The US government is not happy with Silicon Valley's free lunch

Corporate perks are nothing new: Everything from free parking to corporate jets all exist, and for companies in Silicon Valley, corporate perks are a way of life to attract the best talent. Unfortunately, the government is not so happy about one aspect of the free offerings.

It is quite common to hear about the luxury services offered to employees by companies like Google or Facebook, and one of them is a free lunch. It's these free lunches that has the IRS perturbed as they feel that these meals should be taxed like other benefits as they are, in a way, income for the employees.

Here's the deal, if your company does not provide you free food, you have to go out and buy food. Nothing strange here, but if your company is giving you free food, the IRS sees that as a benefit that is providing you with additional income, since you are no longer buying food, and therefore, it should be taxed.

As with all things related to taxes, nothing is simple. For example, at some offices, lunches have to be provided as it is not feasible for employees to go off-site for food or they can't bring food to the office. An example of this are folks who work on an oil rig in the middle of the ocean, and these employees can enjoy their 'free' lunch without the worry of tax implications.

The IRS believes that this matter will likely be settled in the courts as they expect corporations to push back heavily against the idea that free lunches should be taxed as income. The government is not concerned about the 'free lunch' that is distributed at meetings as those are seen to be infrequent.

While we won't know officially if these lunches are a taxable event for some time, if they are found to be, this could represent a significant rise in cost for employees.

Source: WSJ | Image Credit: Shutterstock - Famous Golden Gate Bridge

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There are so many ways around this "Law" its unreal.

The company could say, Well we are just going to leave this food sitting here all cooked and ready to eat all tempting and tasty...Now its not our problem is someone happens to "Steal" is it now employees ... ;-) ...What free lunch? I just found some food lying there didn't know who it belonged to so I helped myself.

I at all not clear about this; how about if the company is taking the free lunch of as some sort of exemption on their tax form? Could this be construed as a gift to employees and looked at as part of their benefits. I know companies look at every giveaway to employees as part of their benefits.

I think this needs to be looked into on a per company basis. If I get a $100 gift for thanksgiving from my employer, I have to pay tax on that.

The IRS are out of their minds! The company that is buying the lunches are already being taxed when they purchase that food. The IRS are trying to double dip.

EDIT: I forgot only some states tax food, not all do.

The IRS are out of their minds! The company that is buying the lunches are already being taxed when they purchase that food. The IRS are trying to double dip.

You are wrong on most accounts when you say the food is being taxed twice. Food bought for preparation to be turned into a meal is not taxed otherwise the entire restaurant industry would be up in arms about this issue. Second having dealt with this issue before as a tax representative for a state, they do have good footing to go after these free meals a they do fall under an added benefit of employment at these business. From a tax side it makes sense to tax the meals.

There is a simple and effective solution for this. Instead of companies giving lunch for free, they can sell them for one penny. IRS can collect the taxes on a penny, as it is not illegal to sell something for a loss.

Companies that offer these free lunches or food for a business meeting ARE still paying tax on the food. Someone has to go out to the grocery or wherever and buy the food. Afterwards the company generally writes it off as a business expense and/or as part of success sharing, but regardless tax was still paid for the food at the time of purchase. Even when I worked in food service, if a meal was discounted or free, tax was still paid on the original purchase price before discount was applied.

What about US military personnel? Are they taxed for the meals they receive? I sure as hell wasn't when I was in the Army. Seems like a double standard to me.

watkinsx2 said,
Foods classed as essentials are not subject to sales tax in the UK.

I believe that where your wrong even foods subject to some kind sales tax even there after all isn't the fuel being use in truck the stuff around is tax's there.

I'm right. I live in the UK. At the point of sale no extra VAT or TAX is added to essential food goods.

You can read the official line here:
http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services.htm

"Food and drink for human consumption is, in general, zero-rated but many items are standard-rated, including alcoholic drinks, confectionery, crisps and savoury snacks, hot food, sports drinks, supplies of food made in the course of catering including hot takeaways, ice cream, soft drinks and mineral water."

I hope everybody agreeing with this is reporting their coffee/snacks/donuts/bagels etc. etc.

You can want to tax this all you want... but if a law is not enforceable it's useless.

I'd love to see the costs of enforcing and/or complying with this vs the tax income. It won't be much :|

There are several states to my knowledge that have a sales tax for groceries and prepared food.

Alabama and Arkansas are two that come to mind, I'm sure Google could give you more details.

I thought the same thing, here in nj the only food that is taxed is the prepared foods (rotissierie chickens for example). But all other groceries are tax free.

MrHumpty said,
They do.

The majority quite definitely do not but this is more to do with open loopholes in the system. Maybe the IRS/HMRC should spend some time looking this rather than 'free lunches'.

You realize a loophole is actually fancy speak for a portion of tax law people don't agree with. It's still legal.

Type comment here...

Raa said,
Source?
Lack of legal prosecution for tax violations? I believe the burden of proof is on those claiming they don't pay their taxes. If they take advantage of legal tax avoidance that's still legal and it still means they are paying their taxes.

MrHumpty said,
You realize a loophole is actually fancy speak for a portion of tax law people don't agree with. It's still legal.

Type comment here...

I'm well aware of what a loophole is thank you. I'm stating that if they're looking to close loopholes, the ones that large corporations are using to avoid billions of dollars should probably be the first port of call rather than 'free lunches'.

For the record I was talking about loopholes, offshore accounts, and other shady ways people avoid paying taxes. We probably wouldn't be in such debt if the IRS would stop hunting the small game and take down the elephants. Picking on people who get free lunches? They can go to hell.

Geezy said,
For the record I was talking about loopholes, offshore accounts, and other shady ways people avoid paying taxes. We probably wouldn't be in such debt if the IRS would stop hunting the small game and take down the elephants. Picking on people who get free lunches? They can go to hell.

Ah but it's all about kick backs my friend. They won't hunt the big game in fear of losing the big game. Instead they'll hunt the small fry as there's little they'll do about it. Pretty sh*** if you ask me.

MikeChipshop said,
I'm well aware of what a loophole is thank you. I'm stating that if they're looking to close loopholes, the ones that large corporations are using to avoid billions of dollars should probably be the first port of call rather than 'free lunches'.
If you know what loopholes are then your arguments seem even sillier.

As far as those large corporations avoiding taxes. They do so outside of the IRS's reach. Multi-nationals can do that because they are multi-national.

If we didn't tax overseas income much of this would go away.

MikeChipshop said,
Yes please, roast beef and horseradish, if you're buying.

He's probably not, and soon your company might not be either!

As an employee in the service industry we were taxed for any food we were provided from work. (Looking at the tax code I may be wrong about that, but I swear I was taxed at the time) Obviously we had the option to not take it and eat elsewhere but in some cases that wasn't feasible either. With my current position if I claim any expenses (food gas ect) I do believe those are taxable, so why would this be any different?

I'm not saying I agree with it, but it should be a level playing field for all involved.

As an employee in the service industry we were taxed for any food we were provided from work. Obviously we had the option to not take it and eat elsewhere but in some cases that wasn't feasible either. With my current position if I claim any expenses those are taxable, so why would this be any different?

I'm not saying I agree with it, but it should be a level playing field for all involved.

Everyone wants to live at the expense of the state. They forget that the state lives at the expense of everyone.

― Frédéric Bastiat

It kinda makes sense. Besides a meeting why should your work provide food for other reasons besides the oil rig argument? I pay for my own food at work, or I bring food from home.

Well.. in that case you might want to look for employee that gives you free lunch. unless you don't care so you don't complain about the people who get it

well, IRS are known as greedy bunch.
in anycase IRS logic are also shrewd, those "Free lunch" are footed by the companies, and those became an Income for the foods providers, so tax there.

If IRS insist that it should be taxed again, it will became a double tax.
See, the greedyness of IRS.

Article title is a bit screwy... the IRS is not a "registered" part of the US Government xD in fact their existence is quite illegal.

On the contrary Torolol. The company is writing off food provided to employees as an expense, just like payroll is an expense. The IRS's point is that the free breakfast, lunch, dinner, snacks, etc. are a benefit that companies are paying for just like payroll.

Trying to gage just what value to assign to all of the food an employee gets as a "benefit" sure would keep the accountants busy. I suppose they could just make employees "pay" with their badge to figure out that amount and then give employees a year end "bonus" that when calculated, would be enough to cover the taxes on your "meal benefit".

Cut the IRS some slack, all they are doing is enforcing the tax code as written by Congress (lobbyists) and signed into law. Talk about having the worst part of the US Code to enforce AND pretty much everyone hates it when they do their job.

This is just stupid. To hell with the IRS. They really need to be done away with anyway, kill the IRS and implement a flat tax, job done.

And besides, the wages of those workers are already taxed, so the IRS should stop trying to come up with another way to double dip. There's already far too much of that going on.

They really had nothing better to do with their day at work? I think someone at the IRS is a little unhappy he isn't getting free lunches every day.

Its not stupid. What is happening is these business is purchasing the ingredients tax free and the preparing a meal that should be taxable and giving it away for free. You can't buy items for a business and never pay taxes on said items and expect to write them off as expenses when you are essentially using a crromed viewes