Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues:
1. Can a Hairstylist deduct the cost of supplies consumed directly in the performance of his/her employment under subparagraph 8(1)(i)(iii)?
2. Is a Hairstylist considered a "tradesperson" for purposes of paragraph 8(1)(s) of the Act such that he/she is entitled to deduct the cost of "eligible tools" purchased in the year under paragraph 8(1)(s) of the Act?
Position:
1. Yes, as long as the requirements in that subparagraph are met.
2. Question of fact, but generally, yes.
Reasons:
1. Subparagraph 8(1)(i)(iii) is not restricted to employees of specific occupations.
2. There is no definition of "tradesperson" in the Act and accordingly the term should be interpreted using its everyday meaning. A hairstylist is considered a "tradesperson" in Canada.
XXXXXXXXXX 2008-029119
Renee Sigouin
(613) 957-2128
January 9, 2009
Dear XXXXXXXXXX :
Re: Employment Expenses - Hairstylist
We are writing in response to your letter of August 28, 2008 wherein you requested our comments regarding the deductibility of certain expenses incurred by a hairstylist and her employer's obligation to complete and sign a Form T2200 - Declaration of Conditions of Employment in relation to these expenses.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.
You have advised that according to the terms of the employee's employment contract, she must purchase her own supplies in order to fulfill her employment duties. The supplies include shampoo, conditioner and other hair products, combs, brushes and other hair utensils. In addition, she must supply her own tools, which includes hairdryers, curling and straightening irons and scissors.
Subsection 8(2) of the Act provides that no deductions are allowed in computing a taxpayer's income for a taxation year from an office or employment except as specifically enumerated in section 8 of the Act. One such exception arises under subparagraph 8(1)(i)(iii) of the Act which allows a deduction with respect to the cost of supplies that are consumed directly in the performance of a taxpayer's employment duties.
As discussed on page 9 of CRA Guide T4044: Employment Expenses ("T4044"), the cost of supplies purchased in a taxation year are deductible provided all of the following requirements are met:
a) under the contract of employment, the employee had to provide and pay for the supplies;
b) the employee used the supplies directly in his/her work;
c) the employer did not reimburse the employee for these expenses; and
d) the employer completed and signed a copy of Form T2200 and this is retained by the employee.
It is our view that provided the foregoing conditions are otherwise met, shampoo, conditioner and other similar products "consumed" would qualify for deduction under subparagraph 8(1)(i)(iii) of the Act.
There is no general provision to enable an employee to deduct the cost of tools acquired in a taxation year. However, paragraph 8(1)(s) of the Act provides a deduction for "tradespersons" for the first $500 spent in excess of $1,000 (including GST and PST/HST) on "eligible tools" in a taxation year. A general discussion of the tradespersons tool deduction is contained on pages 13 and 14 of T4044.
The term "eligible tools" is defined in subsection 8(6.1) of the Act to be a tool that:
a) is acquired by the taxpayer on or after May 2, 2006 for use in connection with the taxpayer's employment as a tradesperson;
b) has not been used for any purpose before it is acquired by the taxpayer;
c) is certified in prescribed form by the taxpayer's employer to be required to be provided by the taxpayer as a condition of, and for use in, the taxpayer's employment as a tradesperson; and
d) is, unless the device or equipment can be used only for the purpose of measuring, locating or calculating, not an electronic communication device or electronic data processing equipment.
As there is no definition of "tradesperson" in the Act, this term should be interpreted using its ordinary or everyday meaning. The Concise Oxford Dictionary (8th edition) defines a "tradesman" as "a person engaged in trading or a trade, esp. a shopkeeper or skilled craftsman" and a "trade" as "a skilled handicraft esp. requiring an apprenticeship." It is our understanding that hairstylists are required to complete apprenticeships and are included in formalized apprenticeship programs as "trades". Accordingly, it is our view that a hairstylist is a "tradesperson" under its ordinary meaning and accordingly, would be eligible to deduct the cost of tools where the conditions of paragraph 8(1)(s) of the Act are otherwise met.
As noted above, in order for an employee to deduct the cost of supplies (under subparagraph 8(1)(i)(iii) of the Act) and tools (under paragraph 8(1)(s) of the Act), the employer must complete and sign Form T2200 to certify that the requirements in those provisions have been met.
Although an employer is not statutorily obligated to issue a completed and signed Form T2200 in relation to the abovementioned expenses, we would expect an employer to issue a Form T2200 in a situation where an employee has reasonable grounds to make certain claims. Where a determination of the employee's eligibility to make the claims and the employer's requirement to complete supporting tax forms can not be made and resolved by a mutual agreement between both parties, we would encourage them to contact their local tax services office for assistance.
We trust these comments have been of assistance.
Yours truly,
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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