Companies like Google, Twitter, and Facebook are known for offering free food as a perk — employees don't have to pay for lunch and dinner, and the company gets them in the building and around colleagues for longer each day. But The Wall Street Journal has examined whether these free meals should be taxed as fringe benefits. According to lawyers who spoke to the Journal, the IRS has been considering the question of whether Google's cafeterias are more like a necessary amenity or a company car, and the legal ground for either case is still shaky.
The question of meal taxes is complicated: opponents of taxing meals say they could fall under an exception that allows companies to provide meals for the "convenience of the employer." That exception is largely in place for jobs where leaving to get lunch isn't feasible, or for workers in remote locations. Others, though, say the IRS is already wary of untaxed free meals. "If they're in there auditing, and you're not taxing the meals, they're going to challenge you on it," says tax attorney Thomas M. Cryan, Jr.
Technically, employees are responsible for paying any back taxes, but employers can also be taken to task for not automatically withholding money. While it's not clear whether some of the best-known free food providers include meals in tax forms, ex-Googlers have reported that their old employer doesn't. Startups often bristle at what they see as outdated laws, and taxing cafeterias may soon become the newest point of contention.