Streamlining small business tax filing can save business owners time and headaches during tax season. Some businesses are eligible for Quick Method Accounting for their HST/ GST tax filings. The HST quick method tax filing method uses quick method remittance rates to tabulate the tax credits for most purchases. If a small business owner opts for this method, then they are not required to report the actual GST or HST tax paid on applicable purchases. However, HST and GST quick method accounting may be highly scrutinized by the Canadian Revenue Agency (CRA). A professional tax preparation attorney at Jeremy Scott Law can guide small business owners to the correct method of filing business sales tax to reduce their tax liability. Contact the firm today at (902) 403-7201 for a consultation.
What Factors Determine the Quick Remittance Rates?
The quick remittance rates are based on several factors:
- The HST or GST tax rate that applies to the purchases
- The permanent establishment of the small business
- Whether the small business provides goods for resale vs. providing professional services
Not all supplies are eligible for GST quick method accounting. Furthermore, if a small business owner makes certain changes in the nature of their business, their eligibility for GST/ HST quick method accounting could be in jeopardy.
Eligibility for GST/ HST Quick Method Accounting
The eligibility of supplies to qualify for GST/ HST quick method accounting is covered under Subsection 123(1) of the Excise Tax Act. The Excise Tax Act classifies a “supply” in the following manner: “the provision of property or a service in any manner.” Therefore, a supply in this sense may be considered either a good or a service provided by a business in the form of a sale. “Sale” can also include transfers such as:
- Barter
- Gifts
- Rental or lease
- Dispositions
- Licenses
- Other types of exchanges
If you are unsure whether your supplies qualify for HST quick method accounting, or if you are unsure which types of transfers qualify as a sale, request a consultation from a Canadian business tax attorney at Jeremy Scott Law.
Is My Business Eligible for Quick Method GST/HST Accounting?
Not every business is eligible to participate in GST quick method accounting to calculate business sales tax. Business owners may want to confirm with a tax attorney as the list can change, but if a business falls into one of the following categories, it is most likely ineligible:
- Provides financial consulting, tax preparation or consulting, or book-keeping services
- Provides actuarial, accounting, or legal services
- Operates a charity or certain type of non-profit organization
- A municipality or a local authority designated as municipality
- A public, not-for-profit school or university, or a school authority
- A not-for-profit public institution with at least 40% funding from government sources
- A listed financial institution
Furthermore, to qualify for GST/ HST quick method accounting, the business may not exceed a $400,000 revenue threshold, calculated from the entity’s most recent four consecutive quarters. Revenue for the purpose of determining quick method accounting eligibility includes:
- Sale of real property
- Revenue derived from supplying financial services
- Sale of capital property
Businesses must file an election to use this method of tax accounting. Quick method accounting may not be the only option available for a business, nor the most appropriate one to reduce a particular business’s specific tax burden. An experienced tax attorney may be able to evaluate the options and provide insight to help business owners achieve their financial goals.
The Quick Method Accounting Process
Under the HST quick method or GST quick method, the business will still charge customers the appropriate HST/GST tax rate. The difference between using the quick method and the traditional method is the total GST/ HST the business owes upon filing its annual return. The Remittance Rates reflect the value of the tax credits the business would have claimed under the traditional method of filing. The business also receives a 1% tax credit for the first $30,000 in eligible supplies it provides.
The business calculates the total billable sales and the total GST/ HST tax assessed from customers. Then, the business owner, or their tax attorney if applicable, applies the quick method remittance rate to the total and deducts the 1% credit noted above. Transactions including real property or eligible capital property may affect the business’s tax filing, as the business may claim ITCs on these transactions. The business may also qualify for ITCs on purchases made before it elected to use the Quick Method Accounting, or for goods bought strictly for use in its commercial activities.
Assessing Tax on Eligible and Non-Eligible Supplies
Business owners must report the full amount of tax charged for supplies ineligible for quick method accounting. Most supplies are eligible; however, a tax attorney may be able to analyze all supplies provided by a business to ensure compliance with Canada Revenue Agency standards.
These supplies are ineligible for quick method accounting:
- Any tax-exempt supplies
- Any supplies made outside the country
- Zero-rated supplies
- Sale of eligible capital property or real property
- Supplies stemming from services as an auctioneer or agent
Remittance Rates for Quick Method GST/HST Accounting
Each province sets its own remittance rates, so the tax assessed will vary depending on the business location. Furthermore, different HST and GST rates apply to different classifications of supplies. Business owners can check the CRA’s Publication RC4058 for tables of the remittance rates of each province and type of supply.
Bear in mind that if the business makes sales or supplies in both participating and non-participating provinces, then it will be necessary to calculate different remittance rates for its GST/ HST taxes. However, if more than 90% of the supplies generated by the business were either in a non-participating or a participating province, then a special rule applies to that business’s tax filing. Again, though, business owners may want to check with a tax preparation attorney to ensure their business’s eligibility for the special rule.
Experienced Tax Attorneys Help Small Businesses With GST/ HST Quick Method Accounting
Switching to the HST quick method of accounting for your small business may take careful evaluation. The advice of a professional small business tax attorney can help. If you have questions about your business’s eligibility for GST quick method accounting or wish to learn more about cost-saving opportunities for your business, contact Jeremy Scott Law at (902) 403-7201 to schedule a consultation with an experienced Canadian GST/HST tax lawyer.