Appellant not required to incur those costs as employment condition, ruling says
The Tax Court of Canada has affirmed reassessments of a luxury department store chain’s designated sales associate (DSA) upon finding that she was not required to incur luxury clothing and home office expenses as a condition of employment.
In Samotus v. The King, 2025 TCC 104, the appellant worked for Holt Renfrew as a DSA from 1994–2019. She received a $2,000 clothing allowance per fashion season.
The appellant deducted the costs of luxury clothing and home office expenses in her 2016, 2017, and 2018 taxation years.
Upon being audited, the appellant asked Holt Renfrew to provide a T2200 form for a declaration of conditions of employment, a statutory condition to deduct some employment expenses, for the three taxation years. Holt Renfrew declined to do so.
The national revenue minister reassessed the three taxation years via reassessment notices dated Jan. 23, 2020. The appellant filed objection notices. On Dec. 11, 2020, the minister
confirmed the reassessments.
On appeal, the appellant alleged that the specialist DSA program required her to wear vendors’ brands to help exceed sales criteria. She claimed she had to buy more clothes, worn exclusively for work, at her own expense since her allowance was not enough.
The respondent argued that the appellant did not incur the expenses. Alternatively, it asserted that the expenses were personal expenditures, unreasonable, or not deductible under s. 8 of the Income Tax Act, 1985.
Reassessments upheld
First, the Tax Court of Canada saw no basis to conclude that Holt Renfrew intended the appellant to incur any expenses exceeding the allowance.
The court noted that an email from Holt Renfrew’s management denied that the appellant had to incur expenses as an employment condition. The email provided that Holt Renfrew would be willing to complete a T2200 form, but it would contain answers denying any requirement to incur employment-related expenses.
The court said the specialist DSA program document did not expressly require employees to pay out of pocket for high-end clothing as a condition to work for Holt Renfrew or as a specialist DSA. The court added that the Holt Renfrew Dress Code also did not require purchasing clothing.
Second, the court noted that s. 8(13) of the Income Tax Act limited deductions for home office expenditures, except if the home office was a place where the taxpayer principally performed their duties, or which the taxpayer used exclusively for work on a regular and continuous basis to meet customers or other work-related individuals.
The court ruled that the limitation on deducting home office expenses in s. 8(13) applied in this case. The court explained that the appellant did not principally perform her duties from home or regularly use the space to meet customers or others in the ordinary course of her work.
Lastly, the court decided that the evidence in the record and the testimony failed to support that the disputed expenses had in fact been incurred.
The court noted that it repeatedly asked the appellant’s agent to show it documents that might help establish whether the contested expenses had been incurred.
