI) | 5.0% | 61.7% | 69.3% | 66.3% | 64.0% | 62.8% | 62.2% |
Revenue in the column headings is the tax-included figure, and the credit is 1% of the first $30,000 of it. The services group sits in a narrow band, 23.3% to 24.4% before the credit, because RC4058 sets each rate at about 76% to 77% of the tax charged. The goods group sits at 61.7% to 62.2% for the same reason, the rate being about 38% of the tax charged. The credit lifts the Ontario services break-even to 32.2% at $30,000 and to 24.2% at $400,000. A very small business gains the most, and a business at the $400,000 limit gains about 0.7 points.
The tables answer a narrower question than the one a business asks. They give the cutoff for the purchase ratio. They do not say what the ratio will be next year, and the election is not easily undone, as the section on leaving shows. A year with an unusual inventory build, a new subcontractor or a big advertising push can move a ratio by ten points.
An Ontario IT consultant under both methods
The worksheet case is a consultant who invoices $120,000 of fees in a calendar year to Ontario clients at 13% HST, a total of $135,600 with tax. The business is an IT services sole proprietorship, so the exceptions list does not apply, and the figures are inputs chosen for the example rather than a real business. Its purchases in the year, before HST, are:
| Taxable purchase (case A) | Before tax | HST paid at 13% |
|---|---|---|
| Software and cloud subscriptions | $4,800.00 | $624.00 |
| Phone and internet | $2,400.00 | $312.00 |
| Advertising and website | $2,400.00 | $312.00 |
| Bookkeeping and accounting fees | $2,000.00 | $260.00 |
| Office supplies | $1,200.00 | $156.00 |
| Travel | $1,200.00 | $156.00 |
| Total | $14,000.00 | $1,820.00 |
That is 11.7% of fees. Under the regular method the consultant remits $15,600.00 less $1,820.00, which is $13,780.00. Under the quick method the consultant remits $11,932.80 less the $300 credit, which is $11,632.80. The quick method remits $2,147.20 less. The $3,000 laptop's $390.00 ITC is claimed either way and is left out of both figures. If any of the software vendors were non-resident businesses on the simplified regime, their HST would earn no ITC and that spend would leave the ratio.
Case B changes one input. The consultant brings on a subcontractor registered for HST and pays $30,000 before tax for work passed through to clients. Purchases rise to $44,000, or 36.7% of fees, and the HST paid on them to $5,720.00. The regular method now remits $9,880.00. The quick method still remits $11,632.80, so the regular method is lower by $1,752.80. The break-even for these inputs is 25.4% of fees, or $30,516.92 of taxable purchases, and the table below walks across it. The quick method column does not move, because the quick remittance depends only on revenue.
| Taxable purchases, % of fees | Taxable purchases before tax | Regular method net tax | Quick method net tax | Which is lower |
|---|---|---|---|---|
| 5.0% | $6,000.00 | $14,820.00 | $11,632.80 | Quick method, by $3,187.20 |
| 10.0% | $12,000.00 | $14,040.00 | $11,632.80 | Quick method, by $2,407.20 |
| 11.7% (case A) | $14,000.00 | $13,780.00 | $11,632.80 | Quick method, by $2,147.20 |
| 15.0% | $18,000.00 | $13,260.00 | $11,632.80 | Quick method, by $1,627.20 |
| 20.0% | $24,000.00 | $12,480.00 | $11,632.80 | Quick method, by $847.20 |
| 25.0% | $30,000.00 | $11,700.00 | $11,632.80 | Quick method, by $67.20 |
| 30.0% | $36,000.00 | $10,920.00 | $11,632.80 | Regular method, by $712.80 |
| 36.7% (case B) | $44,000.00 | $9,880.00 | $11,632.80 | Regular method, by $1,752.80 |
| 40.0% | $48,000.00 | $9,360.00 | $11,632.80 | Regular method, by $2,272.80 |
Each extra $1,000 of taxable purchases cuts regular-method tax by $130.00 and leaves quick-method tax alone, which is why the two columns cross exactly once and never bend. It is also why the ratio is sensitive for a service business. When purchases are small, a single new registered subcontractor or an equipment-heavy contract can put the business on the wrong side of the line without anyone noticing.
The $2,147.20 in case A is cash that stays in the business. It is not after-tax income, as the section on the return explains.
An Alberta art and craft shop under both methods
The shop sells gifts and crafts from a Calgary storefront, one of the business types RC4058 lists for the goods group. Pre-tax sales are $200,000 and GST at 5% brings tax-included sales to $210,000. Cost of goods bought for resale in the previous year was $100,000 before GST, $105,000 with it, which is 50% of tax-included sales and clears the 40% test. Other taxable purchases, again without rent, are:
| Taxable purchase other than stock | Before GST | GST paid at 5% |
|---|---|---|
| Utilities | $4,800.00 | $240.00 |
| Packaging | $3,600.00 | $180.00 |
| Advertising | $4,800.00 | $240.00 |
| Point-of-sale software subscription and web hosting | $3,000.00 | $150.00 |
| Shop supplies and repairs | $4,800.00 | $240.00 |
| Delivery and courier | $3,000.00 | $150.00 |
| Total | $24,000.00 | $1,200.00 |
Taxable purchases total $124,000, 62.0% of pre-tax sales. The shop collected $10,000.00 of GST. Under the regular method its ITCs are $6,200.00, so it remits $3,800.00. Under the quick method it remits 1.8% of $210,000, which is $3,780.00, less the $300 credit, which is $3,480.00. The quick method remits $320.00 less. The same thin margin that makes the saving small makes the break-even high: 65.2% of sales in total purchases, or 53.2% in cost of goods with the other $24,000 unchanged.
| Cost of goods bought, % of sales | Cost of goods before tax | Total taxable purchases, % of sales | Regular method net tax | Quick method net tax | Which is lower |
|---|---|---|---|---|---|
| 40% | $80,000 | 52.0% | $4,800.00 | $3,480.00 | Quick method, by $1,320.00 |
| 45% | $90,000 | 57.0% | $4,300.00 | $3,480.00 | Quick method, by $820.00 |
| 50% | $100,000 | 62.0% | $3,800.00 | $3,480.00 | Quick method, by $320.00 |
| 55% | $110,000 | 67.0% | $3,300.00 | $3,480.00 | Regular method, by $180.00 |
| 60% | $120,000 | 72.0% | $2,800.00 | $3,480.00 | Regular method, by $680.00 |
| 65% | $130,000 | 77.0% | $2,300.00 | $3,480.00 | Regular method, by $1,180.00 |
| 70% | $140,000 | 82.0% | $1,800.00 | $3,480.00 | Regular method, by $1,680.00 |
| 75% | $150,000 | 87.0% | $1,300.00 | $3,480.00 | Regular method, by $2,180.00 |
This table decides the shop's year on two points. First, the saving never gets large: at 40% cost of goods the quick method is $1,320.00 lower, and that is the most the table shows. A retailer with a wide margin gets the credit and a rate advantage and little else. Second, the shop cannot see the crossing in a single quarter. Cost of goods swings with the season, and the election is made for a year at a time. A shop with 65% cost of goods and the same $24,000 of other purchases would remit $1,180.00 less under the regular method.
There is also an exit cost. Suppose the shop leaves the quick method with $20,000 of unsold stock bought while it was on the method. RC4058 (section "How to revoke the election") bars ITCs on tax paid or payable on purchases made while on the method, other than ITCs the business was entitled to claim but did not. The $1,000.00 of GST on that stock is gone. It is a small figure for a shop of this size, and a large one for a shop carrying a year of stock.
Selling into another province: the lumber yard return
The two examples above sell in the province where the business sits. RC4058's own worked return does not, and it is a useful check on the arithmetic. Al and Bob's Lumber Yard in Hamilton, Ontario sold $45,000 of goods in the first quarter of 2025, tax included: $36,000 in Ontario at 13% HST and $9,000 to Manitoba at 5% GST. In 2024 its taxable sales were $140,000 and goods for resale cost $63,000, which is 45% and clears the 40% test. Because it made 80% of its sales in Ontario and 20% in Manitoba, neither side reached 90%, so two rates apply.
| Step | Calculation | Amount |
|---|---|---|
| Ontario sales | $36,000 x 4.4% (Column 2, 13% row) | $1,584.00 |
| Manitoba sales | $9,000 x 0% (Column 2, 5% row) | $0.00 |
| Line 103 total | $1,584.00 | |
| Credit for Manitoba sales | $9,000 x 2.8% (line 106) | -$252.00 |
| 1% credit | 1% of the first $30,000 (line 107) | -$300.00 |
| First-quarter remittance | $1,032.00 |
The result, $1,032.00, is the figure printed in RC4058, and it agrees with the arithmetic used throughout this guide. The Manitoba line shows the sign convention for the 0% cells: the sales add nothing to line 103 and a $252.00 credit to line 106, so those sales reduce the quarter's bill.
Filing the return, and what the saving does to income tax
The return changes in four lines. Line 101 is eligible revenue including the tax, rounded to the nearest dollar. Line 103 is that revenue times the remittance rate, plus any tax on supplies not eligible for the method. Line 106 holds ITCs on the short list of allowed purchases plus any 0%-rate credits. Line 107 holds the 1% credit. The consultant's first two quarters, with revenue spread evenly at $33,900.00 a quarter, look like this:
| Line | Quarter 1 | Quarter 2 |
|---|---|---|
| 101 Sales and other revenue | $33,900 | $33,900 |
| 103 GST/HST collected, at 8.8% | $2,983.20 | $2,983.20 |
| 106 ITCs (capital purchases only) | $0.00 | $0.00 |
| 107 1% credit | $300.00 | $0.00 |
| 109 Net tax | $2,683.20 | $2,983.20 |
The year totals $11,632.80, matching the $11,632.80 in the case A comparison. The credit is used up in the first quarter because the quarter's $33,900 already passes $30,000.
Supplies the method does not cover stay on the regular side of the return. RC4058 lists them: zero-rated supplies, supplies made outside Canada, certain supplies to Indians, sales of real property and capital assets, supplies made as an agent or auctioneer for which tax must be accounted for, supplies to employees or shareholders that are taxable benefits, self-assessed appropriations for personal benefit, and self-assessed warranty reimbursements. A consultant whose clients are partly outside Canada has export fees that fall in this group: they stay off line 101 and earn no quick-method rate, and since the list of allowed ITCs above has no row for purchases that served them, those purchases earn none either. They do count toward the $400,000 limit.
The saving is also income. The T4002 guide for self-employed income (2025 edition, Rev. 25) tells a quick-method user to work out government assistance in the revenue section: amount 3D is the GST/HST collected or collectible on eligible sales, commissions and fees, amount 3E is the eligible revenue plus the tax multiplied by the remittance rate, and "The subtotal at amount 3F is amount 3D minus amount 3E", which is then added to adjusted gross sales. Under other income, the same guide tells the filer to report the 1% credit (maximum $300) claimed on the GST/HST return. For the consultant, amount 3D is $15,600.00, 3E is $11,932.80 and 3F is $3,667.20; the $300 credit is reported separately, so $3,967.20 reaches income. Under the regular method T4002 treats ITCs as government assistance that reduces the related expense or asset cost instead. The break-even ratio is a comparison of the two remittances in cash, so it does not change. The after-tax gain, though, is smaller than the cash gain, because the quick method's added income is taxed at the owner's marginal rate. How the HST paid on purchases is deducted under each method is outside this arithmetic.
GST/HST instalments are a separate matter from income tax instalments. RC4022 says an annual filer whose net tax was $3,000 or more last year and is $3,000 or more this year must make quarterly instalments, usually equal to one quarter of the previous year's net tax, and that the business may instead base them on an estimate of the current year's net tax. For an annual-filing consultant in case A, a quarter of the regular-method net tax is $3,445.00 and a quarter of the quick-method net tax is $2,908.20. In the first year on the quick method the default calculation still follows the prior regular-method year, so the lower amount applies from the start only if the business uses its own estimate. Income tax instalments follow their own test, covered in CRA tax instalments. The CPP, income tax and GST/HST amounts that a self-employed Canadian puts aside are laid out in how much to set aside when self-employed, which treats collected GST/HST as money held for the government and leaves it out of the income percentages.
Leaving the election, and the traps on the way out
An election is not a trial. RC4058 allows revocation only after the election has been in effect for at least one year. The business revokes online (My Business Account or Represent a Client) or on Form GST74, and must do so by the due date of the GST/HST return for the last reporting period it wants on the quick method. After revoking it must wait at least one year before electing again. And RC4058 says "you cannot claim ITCs for any tax paid or payable on purchases you made while using it", other than ITCs the business was entitled to claim but did not claim while on the method.
The election can also end without the business choosing. RC4058 says it stays in effect while revenue stays within $400,000 and the business remains eligible. When either stops being true, the regular method returns on a date set by the filing frequency:
| Filer | Conditions (all must apply) | The regular method starts |
|---|---|---|
| Annual returns | In the current fiscal year the business exceeds $400,000 or becomes a type of business that cannot use the quick method | Beginning of the next fiscal year |
| Monthly or quarterly | The election was in effect at the beginning of the fiscal year, and the business exceeded $400,000 in its previous fiscal year | Beginning of the second fiscal quarter of the fiscal year |
| Monthly or quarterly | The election was not in effect at the beginning of the fiscal year, and the business exceeded $400,000 in both the first four and the last four consecutive quarters of the previous five fiscal quarters | Beginning of the next fiscal quarter |
| Monthly or quarterly | The business becomes a type of business that cannot use the quick method because of the type of business it began to carry on in the fiscal quarter | Beginning of that fiscal quarter |
Three accounting rules also differ from the regular method. On bad debts, RC4058 allows no adjustment to net tax except for supplies that are not eligible for the quick method calculation. A quick-method business that is never paid still remits on the invoice. On price reductions, a credit, refund or rebate given for a lower price on an eligible supply comes off eligible revenue before the rate is applied, in the reporting period when the customer is credited or paid. On trade-ins, the full price counts: RC4058's example is a $100 pair of skates sold with a $35 credit for a used pair, and the business includes $100 in eligible sales.
Self-assessment also sits outside the method. A business that has to self-assess the provincial part of the HST, as when it brings goods into a participating province from another province, does so at the full rate and reports it on line 405, not through a remittance rate.
Testing your own purchase ratio
The comparison takes five inputs and about ten minutes with last year's records. Pull the revenue figure including tax, as the quick method does; the GST/HST calculator backs the tax out of a tax-included total for any province. List purchases that carried GST or HST and came from registrants, drop the items in the table above that do not belong, and add them up before tax. Divide by revenue before tax. Compare the result with the row for the business's province and group in the tables above. Then check the group itself, since a retailer under 40% cost of goods is in the services table whatever it sells.
A result within a few points of the line deserves dollars, not percentages. In Ontario a one-point move in the purchase ratio is $156.00 on $120,000 of fees, and in Alberta at the 5% rate it is $100.00 on $200,000 of sales. The credit is worth $300 either way. Those amounts sit beside the time spent recording tax on each purchase, which the quick method removes and which RC4058 names as its purpose. For anyone weighing GST/HST inside a pricing decision, markup versus margin works the conversion between cost, price and margin, and the self-employed and seller math hub collects the Canadian and US set-aside guides next to it.
Sources
- Canada Revenue Agency, RC4058 Quick Method of Accounting for GST/HST, RC4058(E) Rev. 25, page dated 2025-07-21: eligibility, exceptions, remittance-rate grids, applicable-rates table, 1% credit, ITC list, election, revocation, return lines and worked examples. The publication landing page carries the same date. Checked November 3, 2026.
- Canada Revenue Agency, RC4022 General Information for GST/HST Registrants, Rev. 25, page dated 2026-01-07: ITC restrictions, meals and entertainment, simplified method for claiming ITCs, instalments. Checked November 3, 2026.
- Canada Revenue Agency, GST/HST calculator and rates, rates by province (modified 2025-04-01), and Charge and collect the GST/HST (page dated 2026-04-08), which reports the Nova Scotia decrease as the current rate change. Checked November 3, 2026.
- Canada Revenue Agency, Input tax credits, page modified 2026-10-14: the sentence that quick-method users cannot claim ITCs for operating expenses, and the purchases that may still qualify. Checked November 3, 2026.
- Canada Revenue Agency, T4002 Self-employed Business, Professional, Commission, Farming, and Fishing Income, T4002(E) Rev. 25 (2025 tax year): treatment of quick-method amounts and the 1% credit in income, and the note that GST/HST paid to simplified-regime vendors is not eligible for ITCs. Checked November 3, 2026.
- Break-even ratios, the consultant and shop comparisons, the lumber-yard check and every dollar figure in the tables are figured here from the rates above. The two worked businesses are illustrations with their inputs stated. Quebec is not in the tables: Quebec businesses generally file with Revenu Québec and RC4058's applicable-rates table has no Quebec row. The arithmetic applies published rules to stated inputs and is not tax advice.