It’s crucial for businesses to understand how to properly handle taxes when it comes to employee discounts and providing complimentary meals. Let’s delve into the details and guidelines provided by the Minnesota Department of Revenue.
Employee Meals:
When employees receive a discount on meal, businesses need to charge tax based on the price the employee pays for the meal. Here’s an example to illustrate this:
Scenario:
Your employees receive a 15% discount on meals. The menu price (before tax) for a particular meal is $10.00. The discounted price that the employee pays is $8.50. In this case, the taxable amount is the discounted price of $8.50.
Free Meals and Drinks:
Free meals and drinks are those given away without any purchase necessary. However, it’s important to note that certain types of free meal, such as two-for-one meal, free child meals with an adult purchase, or coupon meals, are excluded from this definition.
When providing free meal and drinks, businesses are responsible for paying use tax on the cost of any taxable items used in the meal. Taxable items may include disposable cups, napkins, prepared food, soft drinks in cans or bottles, and straws. If free drinks are served, businesses must pay use tax on the cost of liquor used in those drinks. Use tax includes the state general use tax rate, the liquor gross receipts use tax, and any applicable local taxes.
It’s important to note that use tax is not applicable to the cost of Non Taxable food items.
Complimentary Hotel Meals:
In the context of hotel stays, meals and drinks are considered complimentary when they are included in the price of a room, regardless of whether the customer consumes them. Here are some examples of complimentary hotel meal:
- Appetizers
- Beverages (alcoholic and nonalcoholic)
- Continental or hot breakfast
- Cookies and snacks
- Evening dinner
In these cases, the price of the room remains the same, regardless of whether the customer consumes the meal or drink.
In this blog post, we have outlined the guidelines provided by the Minnesota Department of Revenue for charging tax on employee meals and paying use tax on taxable items provided in free meals and drinks. It is crucial to consult the official resources and guidelines provided by the Minnesota Department of Revenue for complete and up-to-date information.
For further details and specific scenarios, we recommend visiting the Minnesota Department of Revenue’s official website Discounts and Coupons | Minnesota Department of Revenue (state.mn.us) and get in touch with Prudent Accountants to stay informed and compliant to ensure accurate tax reporting and a smooth business operation.
