24 June 1999 External T.I. 9912525 - SUPPLIES & EQUIPMENT

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

XXXXXXXXXX 991252

Wm. P. Guglich

Attention: XXXXXXXXXX

June 24, 1999

Dear Sirs:

Re: Employment Expense Deduction - Supplies and Equipment

This is in reply to your recent letter received on May 6, 1999, requesting our views on the tax treatment of certain items, for purposes of subparagraph 8(1)(i)(iii) of the Income Tax Act (the “Act”).

You indicate that XXXXXXXXXX employs fitness and art instructors on an hourly basis to teach aerobics, fitness programs and a variety of art classes. As a condition of their employment, they are required to provide specific supplies.

You requested our views as to whether the following items would be considered the “cost of supplies that were consumed,” for purposes of subparagraph 8(1)(i)(iii) of the Act.

1. Taped Music - (a) pre-recorded canned music tapes purchased from third parties, (b) music CD’s that are used to tape specific tracks, and (c) blank tapes.

2. Microphone Headsets - portable microphone used for aerobic classes.

3. Miscellaneous - (a) photocopied information sheets on exercises or stretches handed out to the class participants, (b) exercise books or publications used as reference material.

Our Comments

Subsection 8(2) of the Act limits an employee’s deduction to amounts specifically permitted under section 8 of the Act.

Subparagraph 8(1)(i)(iii) of the Act permits an employee to deduct the cost of supplies if the following conditions are met:

• the supplies were consumed directly in the performance of the duties of the office or employment, and
• the employee was required under the employment contract to supply and pay for such supplies.

A supply that is consumed directly in the performance of the duties of office or employment is normally used up after being used a few times. Paragraph 9 of Interpretation Bulletin, IT-352R2 Employee’s Expenses, Including Workspace in Home Expenses states that the word “supplies” as used in subparagraph 8(1)(i)(iii) of the Act is limited to materials that are used up directly in the performance of the duties of the employment.

Pre-recorded canned music tapes, purchased from a third party, music CD’s used to tape music and blank tapes are not, in our view, in the nature of supplies. Further, these items normally are not consumed (used up) directly in the performance of the duties of employment in that the tapes and CD’s can be used over and over again. Similarly, microphone headsets (portable microphones) would also likely not be considered supplies. Microphone headsets can also be used on an ongoing basis and hence are not “consumed” in the performance of employment duties.

Photocopied information sheets on exercises or stretches that are handed out to class participants may be considered supplies consumed directly in the performance of the duties of employment. Therefore, the sheets may qualify under subparagraph 8(1)(i)(iii) of the Act. However, as stated in paragraph 9(e) of IT-352R2, exercise books and publications are not considered supplies.

We trust our comments will be of assistance to you.

Yours truly,

J. F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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