December 21, 2014

IRS Looking to Tax Free Lunches Offered at Tech Firms

employee lunch

Federal tax officials may bring more reality to the old adage “There’s no such thing as a free lunch.”

According to reports from the California Bay Area and Silicon Valley, the Internal Revenue Service is considering whether to tax free lunches and other perks routinely offered to employees at tech companies.

Silicon Valley Mercury News reported recently that employees at companies like Facebook and Google may have to pay taxes on free meals.  It’s a fringe benefit that their employers use as a selling point to recruit talented employees and keep them working on-site. A free lunch — and more — is seen by these and other companies as something they can offer to improve the workplace environment and morale.  But now the IRS is considering making that less free by taxing the benefit.

There are no details about what the tax would be on the free lunches offered at these workplaces. A report by The Wall Street Journal details debate among tax experts including tax attorneys practicing in the Silicon Valley.  They say the IRS has begun to focus on whether the meals constitute part of a compensation package.

Of course, the implications resonate far beyond Silicon Valley.

Businesses of all sizes offer a variety of benefits for employees that go beyond traditional payment for services.  Free coffee and soda beverages; free snacks; free meals; free dry cleaning services; free bus transportation; free health clinic services — the list goes on, and it’s all over the country.  Rules are complex about which additional compensations may constitute taxable perks.

The concern for the rest of us who do not get free lunches, is whether the American taxpayers are in effect giving already-highly-paid individuals a tax break.  Mark Maremont, a reporter for the Wall Street Journal, called the food spreads “lavish buffets.”

A former Google marketing employee told MercuryNews.com that the free lunches his wife, a current Google employee, still enjoys are “a phenomenal convenience, a terrific motivator, and a great social thing.” He said the proposed tax is “stupid.”

Employee Lunch Photo via Shutterstock

1 Comment ▼

Joshua Sophy - Staff Writer


Joshua Sophy Joshua Sophy is a staff writer for Small Business Trends, covering technology and business news. He is a journalist and editor with 15 years experience in media. A former newspaper reporter and editor, Joshua also serves as President of the Board of Directors of a curling club and is editor of a regional newsletter focused on the sport of curling in the Eastern U.S.

One Reaction

  1. When will the government learn that they need to quit worrying about little stuff like taxing free lunches and handle bigger issues like immigration and foreign policy? This kind of stuff infuriates me.

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