The GST/HST Quick Method in Canada: Does It Pay for a Labour-Heavy Contractor?

At your year-end meeting, your accountant asks whether you want the GST/HST Quick Method for 2027. On the same $120,000 of sales in Ontario, it saves a painter $2,407 and costs a renovator $3,053. What you buy decides it.

Both contractors bill $120,000 a year plus HST. Under the GST/HST Quick Method, each sends the CRA $11,632.80. Under the regular method, the painter sends $14,040 and the renovator sends $8,580. The difference is how much of your spending carries HST, and for a labour-heavy business the Quick Method usually leaves more money in the account.

The Quick Method of Accounting is optional, an election rather than a requirement. You still charge customers the full tax: 5% GST, or the Harmonized Sales Tax that combines it with the provincial share (13% in Ontario, 14% in Nova Scotia, 15% in New Brunswick, Newfoundland and Labrador and PEI). But instead of subtracting input tax credits, the HST you paid on business purchases, you remit a fixed percentage of your HST-included sales and keep the rest. The rules sit in section 227 of the Excise Tax Act and Part IV of the Streamlined Accounting (GST/HST) Regulations, and the CRA explains them in its guide RC4058.

If you’re still working out whether you have to register at all, start with our piece on GST/HST for contractors and the $30,000 line.

The painter and the renovator, worked through

Both are in Ontario, on the services rate, and file annually with the election in effect from 1 January. The figures are illustrative. “HST-bearing costs” means everything that carries HST, not just materials. Wages, the owner’s own time and insurance don’t carry it, so they never count.

The painter’s spending is mostly paint, tape and fuel, so there’s little HST to claim back and the fixed rate wins. The renovator buys cabinets, lumber and fixtures and pays HST on a plumber’s and an electrician’s invoices, so the actual credits beat the fixed rate easily. The painter’s $2,407.20 is taxable income, though, so the real gain is that figure less income tax at your marginal rate.

Where the GST/HST Quick Method breaks even

In Ontario at these sales, the two methods break even when HST-bearing costs are about 25% of sales before tax, or roughly $30,500 on $120,000. Below that share, the Quick Method usually costs you less; above it, keep claiming actual ITCs. The break-even share drifts down a little as sales grow, because the $300 credit doesn’t. At the same sales it’s about 29% in the GST-only provinces and about 25% in Nova Scotia and the 15% provinces.

Labour carries no HST, so the more of your hourly rate that pays for labour, the more likely you are to land on the Quick Method side.

Check your rate group before you compare

RC4058 has a lower set of rates for businesses whose purchases of goods for resale reach 40% of their sales, and in Ontario that rate is 4.4%. The guide lists painting contractors with the service businesses and says nothing either way about renovators or general contractors. If a materials-heavy contractor did qualify for the goods rate, the Quick Method would come out ahead again. Ask your accountant which group you’re in before you rely on the renovator’s answer.

How the GST/HST Quick Method remittance is worked out

You multiply your HST-included sales by a remittance rate. For a service business with its permanent establishment in Ontario, doing Ontario work, the rate is 8.8%. In the GST-only provinces it’s 3.6%, in Nova Scotia 9.4%, and in New Brunswick, Newfoundland and Labrador and PEI it’s 10.0%. Different rates apply to work you do in another province, though if 90% or more of your eligible sales are in your own province you use its rate for everything.

You also get a 1% credit on the first $30,000 of HST-included sales each year, so up to $300. The credit only applies if the election is in effect on the first day of your fiscal year, which makes a 1 January start worth more than a mid-year one.

What you give up on the GST/HST Quick Method is the input tax credit on day-to-day costs. That covers materials, fuel, small tools, your phone and the HST on registered subcontractors’ invoices. You can still claim ITCs on capital property such as the truck, the trailer or a laptop, and on real property. Those claims are the same under either method, so they drop out of the comparison. The CRA’s T4002 guide has you report the tax you keep as business income on your T2125, along with the $300 credit.

Who can elect the GST/HST Quick Method

RC4058 sets four conditions, and you have to meet all of them:

• Your worldwide taxable sales, including the GST/HST and the sales of any associated business, were $400,000 or less in either the first four or the last four of your last five fiscal quarters.
• You’ve been in business continuously for the 365 days before the period you start in, and you haven’t revoked a Quick Method election in that time.
• You have a permanent establishment in Canada.
• Your business isn’t on the excluded list, which covers bookkeeping, tax preparation, legal, accounting and financial consulting, among others. No construction trade is excluded.

Sales of real property, capital assets and financial services don’t count toward the $400,000. In Ontario that ceiling works out to about $354,000 of sales before tax.

How to elect for 1 January 2027

For a calendar-year business that wants the GST/HST Quick Method, and the $300 credit, for 2027:

1. Check the four conditions against your figures to 31 December, then run the comparison on this year’s numbers. Count every cost that carried HST, including subcontractors’ invoices.
2. Choose 1 January 2027 as the start date. The method always starts on the first day of a reporting period.
3. File the election through My Business Account, the CRA’s online portal for business owners, or on Form GST74 sent to your tax services office. An annual filer has until 1 April 2027, the first day of the second fiscal quarter. A quarterly filer has until the due date of the first-quarter return, 30 April 2027. A monthly filer has until the due date of the January return, one month after the month ends.
4. Stay in for at least a year. You can revoke only after a full year in the method, and after revoking you wait another year before electing again.

What changes on the return

Your bookkeeper puts HST-included sales on line 101, the remittance on line 103, the $300 credit on line 107, and only capital ITCs on line 106. Keep every purchase invoice for six years anyway. In Quebec, Revenu Québec runs its own quick method for the QST.

If you’re reviewing the year more broadly, our pieces on sole proprietor versus corporation and T5018 slips for subcontractor payments cover the other year-end decisions.