Principal Issues: Whether a group discount on transit passes results in a taxable benefit where the employer purchases and distributes the passes and then recovers 100% of the cost from the employees through payroll deductions.
Position: In this case no.
Reasons: The employer is not absorbing any of the costs relating to the discount.
XXXXXXXXXX 2011-039441 Andrea Boyle, CGA
February 9, 2011
Dear XXXXXXXXXX :
Re: Discounted Transit Passes
I am writing in reply to your facsimile dated February 1, 2011, in which you have indicated that employees at your workplace would like to get a "group discount" on transit passes. In the proposed arrangement, your employer would purchase and distribute the transit passes to the employees and would then recover 100% the cost of the discounted passes from the employees through payroll deductions. Your employer is not a transit company (i.e. is not in the business of operating bus, streetcar, subway, commuter train, or ferry services) and does not have any special relationship with such an organization.
You have asked whether there are any tax implications if the employer facilitates the purchase of the discounted transit passes; specifically, you have asked whether the discount received on the transit pass is a taxable benefit.
In the circumstances which you have described, the employer is not absorbing any of the costs relating to the discount; therefore, it is our view that there would be no taxable benefit to the employees with respect to the group discount enjoyed on the transit passes.
It should be noted that the cost of a public transit pass may be eligible for the transit pass credit. Therefore, where an employee purchases a public transit pass though payroll deductions, the total of amounts paid by the employee should be reported on the employee's T4 slip in the "Other information" area under code 84.
We trust that these comments will be of assistance.
Yours truly,
Guy Goulet CA, M.Fisc.
Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch