Tax Tips: What Expenses Can Commission Salespeople Claim?

Employees who earn their living negotiating contracts for their employers or selling on commission may claim certain itemized sales expenses, income tax preparation costs, legal fees incurred to defend charges incurred in the normal course of business, as well as auto and travel expenses.

These claims are allowed only if salespeople are required to pay their own expenses and regularly perform their duties away from their employer’s place of business. However, the expenses are categorized into two groups: deductible travel expenses and deductible sales expenses, which includes promotion, 50% of entertainment costs and home office costs in certain cases.

The expense categories are separated because it is not possible to claim sales expenses that exceed commissions earned in the year, except for the costs of interest and capital cost allowances on a motor vehicle. Employers will be required to verify in writing that expense reimbursement was not given and that the out-of-pocket payments were required as a condition of employment by signing Form T2200 Declaration of Conditions of Employment.

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