Citation: 2008TCC176
Date: 20080509
Docket: 2007-3348(IT)I
BETWEEN:
GINETTE TAUPIER GIRARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Angers J.
[1]
This is an appeal from
reassessments made against the Appellant on June 19, 2006, for the 2005
taxation year and on January 29, 2007, for the 2004 taxation year. The Minister
of National Revenue (the "Minister") denied the Appellant employment
expense deductions of $7,461 for the 2004 taxation year and $15,867 for the
2005 taxation year.
[2]
During the two years in question,
the Appellant worked for a travel agency, Agence aux Cinq Continents inc. (the "Agency"). Her income for 2004 was
$32,418, including $7,461 in commission earnings. For 2005, it was $32,337,
including $7,295 in commission earnings.
[3]
The Appellant was hired in October
2003 as a travel consultant. She was to work 40 hours a week at the rate of $12
an hour. In addition, her employer agreed to allow her to do some outside,
commission-based work, with 60 per cent of the earnings going to the Appellant
and 40 per cent, to the Agency. Of note is the fact that the Appellant had to
go through the Agency to bill for her work as an outside travel agent, as the
Agency was the only one with the travel agency licence and the right to use a
trust account, among other things.
[4]
However, the Agency and the Appellant
only signed a work contract, for a period of one year, on September 17, 2004. It
stated, as set out above, that the Agency would pay the Appellant a gross base
salary of $12 per hour. It would also pay the Appellant 60 per cent of the
commission earnings on sales of travel products made by the Appellant. Handwritten notes added that the
sales in question were "personal" sales. The Appellant explained in
her testimony that commission had been paid on sales of travel products to her
own clients and not those of the Agency. It was this clause that was the source
of the misunderstandings between the Agency and the Appellant.
[5]
According to the Appellant, when
she had started work with the Agency, she had had her own list of clients, and
it was the use of this list in return for a share of the commissions that she
had negotiated with the Agency. However, she contended that the Agency had not
allowed her to work on her personal files or meet with her personal clients
during her regular hours of work. This fact was more or less confirmed by the
Agency representative, Ms. Lafond, when she explained that it would not have
been profitable for the Agency to pay the Appellant a commission on sales made
to her personal clients if those sales were being made during her hours of work
for the Agency.
[6]
The Appellant therefore set up
some work space at home with a computer, cell phone and office supplies, and
she incurred expenses related to training, a home office, advertising, and so
on. These various expenses were denied by the Minister of National Revenue and
are the subject of this appeal for the two taxation years in question.
[7]
According to the Appellant,
she had had to work on her personal files and meet with her personal clients away
from the Agency, which was why she had set up an office at home and incurred
the expenses she had claimed as deductions. According to Ms. Lafond's
testimony, the only requirement placed on the Appellant was that she carry out
her work for personal clients outside her 40 hours of work for the Agency. The Appellant moreover admitted that the Agency had never
required that she or other employees set up offices at home.
[8]
The relationship
between the Agency and the Appellant deteriorated over time and this resulted
in some changes in the conditions. According to Ms. Lafond, the Appellant's
hourly wage was increased and the payment of commission discontinued. However,
the Appellant had allegedly continued to make sales of travel products to her
personal clients through another travel agency, and when Ms. Lafond had found
out, the Appellant had quit her job with the Agency. According to the
Appellant, however, she had been dismissed.
[9]
In 2004, the Agency signed form TP-64.3
(General Employment Conditions) for the Quebec Department of Revenue. It also allegedly
signed the equivalent form, the T‑2200, for 2004, but a copy of that form
was not introduced in evidence. The parties indicated that the answers to the
questions had been the same. According to the General Employment Conditions
form for 2004, the Appellant received $7,644.98 in commissions, received no allowance
or reimbursement of expenses, and received no payment for office rent, the
salary or wages of an assistant or substitute, or the cost of supplies.
According to the information entered on the form, the Appellant was not
required to perform some or all of her duties away from the employer's place of
business.
[10] The answers to questions 5, 9, 10, 11, 12, 15 and
17 were all altered. Ms. Lafond had signed the form on behalf of the
Agency. She stated that she had given the opposite answer to what was indicated
for questions 5 and 9 and that she would
have initialed the other changes if she had been the one to make them. For
example, question 5 asks whether the employee had to perform some duties away
from the place of business during working hours. The answer on the form is
"yes", but Ms. Lafond indicated that the answer was actually
"no". Question 9 asks whether the employer was required to provide a
motor vehicle. The answer is "yes", but Ms. Lafond indicated that the
answer was "no". Question 12 asked whether the Appellant was required
to maintain an office outside the employer's establishment exclusively to earn
employment income and to meet clients or other persons on a regular and
continuous basis in the ordinary course of her employment. The initial "no" was changed to
"yes". This was also the case for question 15, which asked
whether the Appellant was required to purchase supplies used in the performance
of her duties. The answer now reads
"yes". At question 17, the
answer indicates that the Appellant was required to pay certain other expenses,
but none are specified.
[11] No form was signed by the Agency in respect of
the 2005 taxation year. The Appellant submitted
that she was before the Court because Ms. Lafond had refused to sign form T‑2200 on behalf
of the Agency. A completed, but unsigned form was filed in evidence.
[12] Nevertheless, the Appellant contended in her
notice of appeal that she considered herself self-employed as far as her
commissions on sales to her personal clients were concerned. If that were the
case, the Appellant would not need a statement from her employer to be eligible
to claim deductions as a commission salesperson. The Court therefore deems it
necessary to clarify the relationship that existed between the Agency and the
Appellant with respect to the personal sales made by the Appellant.
[13] To determine whether or not a contract of
employment existed, the Court refers to the Civil Code of Québec. Articles 2085, 2086, 2098 and 2099 are the most
relevant provisions. They read as follows:
Contract of employment
2085. A contract of employment is a
contract by which a person, the employee, undertakes for a limited period to do
work for remuneration, according to the instructions and under the direction
or control of another person, the employer.
2086. A contract of employment is for a fixed term or an
indeterminate term.
Contract of enterprise or for services
2098. A contract of enterprise or for services
is a contract by which a person, the contractor or the provider of services, as
the case may be, undertakes to carry out physical or intellectual work for
another person, the client or to provide a service, for a price which the
client binds himself to pay.
2099. The
contractor or the provider of services is free to choose the means of
performing the contract and no relationship of subordination exists
between the contractor or the provider of services and the client in
respect of such performance.
[Emphasis added.]
[14] That said,
the evidence adduced clearly shows that, within the context of her employment,
the Appellant worked under the direction of the Agency. The employment contract between the Agency and the
Appellant is evidence of their intent and, especially, of the fact that the
Appellant was required to work full time for the Agency, even if her earnings were
different for sales made to her personal clients. The Appellant could not make
any personal sales without going through the Agency, as she did not have a
licence issued under the Travel Agents Act, R.S.Q, c. A-10. Section 5 of
that Act provides that the employee of an employer on
whose account or on whose behalf a licence is held may perform operations
proper to a travel agent without holding a licence himself or herself provided
he or she so acts on account of the employer and not on his or her own account.
It is clear, then, that the Appellant was required to make her sales of travel
products to her clients through the Agency so that the Agency would be the one
to assume all the responsibilities toward the clients and have to meet the
obligations under the Travel Agents Act such as keeping books and
accounts, in particular a trust account.
[15] It
is therefore clear that the Agency always maintained the authority to direct or
control the performance of the Appellant's work. What was involved, then, was work
for remuneration involving two different payment methods, and a relationship of
subordination characteristic of a contract of employment.
[16] The Appellant thus was working under two
separate contracts of employment, one as a travel consultant for Agency
clients, at a set hourly rate, and the other as a travel consultant for her
personal clients, but the terms of which required her to work through the
Agency and receive a commission.
The problem in this appeal is that the
terms and conditions of employment were never clearly established, which
explains the many misunderstandings and the difficulties encountered by the two
parties.
[17] In order to deduct work-related expenses in
respect of the commission income earned in the two taxation years at issue, the
Appellant must have met the conditions set out in paragraph 8(1)(f) of
the Income Tax Act (the "Act"). The Court notes straightaway that
deductible expenses are limited to those incurred in order for the Appellant to
earn commission income, that is, $7,644.98 and $7,295.07 for the 2004 and 2005
taxation years respectively. The conditions are set out in paragraph 8(1)(f),
which the Court summarizes as follows:
a.
the employment is in
connection with the selling or negotiating of contracts;
b.
under the contract of
employment, the employee is required to pay his or her own employment expenses;
c.
the employee is ordinarily required to carry on the duties of the
employment away from the employer’s place of business;
d.
the employee is remunerated in whole or part by commissions;
e.
the employee is not in receipt of an allowance for travel expenses.
[18] Subsection
8(10) of the Act moreover provides that an
amount otherwise deductible for a taxation year under paragraph (1)(c), (f), (h)
or (h.1) or subparagraph (1)(i), (ii) or (iii) by a
taxpayer may not be deducted unless a prescribed form, the T-2200, signed by
the employer certifying that the conditions set out in the applicable provision
were met, is filed with the taxpayer’s return of income for the year. Paragraphs (1)(h) and (h.1) relate to
travel expenses and motor vehicle travel expenses. The Appellant also claimed
expenses connected with her home office and the cost of supplies, provided for
under paragraph 8(1)(i) of the Act. Subsection 8(10) and paragraphs
8(1)(h) and 8(1)(h.1) of the Act are reproduced below:
8(10)
Certificate of
employer
(10) An amount otherwise deductible for
a taxation year under paragraph (1)(c), (f), (h) or (h.1)
or subparagraph (1)(i)(ii) or (iii) by a taxpayer shall not be deducted unless
a prescribed form, signed by the taxpayer’s employer certifying that the
conditions set out in the applicable provision were met in the year in respect
of the taxpayer, is filed with the taxpayer’s return of income for the year.
8(1)(h)
Travel expenses
(h) where the taxpayer, in the year,
(i) was ordinarily
required to carry on the duties of the office or employment away from the
employer’s place of business or in different places, and
(ii) was required under
the contract of employment to pay the travel expenses incurred by the taxpayer
in the performance of the duties of the office or employment,
amounts expended by the taxpayer in the year (other
than motor vehicle expenses) for travelling in the course of the office or
employment, except where the taxpayer
(iii) received an
allowance for travel expenses that was, because of subparagraph 6(1)(b)(v),
6(1)(b)(vi) or 6(1)(b)(vii), not included in computing the
taxpayer’s income for the year, or
(iv) claims a deduction
for the year under paragraph 8(1)(e), 8(1)(f) or 8(1)(g);
8(1)(h.1)
Motor vehicle travel
expenses
(h.1) where the taxpayer, in the year,
(i) was ordinarily
required to carry on the duties of the office or employment away from the
employer’s place of business or in different places, and
(ii) was required under
the contract of employment to pay motor vehicle expenses incurred in the
performance of the duties of the office or employment,
amounts expended by the taxpayer in the year in
respect of motor vehicle expenses incurred for travelling in the course of the
office or employment, except where the taxpayer
(iii) received an
allowance for motor vehicle expenses that was, because of paragraph 6(1)(b),
not included in computing the taxpayer’s income for the year, or
(iv) claims a deduction
for the year under paragraph 8(1)(f).
[19] The Court also notes the
requirements under subsection 8(13) of the Act and the restrictions that
subsection places on work space in the home:
8(13)
Work space in
home
(13) Notwithstanding paragraphs 8(1)(f) and 8(1)(i),
(a) no amount is
deductible in computing an individual’s income for a taxation year from an
office or employment in respect of any part (in this subsection referred to as
the “work space”) of a self-contained domestic establishment in which the
individual resides, except to the extent that the work space is either
(i)
the place where the individual principally performs the duties of the office or
employment, or
(ii)
used exclusively during the period in respect of which the amount relates for
the purpose of earning income from the office or employment and used on a
regular and continuous basis for meeting customers or other persons in the
ordinary course of performing the duties of the office or employment;
(b) where the conditions set out in subparagraph 8(13)(a)(i) or 8(13)(a)(ii) are met,
the amount in respect of the work space that is deductible in computing the
individual’s income for the year from the office or employment shall not exceed
the individual’s income for the year from the office or employment, computed
without reference to any deduction in respect of the work space; and
(c)
any amount in respect of a work space that was, solely because of paragraph
8(13)(b), not deductible in computing the
individual’s income for the immediately preceding taxation year from the office
or employment shall be deemed to be an amount in respect of a work space that
is otherwise deductible in computing the individual’s income for the year from
that office or employment and that, subject to paragraph 8(13)(b), may be deducted in computing the individual’s income
for the year from the office or employment.
[20] The
Appellant meets conditions 1, 4 and 5 set out in paragraph 16 of these Reasons
in respect of the 2004 and 2005 taxation years.
[21] For 2004, the Appellant allegedly filed form
T-2200 with her income tax return and the information on that form allegedly
was the same as the information on form TP-64-3 filed with her income tax
return to Revenu Québec, which was entered into evidence. On
that form, the answer provided by the Agency to the question concerning travel
and motor vehicle costs is that the Appellant was not required to perform some
or all of her duties away from the Agency's place of business. Ms. Lafond
confirmed this in her testimony when she pointed out that the only condition placed
on the Appellant had been that she not deal with personal clients during her
hours of work for the Agency. Again according to Ms. Lafond's testimony, the
Agency's premises and equipment had been available to the Appellant after hours
in order for her to serve her own clients. As regards the questions on the T-2200
in respect of which the answers were changed, the answers are inconsistent with
the fact that the Appellant was not required to work away from the Agency's
place of business and so was not required to travel, use a motor vehicle or
incur travel expenses during working hours.
[22] The answers on the form regarding expenses
related to work space and supplies were also changed. According to Ms. Lafond, she would have initialled the changes if she
had been the one to make them. The Appellant therefore was not required to
maintain work space away from the Agency's place of business. And even if she had been required to so do, it is
clear from the evidence heard that she would not have been using it exclusively
to earn
employment income and to meet clients on a regular and continuous basis in the
ordinary course of her employment.
[23] Moreover, the Agency did not require her to
purchase a computer, software, or other equipment or supplies in the course of
her employment. Again, the answer to the
question in this regard was changed.
[24] The
testimony heard and terms and conditions of the contract entered into evidence
have not satisfied the Court that the Appellant was required to routinely perform
her duties away from the Agency's place of business. Although it is reasonable
to conclude that the Appellant incurred some employment expenses related to her
sales to her own clients and that she did some work at home, she was not
required to do so by the Agency. This condition is essential to give
application to paragraph 8(1)(f). And even if the Appellant had
been required to do so, she would have had to establish that her office at home
had been the place where she principally
performed the duties of her office or employment. The evidence showed that the Appellant's commission sales accounted
for no more than 10 to 15 per cent of her overall sales for the Agency. The
Minister was therefore correct in denying the amounts deducted by the Appellant
as employment expenses for 2004.
[25] In
regard to the 2005 taxation year, the terms and conditions of employment did
not change. The Agency did not require the Appellant to have a home office and
the Appellant was not required to exercise the duties of her employment away
from the Agency's place of business. Accordingly, the Minister was correct in
denying the expenses deducted for the 2005 taxation year.
[26] For these reasons, the appeal is dismissed.
Signed at Edmundston, New Brunswick, this 9th day of May 2008.
"François Angers"
Translation
certified true
on this 17th day
of June 2008.
Carole Chamberlin, Translator
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