questions & answers

Question: I work in outside sales. For a number of years my employer has deducted shipping costs from my commission for all accounts outside the metro area. Recently they have begun deducting the % of $ credit charges cost from my commission as well. They deduct this before my paycheck is cut. For example they show me a spreadsheet with my compensation as $7000.00 -500 shipping -500 cc fees (and sometimes other deductions) = $6000.00 since these fees are deducted can i write them off on taxes and is this even legal?

Answer: Depending on whether a salesperson is an independent contractor (perhaps receiving IRS 1099 statements), business expenses may be deductible for federal income tax purposes. However, if the salesperson is an employee, the sales commission deductions may only affect the employee’s gross wage for tax purposes. As an employee, the federal Fair Labor Standards Act ("FLSA") would protect the employee from any deductions that would push the employee's gross wages below the federal minimum wage. Whether the sales commission deductions are legal also depends on a variety of factors, including whether the salesperson is an independent contractor, whether the salesperson is an employee at-will or under a definite-term contract, the nature of the sales contract with the company, and any written employment agreements, contracts, employee handbooks, and more. Tax and employment are extremely complex areas of law: see an attorney for fact-specific information and advice.