For employee expenses a choice has to be made between the exact method and the factors method for GST-HST & QST purposes.
Actually there is even a wider selection since the factors method may be used only on a limited numbers of expense categories. It is common to encounter organizations using the exact method for air fare and the factor method for all other expense categories. Also there is no such thing as using the factors method on allowances, the factors method can only be used on reimbursement of expenses not on allowances paid to employees, partners or volunteers. Finally for large organizations, the recapture of input tax credits in Ontario and PEI has to be calculated using the exact method, even if the factors method is used on expense categories covered by the restrictions (i.e. meals, telecom or gas for vehicles with a weight of less than 3000 KG). The factors method has been viewed by many as the easy method, but is it really easier to manage? This administrative method is notably described within Memorandum 400-1-2 and 9.4. A rather difficult rule to implement is the one where the factors method can only be used when 90% of an expense report is subject to tax. How to implement this rule? Is there a software set to apply it? What about an expense report with a mixture of GST, HST, no tax, expenses with the factors method and expenses without? If the intent at the time of introduction of the GST in 1991 was to create an easier method to claim tax, 24 years later with 6 provinces with HST rates at 13%, 14% and 15%, e-commerce and employees with different traveling behaviors, the factors method may be more of a headache for several organizations than a simple solution.