Ontario HST Quick Method rates: 8.8% for services, 4.4% for goods

The Ontario rates from RC4058

CRA RC4058 publishes a table of remittance rates for each type of supply you make. For a permanent establishment in Ontario (a participating province with 13% HST), the rates are:

You apply each rate to the tax-included amount of supplies made at that tax rate, so an Ontario business that also bills some clients in Alberta at 5% GST uses 8.8% on the Ontario sales and 1.8% on the Alberta sales.

Services rate or goods rate?

The lower “goods” rates are for businesses that buy goods to resell. RC4058 lets you use them only if the cost of goods you bought for resale (including GST/HST) in the previous fiscal year was at least 40% of your taxable supplies (including GST/HST) for that year. If your purchases of goods for resale are below 40%, you use the services rates. Most freelancers, consultants, trades people who mainly bill labour, and drivers use the services rate.

Worked example at 8.8%

An Ontario web developer bills $80,000.00 plus 13% HST of $10,400.00, so tax-included sales are $90,400.00.

• 8.8% × $90,400.00 = $7,955.20
• Minus the 1% credit on the first $30,000 of tax-included sales: −$300.00
• Quick Method remittance: $7,655.20

Under the regular method, the developer would remit $10,400.00 minus their ITCs. The two methods are equal at $2,744.80 of ITCs, which is about $21,113.85 of 13%-taxed expenses. That is the same break-even figure the calculator on our home page shows with its default inputs.

Why the rate is lower than 13%

The rate is not a discount on the tax you charge. It is CRA's estimate of HST collected minus the HST a typical business in your category would have paid on its expenses. A service business usually buys fewer taxable inputs than a retailer, so it keeps less of the HST and its remittance rate is higher (8.8%) than a reseller's (4.4%).

The 1% credit

Every Quick Method user can deduct 1% of the first $30,000 of eligible tax-included supplies in each fiscal year, a maximum of $300, if the election is in effect at the start of the fiscal year (or on the day a new registrant registers). Unused credit does not carry forward. If you elect partway through a year, check RC4058 before you include it.

When the $400,000 ceiling ends the election

The rates above only apply while your Quick Method election is in effect. RC4058 says it generally stays in effect as long as your annual worldwide taxable supplies (GST/HST included, with associates) do not exceed $400,000. Once you pass that, you have to switch to the regular method, and the date depends on how you file:

• Annual filers: the beginning of the next fiscal year, if you exceed $400,000 in the current fiscal year.
• Monthly or quarterly filers whose election was in effect at the start of the fiscal year: the beginning of the second fiscal quarter, if you exceeded $400,000 in the previous fiscal year.
• Monthly or quarterly filers who elected part-way through the fiscal year: the beginning of the next fiscal quarter, if you exceeded $400,000 in both the first four and the last four consecutive quarters of the previous five fiscal quarters.

RC4058 also says that after you stop using the Quick Method, you cannot claim ITCs for tax paid on purchases you made while using it, other than ITCs you were entitled to but did not claim. If your sales are approaching $400,000, run both methods in the free calculator linked below so the switch does not come as a surprise.