Basics

Accounting Methods for Ride-Share GST/HST

If you’re reading this article, you may have heard about the recent federal budget updates released on March 2017 and are wondering if they affect your ride-sharing income! If you haven’t already, make sure to read our 6 Things you need to know about the GST/HST for ride-sharing. This article provides step-by-step guidance on GST/HST for ride share partners/drivers that is necessary to help you comply with the Canada Revenue Agency (CRA) guidelines. We’ll be looking at the two accounting methods for ride-share that you can choose from to calculate the net tax due for your GST/HST returns – the Regular Method and the Quick Method.

The Regular Method for Ride-Sharing

As a ride-share partner/driver, you will need to pay GST/HST on a number of expenses you have while operating your business. Some examples of GST/HST taxable expenses are; gas, vehicle maintenance & repairs and vehicle leases.

When you choose the Regular Method, the GST/HST paid on your business-related supplies can be used as an ITC (Input Tax Credit). These amounts are deducted from the total GST/HST you collect on fares during the reporting period. The resulting amount is the net tax due for the reporting period.

Example:

  • A ride-share partner/driver in Ontario has total (gross) fares during the reporting period of $10,000.
  • The GST/HST rate in Ontario is 13%, so $1,300 was charged and collected from riders during the reporting period.
  • After reviewing receipts, the partner/driver calculates he paid $300 in GST/HST on ride-share expenses for gas, vehicle lease, registration fees, and car washes.
  • The total net tax due for the GST/HST reporting period is $1,000. These figures are reported on the GST/HST return and $1,000 must be remitted.

$1,300 – $300 = $1,000

The Quick Method to calculate GST/HST

Your other option in the Quick Method. Rather than collecting receipts and then adding the total GST/HST collected and subtracting any ITCs, the Quick Method is a simple calculation based on “total taxable supplies” (For ride-share partners/drivers, total taxable supplies is the total amount of gross fares.)

Using the Quick Method, no specific ITCs are claimed. Instead, the payment rate applied is lower than the GST/HST charged and collected by the partner/driver. Because the rate of GST/HST charged varies by province, so do the Quick Method rates. Ontario, for example, has a Quick Method rate of 8.8%. The Quick Method rate in Alberta is 3.6%. All provincial Quick Method rates can be found on CRA’s Quick Method Rates page.

Example:

  • A ride-share partner/driver in Ontario has total (gross) fares during the reporting period of $10,000.
  • The GST/HST rate in Ontario is 13%, so $1,300 was charged and collected during the reporting period. Using the Quick Method rate for Ontario of 8.8%, the partner/driver is required to remit net tax of $994.40.

($10,000 + $1,300) X .088 = $994.40

Which Accounting Method Should I Choose?

There are a number of different factors to consider when choosing between the Regular Method and the Quick Method.

The Quick Method means less math and paperwork. But, if you’re a partner/driver with high expenses, you may prefer to use the Regular Method so you can claim each ITC. What’s good for one partner/driver may not be for another; Research both methods to find out which one is right for you.

You’ll find more information on GST/HST reporting on our GST/HST for Commercial Ride-Sharing Services  web page.