Tax Dilemma of a New Commission Salesperson

Walter Harder

Sales and promotional expenses can be claimed by employees who are required to travel for work and paid on commission, employed in the selling of property or negotiating contracts, or if they are required to pay their own expenses. But when it comes to tax deductibility there’s a big catch. 

 What most commissioned salespeople who started their new career in 2019 don’t know is this: the claim for sales and travelling expenses is limited to income from commissions earned in the year, plus interest and CCA on the vehicle. This means that some of their expenses will not be deductible unless they earn and get paid their commissions in the same year. Depending on the nature of the position, some commissions may not actually get until several months into the job. 

The sales expenses in question include:

• Advertising
• Promotions
• Gifts
• Meals and entertainment

If the employee has no commissions in the year, put off the Christmas gift giving to the new year. But if these expenses were incurred, the best tax filing bet is to forgo the claim for sales expenses and claim all of the travel expenses. 

If  commissions exceed the amount of  travel expenses, sales expenses can be claimed, but only to the limit of the excess of commission income over travel expenses.

If the sales expenses aren’t claimed at all, the taxpayer can claim all the normal employment expenses regardless of the amount of the commission income.

Additional educational resources: Help commissioned salespeople make audit-proof, tax-efficient claims. Hone your knowledge by taking our online Advanced Tax Filing and Planning course.

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