Should Tech Companies Get Taxed on Free Lunches?

Sep 03 at 4pm

They want Google’s lunch money. But should the IRS tax tech companies for their much-lauded free meals? And can they?

As any tech-bashing, non-coding muggle will tell you, San Francisco’s economic overlords are as adept at avoiding taxes as they are at harvesting data. Usual suspects like Twitter and Google or Uber and AirBnB, the argument goes, have circumvented commercial insurance policies, skirted laws protecting city infrastructure like bus stops from private use, and even benefitted directly from tax-incentives for locating downtown.

So we’ve stopped their busses and protested their events. But for once, can we let techies — I mean “information architects” and “sales ninjas” — just enjoy some free in-house lunch?

It looks like the IRS can’t stomach the idea, reports the Wall Street Journal. The Internal Revenue Service, arguing that work-provided meals are a taxable fringe benefit, has given its attention to the issue during routine audits of some companies, according to tax lawyers. Increasingly, the IRS has sought back taxes that can amount to 30% of the meals' fair-market value. Judging by the reputation of the purported tech banquets, that could quickly add up. Equally signaling a new focus on the issue, the IRS and U.S. Treasury Department included taxation of "employer-provided meals" among their yearly list of top tax priorities.

"I suspect this is going to be guidance on these free cafeterias, that the benefit has got to be included in income," Anne G. Batter, an employment-tax attorney at Baker & McKenzie in Washington, told the Journal. Tax lawyers predict some employers could fight the IRS in this matter, the Journal also reported, “but allowing free meals to go untaxed, critics say, distorts the economy and gives some employers an unfair edge.”

Gourmet in-office lunch is increasingly a must-have perk for competitive tech employers. Discovering exactly how deadly-serious an operation lunch can be, food writer Jonathan Kauffman interviewed a panel of four executive tech chefs. “What Zynga really tries to do is connect the world with games,” chef Matthew DuTrumble, told Kauffman,“we’re trying to connect the people at Zynga with food.”

In the end, the question of taxability depends on who really benefits from these perks. After all, time spent thoughtfluencing colleagues in the office or “on campus” can prove valuable for employers hoping to get the most from their workforce.

So, next up: are Nerf guns, ping-pong tables, and slides taxable fringe benefits? We’ll check on that, but meanwhile, here’s to a continued national conversation about “disruption” that also includes some pushback against tax evasion. After all, this isn’t Wall Street.

[Via: The Wall Street Journal; photo by Roman Boed via Flickr]

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