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NO SOUP FOR YOU! Employees earning commissions need to go on a diet, implies CRA

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“NO SOUP FOR YOU” appears to be the message of the day from the Canada Revenue Agency (CRA) regarding business luncheons involving employees earning commission.

This is a case of “don’t shoot the messenger”, I am only here to inform you, so please, holster your weapon.

Consider the following scenarios:

1) A corporation that takes out a client for lunch and has a salesperson attend and reimburses the cost will be able to deduct the expense of the meal, subject to a 50% cap on the expense and will not create a taxable benefit to the employee. (See: Guide T4130)

2) A self-employed individual or partnership has the same benefit as in the first point.

3) A self-employed commissioned agent, like insurance, or real estate, also has the same benefit.

4) A transport employee that doesn’t receive an allowance, also has the same benefit of the above (subject to additional calculations and restrictions)

5) A corporation provides a $17 meal allowance for an employee that is travelling away from the office, but still inside the metropolitan area, where the corporation is the primary beneficiary of the allowance, and the allowance is not an additional form of remuneration – receives the same treatment, and is non-taxable to the employee.

But heaven forbid if you are a sales employee on commission, working in town, claiming your own expenses. If so, you only get to claim the meals that your client consumed up to the 50% cap and there is ‘no soup for you.’

At the October 5, 2018 Association de planification fiscal et financière (APFF) [Tax and Financial Planning Association] Annual Congress in Gatineau, Quebec, the CRA pointed out that the 50% cap on meals expenses in Subsection 67.1(1) applies to the meal expense incurred, however Subsection 8(4) denies any deduction for the commissioned employee’s portion of those meals.

Thus, if the commissioned employee takes one individual client out for lunch, and they eat the same thing, the commissioned employee only gets 25% of the meal receipt as a deduction.

So from now on, Edmonton based commission employees will need to eat in Calgary and stay the night, and Calgary-based commission employees will need to eat in Edmonton and stay the night, because according to the the Department of Finance, and CRA’s interpretation, that makes good business, and tax, sense.

Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr is the President & Founder of CGL Strategic Business & Tax Advisors; you can find out more about Cory’s biography at http://www.CGLtax.ca/Litzenberger-Cory.html


The CRA’s unofficial translated preliminary comment is below:

“Paragraph 8(1)(f) provides that a taxpayer who was employed in the year in connection with the selling of property or negotiating of contracts for the taxpayer’s employer, may deduct in computing the taxpayer’s income amounts expended by the taxpayer in the year for the purpose of earning income from the employment subject to certain conditions provided for in that paragraph.

Furthermore, subsection 8(4) provides, in particular, that amounts expended by an employee on a meal of the employee may not be deducted under paragraph 8(1)(f) unless the meal was consumed during a period while the taxpayer was required by the taxpayer’s duties to be away, for a period of not less than 12 hours, from the municipality where the employer’s establishment to which the taxpayer ordinarily reported for work was located and away from the metropolitan area, if there is one, where it was located.

There is nothing in the Income Tax Act that allows the CRA to not apply subsection 8(4) where an employee’s meal was not consumed during a period while the taxpayer was required by the taxpayer’s duties to be away, for a period of not less than 12 hours, from the municipality where the employer’s establishment to which the taxpayer ordinarily reported for work was located and away from the metropolitan area, if there is one, where it was located”

CEO | Director, Canadian Tax Advisory CGL Strategic Business & Tax Advisors With the Income Tax Act always by his side on his smart-phone, Cory has taken tax-nerd to a whole other level. His background in strategic planning, tax-efficient corporate reorganizations, business management, and financial planning bring a well-rounded approach to assist private corporations and their owners increase their wealth through the strategies that work best for them. An entrepreneur himself, Cory started CGL with the idea that he wanted to help clients adapt to the ever-changing tax and economic environment and increase their wealth through optimizing the use of tax legislation coupled with strategic business planning and financial analysis. His relaxed blue-collar approach in a traditionally white-collar industry can raise a few eyebrows, but in his own words: “People don’t pay me for my looks. My modeling career ended at birth.” More info: https://www.CGLtax.ca/Litzenberger-Cory.html

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Business

Downtown Business Spotlight: Root 51 Salon and Spa

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This week’s Business Spotlight shines on Root 51 Salon & Spa! This unique establishment is located right on 4814 51 St and offers anywhere from haircare to spa treatments to relax and pamper. We spoke with the owner to learn more about this wonderful establishment!

What is your business?
Our business is a small locally owned salon & spa.

When did your business open?
We downsized & renovated this main floor in 2016 & changed our name to Root51 (previously Techniques Hair Therapy & Day Spa in the Millennium Center for 2 decades!)

What makes your business unique?
We have asked our valued guests this same question the responses we got: our education, our flexibility to accommodate, our selection & knowledge in our top-shelf natural products for both hair & skin, our prices are extremely reasonable for the level of experience (over 30 years) & education (over 100K worth of education!!!) (in a big city I would charge 35-40% more for the same treatments), and we work hard and are very proud of this next one…our Cleanliness – often they say your place is always spotless! (even before Covid!!)

What are some products/services that you offer?
Full-service Salon hair Care & Spa treatments that are non-invasive. Michele specializes in colours, balayage & ombre, colour corrections & blondes. Smoothing treatments are in high demand for silky soft straight looks and perms for waves or more body. With 30 years of cutting hair, some guests have said “that’s the best-shaped haircut I ever had.”
Spa treatments are effective and relaxing with visible results after one treatment ~ home care is a must because maintenance is easy than correction. Our skincare line is exclusive to us in RD and is composed of sea plants and seawater with many benefits to your facial skin as well as your body and well-being!

Why did you choose Downtown Red Deer as the location for your business?
In 2000, the Millennium Center was a brand new and very central location — when we changed the location to 2 block north on 51 st ~ we wanted to be able to still cater to our professional corporate downtown business people.

What do you think makes Downtown vibrant?
I believe it’s the local entrepreneurs big & small that make downtown a vibrant place.

Website: Root 51 Official Website
Facebook: Root 51 Facebook Page

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Alberta

Downtown Business Spotlight: Artisan Food Market on Ross

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This week’s Business Spotlight shines on Artisan Food Market on Ross! This unique restaurant is located right on Ross Street (106, 4916 Ross Street) and offers a large selection of locally made products. We spoke with the owner to learn more about this wonderful establishment!

What is your business?
Artisan Food Market on Ross is a specialty food store. We carry a large selection of local, national, and international foods and ingredients.

When did your business open?
We opened on April 1, 2020.

What makes your business unique?
We carry a large selection of local items and have a variety of frozen meals.

What are some products/services that you offer?
Customers can place orders for their favourite D Dutchmen Dairy or Black Forest German Bakery products and the requested items will get delivered to our store the following week. Additionally, customers can shop online and have their products delivered to their homes even during the times that we are closed. If a customer wishes to place an order they can simply visit us at www.ArtisanFoodMarket.ca.

Why did you choose Downtown Red Deer as the location for your business?
As a Red Deerian, I wanted to make a positive impact for our downtown by setting up a local market store right here.

What do you think makes Downtown vibrant?
I love the flower gardens at the city hall and the assortment of independent shops in our downtown core.

Finish this sentence: I love Downtown because…
It’s my home and it’s my place for adventure.

Website: Artisan Food Market on Ross Official Website
Facebook: Artisan Food Market on Ross Facebook Page
Instagram:
@artisanfoodmarket

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