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GST and QST Return for a Self-Employed Worker

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An income tax return and a GST and QST return are two separate processes.

On a personal income tax return, a self-employed worker reports business income and expenses to calculate net taxable business income. A GST and QST return is used to calculate the taxes that must be remitted to Revenu Québec or the refund that may be claimed.

This page explains:

• the $30,000 small-supplier threshold;
• registration for the GST and QST;
• the difference between taxable, zero-rated and exempt supplies;
• the standard and Quick Methods of accounting;
• input tax credits and input tax refunds;
• reporting periods and filing deadlines;
• special rules for Uber and Lyft drivers.

The $30,000 Threshold and Small-Supplier Status

A person is generally considered a small supplier when the total value of their taxable supplies, including zero-rated supplies, does not exceed $30,000:

• in a particular calendar quarter;
• or over the four preceding consecutive calendar quarters.

The calculation generally includes taxable supplies made worldwide by the person and their associates. GST and QST, financial services and sales of capital property are generally excluded from the calculation.

A self-employed worker who qualifies as a small supplier:

• is generally not required to register for the GST and QST;
• does not charge GST or QST;
• cannot claim input tax credits or input tax refunds.

For more information, consult Revenu Québec’s page on small suppliers.

What Happens When the Threshold Is Exceeded?

The consequences depend on how the $30,000 threshold is exceeded.

Threshold Exceeded in a Single Calendar Quarter

If taxable supplies exceed $30,000 during a single calendar quarter, the self-employed worker immediately ceases to be a small supplier.

The sale that caused the threshold to be exceeded becomes taxable. GST and QST must therefore be collected on that sale and on all subsequent taxable sales.

Threshold Exceeded Over Four Consecutive Calendar Quarters

If taxable supplies exceed $30,000 over four consecutive calendar quarters without exceeding that amount in any single quarter, the self-employed worker generally ceases to be a small supplier at the end of the month following those four quarters.

The effective registration date must be determined carefully because it establishes when the person must begin collecting GST and QST.

Voluntary Registration

A self-employed worker may register voluntarily even when taxable supplies do not exceed $30,000.

Voluntary registration may be beneficial when the person incurs significant expenses on which GST and QST are paid, since input tax credits and input tax refunds may then be claimed on eligible purchases.

However, voluntary registration also creates obligations:

• charging GST and QST on taxable sales;
• filing the required returns;
• remitting net taxes by the applicable deadlines;
• maintaining adequate records;
• generally remaining registered for at least one year.

Voluntary registration is not necessarily beneficial in every situation. The recoverable taxes should be compared with the administrative requirements and the effect of charging taxes to customers.

Registering for the GST and QST

In Québec, Revenu Québec generally administers both the GST and QST. Registration can be completed:

• in the Consumption Taxes section of My Account for businesses;
• through Revenu Québec’s online registration service;
• by filing form LM-1, Application for Registration.

Consult Revenu Québec’s page on how to register for the GST and QST.

Taxable, Zero-Rated and Exempt Supplies

Before preparing a return, the nature of the sales must be determined.

Taxable Supplies

Taxable supplies are generally subject to:

• GST at 5%;
• QST at 9.975%.

A registrant charges the taxes and can generally claim input tax credits and input tax refunds on eligible expenses.

Zero-Rated Supplies

Zero-rated supplies are taxable at a rate of 0%. No tax is charged to the customer, but a registrant can generally claim input tax credits and input tax refunds on expenses related to those supplies.

Exempt Supplies

GST and QST are not charged on exempt supplies. As a general rule, taxes paid on expenses related to exempt supplies do not qualify for input tax credits or input tax refunds.

The 5% and 9.975% rates should therefore not simply be applied to all business income. The nature of each activity must first be determined.

Income Tax Return Versus GST and QST Return

The same accounting records are often used to prepare both returns, but the calculations are different.

Income Tax Return

On an income tax return, a self-employed worker generally reports:

• gross business income;
• eligible business expenses;
• net business income.

When input tax credits and input tax refunds are claimed, income and expenses are generally recorded without the recoverable taxes.

For example, a sale of $1,000 plus taxes generally represents $1,000 of business income, not $1,149.75.

GST and QST Return

A GST and QST return is used to report:

• sales and other supplies covered by the return;
• GST and QST collected or collectible;
• eligible input tax credits and input tax refunds, depending on the accounting method used;
• applicable adjustments;
• the balance payable or refund claimed.

A return must be filed for every required reporting period, even when no amount is payable.

Standard Method of Calculating GST and QST

Under the standard method, also called the regular method, net tax is generally calculated as follows:

GST and QST collected or collectible on sales
minus eligible ITCs and ITRs on purchases
equals net GST and QST to remit

Input Tax Credits and Input Tax Refunds

A registrant can generally recover:

• GST through an input tax credit, or ITC;
• QST through an input tax refund, or ITR.

The purchases must generally have been made in the course of commercial activities that qualify for tax recovery. Supporting documents must be retained.

Restrictions may apply when an expense includes a personal or non-commercial component.

For example:

• a telephone used 60% for business generally qualifies for 60% of the eligible taxes;
• taxes related to automobile expenses must be limited to the eligible business-use percentage;
• meals and entertainment expenses are subject to special rules.

Example Using the Standard Method

A self-employed worker makes taxable sales of $50,000 before taxes.

Taxes charged:

• GST: $50,000 × 5% = $2,500;
• QST: $50,000 × 9.975% = $4,987.50.

The worker also incurs $10,000 of fully eligible expenses before taxes.

Taxes paid:

• GST ITC: $10,000 × 5% = $500;
• QST ITR: $10,000 × 9.975% = $997.50.

Net taxes to remit:

• GST: $2,500 − $500 = $2,000;
• QST: $4,987.50 − $997.50 = $3,990;
• total payable: $5,990.

This example assumes that all sales are taxable and that all expenses qualify for full tax recovery.

Quick Method of Calculating GST and QST

The Quick Method is a simplified accounting method available to certain small businesses.

The business continues to charge its customers GST at 5% and QST at 9.975%. However, instead of claiming the actual ITCs and ITRs paid on most operating expenses, it calculates the taxes to remit by applying prescribed rates to its taxable sales, including taxes.

The Quick Method may be beneficial for a service business with relatively few taxable expenses. However, it may be less advantageous for a business that pays significant GST and QST on its operating expenses.

Consult Revenu Québec’s page on the Quick Method of accounting.

Who Can Use the Quick Method?

To qualify, a business must meet the limits established by Revenu Québec.

Its annual worldwide taxable sales must generally not exceed:

• $400,000, including GST, under the GST system;
• $418,952, including QST, under the QST system.

The calculation generally includes zero-rated sales and sales made by associated persons. It excludes exempt sales, financial services, sales of real property and sales of capital property.

Certain businesses cannot use the Quick Method, including businesses that provide:

• legal services;
• accounting services;
• actuarial services;
• financial or tax consulting services;
• bookkeeping services;
• income tax return preparation services.

Eligibility should always be verified before electing to use the Quick Method.

Quick Method Remittance Rates

The applicable rates depend on the nature of the business.

Service Businesses and Other Businesses

The rates generally applicable to businesses that primarily provide services are:

• 3.6% for GST;
• 6.6% for QST.

These rates are applied to taxable sales including taxes, not to sales before taxes.

Certain Retailers and Wholesalers

The following rates may apply to eligible retailers and wholesalers:

• 1.8% for GST;
• 3.4% for QST.

To use these rates, the cost of goods purchased for resale must generally represent at least 40% of annual taxable sales, subject to the applicable rules.

Consult Revenu Québec’s page on the Quick Method remittance rates.

The 1% Credit

An eligible business using the Quick Method may generally claim a 1% credit on the first portion of its taxable sales in each fiscal year:

• on the first $30,000 of taxable sales, including GST;
• on the first $31,421 of taxable sales, including QST.

Zero-rated sales are excluded from this calculation.

The credit must be entered as an adjustment:

• on line 107 of the GST return;
• on line 207 of the QST return.

Any unused portion of the credit cannot be carried forward to a subsequent fiscal year.

ITCs and ITRs Under the Quick Method

A business using the Quick Method generally cannot claim ITCs or ITRs for most operating expenses because the reduced remittance rates already take those taxes into account.

However, ITCs and ITRs may still be available for certain purchases of capital property used primarily in commercial activities, subject to the applicable requirements.

It is therefore important to compare the two methods before making an election.

Example Using the Quick Method

Consider a self-employed worker who primarily provides services:

• taxable sales before taxes: $50,000;
• sales including GST: $52,500;
• sales including QST: $54,987.50.

Calculation before the 1% credit:

• GST: $52,500 × 3.6% = $1,890;
• QST: $54,987.50 × 6.6% = $3,629.18.

If the business qualifies for the maximum 1% credit:

• GST credit: $300;
• QST credit: $314.21.

Approximate net taxes to remit:

• GST: $1,890 − $300 = $1,590;
• QST: $3,629.18 − $314.21 = $3,314.97;
• total payable: $4,904.97.

The calculation may need to be adjusted for special transactions, capital property, zero-rated supplies and other applicable adjustments.

Comparing the Standard and Quick Methods

Item	Standard Method	Quick Method
Taxes charged to customers	5% GST and 9.975% QST	5% GST and 9.975% QST
Remittance calculation	Taxes collected minus ITCs and ITRs	Prescribed rates applied to sales including taxes
Operating expenses	ITCs and ITRs generally claimed separately	ITCs and ITRs generally cannot be claimed
Capital property	ITCs and ITRs may be available	ITCs and ITRs may be available in certain cases
Business with substantial taxable expenses	Often more advantageous	May be less advantageous
Service business with few expenses	May result in a higher remittance	May be advantageous
Formal election required	No	Yes
Record-keeping required	Yes	Yes

The Quick Method is not automatically the best option. The portion of the taxes retained by the business generally constitutes business income and must be properly reported on the income tax return.

Electing to Use the Quick Method

The election must be formally made with Revenu Québec, generally by filing form FP-2074, Election or Revocation of the Election Respecting the Quick Method of Accounting.

Specific deadlines apply. The election must generally be made no later than the due date of the return for the reporting period in which the election takes effect.

Once the election is in effect, it must generally be applied to all qualifying commercial activities. A person usually cannot use the Quick Method for one business activity and the standard method for another activity operated under the same GST and QST registration numbers.

GST and QST Returns for Uber and Lyft Drivers

Drivers who provide passenger transportation services through a platform such as Uber or Lyft are subject to special rules.

Mandatory Registration Before the First Ride

An Uber or Lyft driver must register for the GST and QST regardless of the amount of income earned.

The usual $30,000 small-supplier threshold therefore does not apply to this activity. Registration must be completed before the driver provides the first passenger transportation service.

If the driver already has GST and QST registration numbers for another commercial activity, new numbers are generally not required. The driver should instead contact Revenu Québec to update the business activity information in the existing account.

Consult Revenu Québec’s information concerning the tax obligations of drivers using digital platforms.

Taxes Collected and Remitted by Uber or Lyft

Under agreements with Revenu Québec, an agreement holder such as Uber or Lyft:

• collects GST and QST on rides completed through its platform;
• remits amounts to Revenu Québec on the driver’s behalf using the rates established in the agreement.

This does not relieve the driver of the obligation to file GST and QST returns.

Depending on the driver’s income, expenses and accounting method, an adjustment may be required and additional amounts may have to be remitted.

Uber Driver Using the Standard Method

A driver who does not use the Quick Method must generally report:

• total sales made during the reporting period;
• GST collected or collectible at 5%;
• QST collected or collectible at 9.975%.

The driver may then deduct:

• eligible ITCs and ITRs on business expenses;
• GST and QST amounts already remitted to Revenu Québec by Uber or Lyft on the driver’s behalf.

Depending on their eligibility and business-use percentage, expenses that may generate ITCs and ITRs include:

• fuel;
• vehicle maintenance and repairs;
• car-wash expenses;
• vehicle leasing expenses;
• certain costs related to the purchase of a vehicle;
• cellular telephone expenses;
• platform fees and commissions;
• other expenses directly related to the passenger transportation activity.

The business-use percentage of the vehicle must be applied, and an adequate mileage log must be maintained.

Uber Driver Using the Quick Method

An Uber or Lyft driver may elect to use the Quick Method if all applicable conditions are met.

Taxi and passenger transportation businesses generally use the following rates:

• 3.6% for GST;
• 6.6% for QST.

The agreement holder already remits certain amounts to Revenu Québec on the driver’s behalf. However, the rates used under the agreement take the 1% credit into account at all times.

When the driver’s annual taxable sales exceed:

• $28,571 before taxes;
• or $30,000 including GST;
• or $31,421 including QST;

the driver may have to calculate and remit additional amounts when filing the GST and QST returns.

Under the Quick Method, the driver generally cannot claim ITCs or ITRs for current operating expenses such as fuel, maintenance or telephone expenses. However, ITCs and ITRs may be available for certain capital property used primarily in commercial activities, such as an automobile or smartphone.

Uber Driver With Another Business Activity

An Uber driver may also carry on another commercial activity, such as consulting, delivery, repair or retail sales.

In this situation:

• all activities must be included in the same person’s GST and QST returns;
• both Uber sales and sales from the other business activities must be reported;
• the chosen accounting method must generally be applied to all qualifying activities;
• amounts remitted by Uber or Lyft must be properly deducted;
• eligibility for the Quick Method must be determined using all business activities.

This situation can be more complex, particularly when some activities involve taxable, zero-rated or exempt supplies.

For more information, consult Revenu Québec’s rules for a driver associated with an agreement holder.

Records an Uber Driver Should Keep

An Uber or Lyft driver should retain:

• annual and periodic summaries issued by the platform;
• detailed ride and gross revenue reports;
• information on taxes collected and amounts remitted on the driver’s behalf;
• platform commissions and other fees;
• fuel, maintenance and repair invoices;
• vehicle purchase or lease documents;
• telephone invoices;
• records of business and personal kilometres;
• filed GST and QST returns;
• payment confirmations.

Net bank deposits do not necessarily represent gross business income. Commissions, fees and taxes may have been deducted before the payment was deposited. Detailed platform statements should therefore be used.

Reporting Periods

Revenu Québec assigns a reporting frequency based on the expected amount of taxable sales. The reporting period may be:

• monthly;
• quarterly;
• annually.

The applicable frequency appears on the registration confirmation and in My Account for businesses.

Monthly and Quarterly Returns

The return and payment are generally due no later than one month after the end of the reporting period.

Annual Return for an Individual in Business

A registrant who is an individual, has an annual reporting period and has a fiscal year ending on December 31 can generally:

• pay the GST and QST balance no later than April 30;
• file the GST and QST return no later than June 15.

Quarterly instalments may be required even when the reporting period is annual.

Consult Revenu Québec’s page on reporting periods and filing deadlines.

Preparing a GST and QST Return

Before beginning, gather the following information:

1. Total sales before taxes.
2. A breakdown of taxable, zero-rated and exempt sales.
3. GST and QST collected or collectible.
4. Credit notes, refunds and bad debts.
5. Expenses qualifying for ITCs and ITRs.
6. The business-use percentage of mixed-use expenses.
7. Purchases and sales of capital property.
8. Instalments already paid.
9. For an Uber or Lyft driver, taxes already remitted by the platform.
10. Confirmation of the Quick Method election, if applicable.

The return can then be filed through My Account for businesses.

Common Mistakes to Avoid

Common errors that may result in an assessment, interest or penalties include:

• confusing the income tax return with the GST and QST return;
• waiting until the income tax return is prepared before checking whether the $30,000 threshold was exceeded;
• calculating taxes on all income without distinguishing between taxable, zero-rated and exempt sales;
• applying Quick Method rates to sales before taxes instead of sales including taxes;
• using the Quick Method without making the formal election;
• claiming ITCs and ITRs on operating expenses while using the Quick Method;
• claiming 100% of the taxes on an expense that is partly personal;
• forgetting to report a taxable sale that has not yet been collected when the tax has become collectible;
• using only net Uber bank deposits instead of gross revenue;
• forgetting the taxes already remitted by Uber or Lyft;
• failing to file a return because no balance is payable;
• overlooking the April 30 payment deadline for an individual with an annual reporting period;
• failing to retain invoices and supporting records.

Summary

A self-employed worker must treat the income tax return and the GST and QST returns as separate filings.

Under the standard method, eligible ITCs and ITRs are deducted from the taxes collected. Under the Quick Method, prescribed rates are applied to taxable sales including taxes, and the recovery of taxes on operating expenses is generally restricted.

Uber and Lyft drivers must register before providing their first ride, even when their income is below $30,000. The platform remits certain amounts on the driver’s behalf, but the driver remains responsible for filing GST and QST returns and paying any additional balance.

The appropriate method should be selected only after considering all business income, operating expenses, capital property and commercial activities.

This information is general in nature. The applicable rules may vary depending on the activities carried on, the nature of the sales, the expenses incurred and the reporting period. It is not a substitute for an analysis of your particular situation.

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