Who this is for
- Canadian sole proprietors and corporations choosing accounting software
- Businesses that charge GST/HST, and possibly PST or QST, and need an accountant to file from the books
Not covered here
- Whether Wave alone is enough for GST/HST and year-end
- Software for a business operating in both Canada and the US
- Setup for a partnership's information return
- Filing the GST/HST, PST or QST return, or moving off a specific older product
Which should a small Canadian business pick: QuickBooks Online, Xero or Wave?
No CRA publication ranks accounting software. The CRA tests the records, not the brand: they must be readable, traceable to source documents and available on request (CRA: Keeping Records; CRA: Electronic Record Keeping). Choose the package that passes these five tests with your own banks, taxes and accountant. A vendor's pricing page is not proof that a package fits Canadian tax or your bank; if you have heard that one is weak in Canada, running these tests on your own accounts is how to find out.
| Test | Pass looks like |
|---|---|
| GST/HST | One trial month's totals match the return lines below |
| Provincial tax | PST or QST sits on its own line and stays out of the GST/HST sales total |
| Bank connection | Every account's history loads without gaps or duplicates, or statements import cleanly |
| Accountant and exit | Your accountant can log in, and an export opens in a spreadsheet |
| Full price | The plan with your users and payroll fits your budget after any introductory discount ends |
Ask the person who will prepare your returns which package they work in before you pick one. A case is not simple if you use the GST/HST Quick Method (a simplified way to work out the GST/HST you remit), charge PST or QST, run payroll, operate as a corporation, are moving from older software and need GST/HST history to carry over, or already have gaps in your bank feed or purchase receipts. If you are starting books or leaving older software and need GST/HST, payroll or a corporation set up so your accountant can file from them, a wrong tax code repeats on every entry and a move can drop GST/HST history; the last section routes these cases.
Before you start a trial, gather:
- every bank account, credit union account and card the business uses;
- whether you are registered for GST/HST, whether you use the Quick Method, and your last GST/HST return if you filed one;
- whether you will pay anyone through payroll;
- your sales by quarter, which also show whether you must register.
GST/HST codes matter once you are registered; if you are not sure you must be, see when to register for GST/HST.
Does the software handle GST/HST: tax codes, input tax credits and the return?
Whether a package handles GST/HST depends on how its tax codes are set up, because the return is built from the tax recorded on each sale and purchase, including input tax credits (ITCs): the GST/HST you paid on business purchases, which a registrant may be able to claim. Run a month of your own transactions through a trial and compare the totals with these CRA regular-method return lines (CRA: preparing a GST/HST return). A business located in Quebec files on Revenu Québec's forms instead, so check the lines there (CRA: RC4022).
| Return line | What the CRA asks for | What to check in the trial |
|---|---|---|
| 101 | Revenue from taxable, zero-rated (taxable at a zero rate) and exempt (not taxable) supplies, plus other revenue; excludes GST, HST and provincial sales tax | A sales total before tax that includes zero-rated and exempt sales and leaves PST or QST out |
| 103 | The GST/HST you were required to collect, plus all amounts collected, on your supplies | A total of all tax charged on invoices for the period |
| 106 | Eligible ITCs on purchases used in your commercial activities | Tax kept apart from each expense, with room to reduce partly claimable purchases, such as restricted meals and entertainment, usually 50% |
| 109 | Net tax: line 105 (tax collected plus adjustments) less line 108 (ITCs plus adjustments) | A net figure that equals line 103 less line 106 when lines 104 and 107 are empty |
The rate on a sale depends on the province or territory of supply (CRA: which rate to charge), so the software needs a tax code for every rate you charge, which can differ from your home province's. See charging GST/HST, PST and QST by province.
A registrant must have sufficient documentary evidence before claiming an ITC (CRA: input tax credits), so the software should let you attach or reference the invoice or receipt on each purchase; see what a receipt must show for an ITC. ITCs generally must be claimed within four years, so old purchase detail has to stay reachable. For account setup and entries after registering, see recording GST/HST in your books; for the return itself, see filing GST/HST and claiming ITCs.
How does the Quick Method change the setup?
A business on the Quick Method remits a set percentage of its tax-included revenue and generally cannot claim ITCs on operating expenses; ITCs stay available for real property, for capital assets other than real property, and for purchases whose tax became payable before the election took effect, while the claim time limit has not run out (CRA: Quick Method; CRA: input tax credits). An established business can elect it only if its GST/HST-included worldwide taxable supplies, with those of associated businesses, are within $400,000 in either the first four or the last four of its last five fiscal quarters, leaving out financial services, sales of real property and capital assets, and goodwill from a business sale; a new business uses a first-full-year estimate. Some businesses, such as those providing bookkeeping or accounting services, cannot use it, and a business located in Quebec files with Revenu Québec and follows its rules for the election and return. For the election itself, see the Quick Method guide.
In the software, that means the revenue report must show tax-included revenue, and operating purchases whose tax becomes payable while the method applies must not create credits. Keep the original dates and tax detail of earlier purchases, because their credits may still be claimable, and keep capital purchases separate. On the return, a Quick Method filer enters on line 101 the eligible tax-included revenue, leaving out zero-rated supplies, sales of real property and sales of capital assets; line 103 is that total times the remittance rate for the period, plus the GST/HST on taxable supplies the method does not cover (CRA: preparing a GST/HST return). Also test the line 107 credit of 1% on the first $30,000 of eligible tax-included sales each fiscal year: it needs the election in effect at the start of the fiscal year or, for a new registrant, on registration, and the software must carry the sales total across returns rather than restart it each period. Ask each vendor how it reports the Quick Method; if it cannot, the return has to be worked out outside the books. When moving software, carry over the election date. See the Quick Method in your books.
What about PST or QST if I sell in BC, Saskatchewan, Manitoba or Quebec?
GST/HST features do not cover these taxes: each is a separate tax with its own rules, and in British Columbia, Saskatchewan and Manitoba also its own registration and return.
| Place | Tax and who runs it | What the official source says |
|---|---|---|
| British Columbia | PST, run by the province | A business required to register must collect PST on its sales; returns can be filed through eTaxBC (Province of BC) |
| Saskatchewan | PST, run by the Ministry of Finance | Businesses operating in Saskatchewan must be licensed or registered for PST (Saskatchewan) |
| Manitoba | PST, called RST in Manitoba, run by Manitoba Finance | Vendors generally register with Manitoba Finance and collect RST on taxable sales; it is figured on the price before GST, and a registered vendor shows it separately on each invoice. A small-business exception depends on sales, tobacco or liquor sales, online sales platforms and tax paid on resale purchases, so check PST in your province before switching off collection; a business using it states that RST is included and does not itemize it (Manitoba bulletin RST 004; The Retail Sales Tax Act, s. 9(2.3)) |
| Quebec | GST/HST and QST | Revenu Québec generally administers the GST/HST in Quebec, and a business located in Quebec files its returns with Revenu Québec on its forms; the CRA points to Revenu Québec's publication IN-203-V for the QST (CRA: RC4022) |
Run one invoice for each tax you charge through the trial. Where a tax is itemized, the software must show each tax on its own line, keep PST or QST out of the GST/HST sales total, and give separate PST or QST totals for what you report. QST rules and filing come from Revenu Québec, not from the GST/HST features. To find out whether PST applies to you at all, see PST in your province.
Will it connect to my Canadian bank, credit union or card?
Only a test with your own accounts can say. A pricing page cannot confirm that your institution is supported, and each package limits or prices feeds differently:
- Wave: automatic bank import belongs to the paid plan, and its page says not every financial institution is supported and a connection cannot be guaranteed (Wave pricing).
- Xero: the pricing FAQ says a chargeable direct bank feed is invoiced for the previous month; the page gives no amount (Xero Canada pricing).
- QuickBooks Online: the entry plan lists two bank connections and the next plan lists unlimited (QuickBooks Online Canada pricing).
Connect every chequing account, credit card and line of credit during a trial or on a free plan. Check that history loads and nothing duplicates before you pay.
What if my bank or credit union is not supported?
You can still meet the CRA's record rules by importing statements or entering transactions by hand, as long as every entry traces to a source document and the account reconciles to the statement. The CRA lists sales invoices, cash register tapes, receipts and bank deposit slips as original supporting documents, and requires electronic records to show an audit trail from those documents to the totals (CRA: business records; CRA: Electronic Record Keeping).
A feed is not a receipt. A feed line comes from the bank, not the seller, so it does not carry the seller's name and address, the buyer's details or the full description that a purchase receipt must show (CRA: business records). Keep the receipt or invoice for each entry; see what a receipt must show for the CRA. Before paying, ask the vendor whether it accepts statement files for your institution.
What does each cost, and what costs extra?
Compare the full monthly price, in Canadian dollars before tax, of the plan with the users, connections and payroll you need. All three pricing pages showed an introductory discount for new customers on the date in the sources, and Xero's page says it can change pricing at any time, so do not budget on the promotional rate. The table shows plan structure only, as each vendor's page listed it on that date; plans change, so check the vendor's current page before you buy.
| QuickBooks Online | Xero | Wave | |
|---|---|---|---|
| Plans | Four tiers, from one user up to 25 users | Three plans; the entry plan caps invoices and bills, and auto-reconcile is a paid add-on there | A free plan and one paid plan |
| Users and accountant access | Users capped by plan; accountant access is not listed for the lowest tier | Page says no per-user licence fees; accountant access not stated | Free plan lists only a payroll-manager role and a tax-professional role; paid plan adds admin, editor and viewer roles |
| Bank connections | Two on the lowest tier, unlimited on the next | Reconciliation on every plan; a direct feed may be charged, amount not shown | Automatic import on the paid plan only |
| Payroll | Separate add-on with a per-employee charge; not available on the lowest tier | Usage charges invoiced monthly after use; price not on the page | Separate add-on |
| Receipts and other extras | Receipt capture on the main tiers; card payments carry fees and third-party apps may cost extra | Document capture on every plan; expense claims and project tracking are paid add-ons; online invoice payments carry fees | Unlimited receipt capture comes with the paid plan and is an add-on on the free plan; card payments carry per-transaction fees |
Full monthly cost is the base plan, extra users, any bank-feed charge, payroll (the add-on plus any per-employee charge) and other add-ons, each taken from the vendor's current page with the introductory discount removed. A corporation that pays staff or owners through payroll should count payroll from the start. Software is one cost and the work of keeping books is another; for the second, see bookkeeping cost per month and keeping your own books or hiring a bookkeeper. If Wave's free plan is your leading option, Wave for a small business covers what it does and does not do.
Will my accountant accept it, and can I export my data if I leave?
Whether your accountant will accept a package is their call and turns on access and complete, traceable records; the CRA's electronic record-keeping circular sets requirements for the records and names no approved software (CRA: Electronic Record Keeping).
- Access: confirm your plan allows an outside accountant before you pay. QuickBooks Online's pricing page lists no accountant access on its lowest tier, and Wave's free plan lists only a payroll-manager role and a tax-professional role.
- Audit trail: electronic records must show an audit trail from source documents to the summarized accounts. Changes to a recorded transaction must be made by journal entry that records who made it, when, the old and new details and the reason. Test whether editing or deleting an imported transaction leaves that trail.
- Export: before adopting a new system, confirm it can export the required information in a commonly used, non-proprietary format, and that moving data will not lose or alter it. In the trial, export transactions, tax detail and attachments, and open the file in a spreadsheet.
If you are leaving older software, export everything for every period that is still open or in the retention period before you cancel, including the GST/HST detail behind each return. Keep a dated record of the change, and report to the CRA any change that affects your ability to access and read your records (CRA: Electronic Record Keeping). For timing in the year, see switching from Sage; the same export and audit-trail tests apply to any move.
Is accounting software all online now?
Not all of it. These three are sold as online services, so your records are likely to sit on the vendor's systems, while desktop software keeps them on your own computer. Either way the CRA's electronic-record rules apply: readable records, an audit trail and backups (CRA: Electronic Record Keeping).
Where is my data kept, and do I still keep records?
You still keep records: the business must make sure adequate records are kept even when a bookkeeper or another third party keeps them (CRA: Keeping Records). The pricing pages do not say where each vendor stores data, so ask the vendor in writing.
- Retention: keep records for at least six years from the end of the last tax year they relate to; longer retention can apply to late-filed returns (six years from the filing date), unresolved objections or appeals, and property or corporate records that remain relevant, and dissolved corporations have their own rule. Keep electronic records in a readable electronic format even if you print them (CRA: retention rules; CRA: Electronic Record Keeping). Records you can no longer open do not meet that rule, so export before you cancel or let a plan lapse. See how long to keep business records.
- Location: records must be kept at your place of business or residence in Canada unless the CRA gives written permission. Records kept outside Canada and accessed from Canada are not treated as kept in Canada; the CRA may accept a copy made available in Canada in a readable, usable format, which is its decision. It recommends backups within Canada (CRA: Electronic Record Keeping).
Does the choice change for a sole proprietor on the T2125 or a corporation filing a T2?
The same package can serve either, but the setup differs, because the books feed different filings.
| Sole proprietor | Corporation | |
|---|---|---|
| What the books feed | Form T2125, which reports business or professional income and expenses (CRA: T2125) | Financial statement information filed with the T2 using GIFI codes, the CRA's standard codes for financial statement items; the CRA says all corporations except insurance corporations should prepare it that way (CRA: GIFI) |
| Accounts to set up | Categories that line up with the T2125, and a clear split of personal and business spending | A chart of accounts that maps to GIFI, plus owner-loan, dividend and payroll accounts |
The CRA says to keep separate records for each business you run (CRA: business records). A sole proprietor who expects to incorporate should test the export first, because the proprietorship's history may have to move. See books after incorporating a sole proprietorship, the chart of accounts for GIFI and an app for a self-employed person.
Example
These examples are illustrative; all figures are in Canadian dollars.
Ontario freelance designer
A designer bills $60,000 in a year, is registered for HST, has no staff and uses one credit union account. During the trial she connects the credit union before paying; if the history does not load cleanly, she imports statements instead. She sets one HST code at 13% for sales and purchases, and gives her accountant access before year-end.
Assume she elected quarterly reporting and checks one quarter against the return, that every customer and supplier is in Ontario and that every purchase is fully claimable:
| Item | Amount | Return line |
|---|---|---|
| Sales before tax | $15,000 | 101 |
| HST charged | $1,950 | 103 |
| HST on business purchases of $3,000 | $390 | 106 |
| Net tax | $1,560 | 109 |
If the software shows different totals, she fixes the codes before the first return.
Alberta corporation
A corporation with $250,000 of revenue, two shareholders and a payroll of two sells only in Alberta, so it needs one GST code. In the trial it runs both employees through payroll to see the full price, maps its accounts to GIFI codes for the T2 and tests an export. Assuming no associated businesses, no excluded line of business and that $250,000 is its taxable sales for a qualifying four-quarter period, its GST-included sales are $262,500 ($250,000 plus 5% GST), below the Quick Method ceiling, so its accountant may ask whether that method suits; if it is elected, operating purchases made afterwards stop creating credits and the purchase codes change.
Quebec contractor
A contractor with $120,000 of revenue charges GST and QST. The software must track both taxes on every invoice and purchase and give separate totals. The contractor tests one invoice carrying both taxes and checks that the report keeps QST out of the GST sales total. A Quebec-located business files its GST/HST return with Revenu Québec on its forms, so the return-line check above is made on those forms, and QST rules come from Revenu Québec, not from the GST/HST features.
Different for you?
- You are starting books or leaving old software, and need GST/HST, payroll or a corporation set up so your accountant can file from them: a wrong tax code repeats on every entry. Bring your accounts, GST/HST status and any export from the old software to bookkeeping help to settle the tax codes, the opening balances and whether your GST/HST history moves over intact, before you enter transactions.
- Your bank feed or ITC records cannot be trusted at filing time: see when the GST/HST return does not match the books and catching up on overdue books, with bookkeeping help if months are missing.
- You are moving off older accounting software: use switching from Sage for timing, and test the export before you cancel.
- You have a US-dollar account: read QuickBooks multicurrency before you turn it on.
- Your business operates in both Canada and the US: see QuickBooks Canada or US for a two-country business.
- You are unsure whether you need a bookkeeper, an accountant or a CPA: see bookkeeper, accountant or CPA.
Figures on this page
| Figure | Value | Source |
|---|---|---|
| Usual ITC share for restricted meals and entertainment Applies when the income tax deduction for reasonable business meals and entertainment is limited to this share; exceptions exist | 50% | CRA: General Information for GST/HST Registrants Checked |
| Usual GST/HST input tax credit claim window For a person who is not a specified person, measured from the end of the original reporting period; claim by the due date for the last reporting period ending in that window, subject to statutory exceptions | Four years | Justice Laws: Excise Tax Act, section 225(4)(b) Checked |
| Quick Method revenue ceiling GST/HST-included worldwide taxable supplies, including associates, under the CRA four-of-five fiscal-quarter test; other conditions apply | $400,000 | CRA: Quick Method of Accounting for GST/HST Checked |
| Quick Method first-sales credit rate Credit on eligible tax-included sales when the election is effective at fiscal-year start or, for a new registrant, at registration | 1% | CRA: Quick Method of Accounting for GST/HST Checked |
| Quick Method sales eligible for first-sales credit First eligible tax-included sales in each fiscal year; unused amount cannot be carried forward | $30,000 | CRA: Quick Method of Accounting for GST/HST Checked |
| General business-record retention period From the end of the last tax year to which the records and supporting documents relate; longer retention can apply | Six years | CRA: Where to keep your records, for how long and how to request permission to destroy them early Checked |
| Retention period for a tax year's records when the return is filed late Counted from the day the return is filed, for records that relate to that taxation year, when the return was not filed as and when required by section 150 | Six years | Income Tax Act, section 230(5) Checked |
Primary sources
- CRA: Keeping Records (RC188)
- CRA: Electronic Record Keeping (IC05-1)
- CRA: Business records
- CRA: Where to keep your records, for how long and how to request permission to destroy them early
- CRA: Input tax credits
- CRA: Instructions for preparing a GST/HST return
- CRA: Which GST/HST rate to charge
- CRA: When to register for and start charging the GST/HST
- CRA: Quick Method of Accounting for GST/HST (RC4058)
- CRA: General Information for GST/HST Registrants (RC4022)
- CRA: General Index of Financial Information (GIFI)
- CRA: Form T2125
- Province of British Columbia: Provincial sales tax (PST)
- Saskatchewan: Provincial Sales Tax
- Manitoba Finance: Information Bulletin RST 004, Information for Vendors
- Manitoba: The Retail Sales Tax Act (C.C.S.M. c. R130), section 9
- QuickBooks Online Canada: pricing page (vendor documentation, plan structure only, read 2026-10-23)
- Xero Canada: pricing page (vendor documentation, plan structure only, read 2026-10-23)
- Wave: pricing page (vendor documentation, plan structure only, read 2026-10-23)
About this guide
Published by Cloud Accounting under standing professional approval. This version has no separately recorded personal review. It explains general rules for the tax year shown. It is not advice for your situation.
Changes
- : First published.