When outsiders visit Silicon Valley, the first thing they often notice is the food: Cafeterias brimming with free gourmet meals and snacks offered to employees of Google Inc and other technology firms. But not all is as it seems in the buffet line. There is growing controversy among tax experts about how to treat these coveted freebies. The Internal Revenue Service also has been focusing on the topic, according to attorneys who practice in the area, examining whether the free food is a fringe benefit on which employees should pay additional tax.
Tax rules around fringe benefits are complex, but in general they categorize meals regularly provided by an employer as a taxable perk, similar to personal use of a company car. That leads several tax experts to wonder if some companies providing free food may be skirting the rules...
...Technically, any unpaid back taxes would be owed by individual employees. In practice, tax lawyers say, the IRS tries to dun the employer for failing to withhold taxes on the meals' collective value.
Yahoo Inc. instituted free meals last year, after new Chief Executive Marissa Mayer took charge. On an investor conference call soon after, the former Google executive twice mentioned the perk in the context of recruiting, at one point saying free food was among the cultural changes intended to make "Yahoo the absolute best place to work. And if you're that, I think attracting talent comes reasonably easily." A Yahoo spokeswoman said in a statement, "We cover all related expenses." She declined to elaborate on how the company handles the tax treatment of its free meals.I haven't heard about any pharma companies offering free food in the cafeterias (my brief experience being that you had relatively reasonable (subsidized, I assume) prices, but you still had to pay for your own food.)
This is the sort of thing that marks an expanding industry, one that is competing for workers -- as opposed to one that is shrinking in fits and starts.