Are Snacks Provided in the Workplace Taxable to Employees? 

Question: Our break room has a refrigerator stocked with drinks that are available to everyone at the office, including guests. We also usually have cookies and other treats available. Are these snacks taxable benefits that we need to track? That would be a lot of trouble for a small benefit (and it would really undermine the open, fun atmosphere we’re trying to create here).

Answer: Like anything of value, food provided to employees is a taxable fringe benefit unless tax law has an applicable exclusion.

In your case, the relevant exclusion is probably the exclusion for “de minimis” fringe benefits. The IRS balances three factors when deciding if something qualifies for the de minimis fringe benefit exclusion: 

• The value. How much is the item worth?
• The frequency. How often is the item provided?
• Administrative burden. Would tracking employee usage be reasonable? 

If, in light of a benefit’s value and frequency, it would be unreasonable or administratively impractical to track each employee’s benefit, the benefit can be disregarded.

Because the exclusion depends on the facts and circumstances, and there is little authority on this subject, it can be challenging to figure out whether the exclusion applies. For example, the IRS has indicated that coffee, doughnuts, and soft drinks may be excludable if they’re occasional or infrequent. But the IRS has also said that daily snacks with a value of one dollar could be taxable as wages, because even benefits that are small in amount will be taxable if they’re provided on a regular basis. (Fixed value and regularity presumably suggest that it will be easier for the employer to determine the value given to each employee).

Your situation doesn’t match either of those scenarios because your snacks aren’t “occasional or infrequent,” and the benefit received may vary greatly by employee (that is, the value isn’t fixed). Your situation more closely resembles the facts of an IRS memorandum that applied the de minimis fringe benefit exclusion to food and beverages offered on a continual basis in a common area. 

In Technical Advice Memorandum 201903017, the IRS answered this question: “Is the value of meals and snacks that the taxpayer provided to employees in the headquarters offices …includable in employees’ income and subject to employment taxes?”

There, the IRS said: “Generally, quantifying the value consumed by each employee of snacks that come in small, sometimes difficult to quantify portions and are stored in open-access areas is administratively impractical given the low value of each snack portion, even if the employer offers the snacks on a continual basis.” 

While that memo can’t be cited as precedent (because it only applied to a specific employer), it suggests the IRS might reach a similar conclusion in your case absent additional facts that tip the scales back toward taxability. Contact your tax advisor about your situation.