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Nasir and Matt discuss the IRS looking into taxing free lunches provided by Silicon Valley companies. The two then answer, "I'm a franchisor, can I be held responsible for labor law violations of my franchisees if I don't know about it?" Full Podcast Transcript NASIR: Welcome to Legally Sound Smart Business. You’re listening to Nasir Pasha. MATT: And this is Matt Staub. NASIR: That’s correct. Welcome to the business podcast where we cover business in the news and also answer some of your business legal questions that you, the listener, can send in to ask@legallysoundsmartbusiness.com and also ask us on Twitter @AskBizLaw and that’s our Twitter handle and you can also follow us and we may respond but we probably won’t. MATT: At least we’re honest. NASIR: No, we will respond. I’m just joking. MATT: I might not. I don’t think I have enough control of it. NASIR: Someone will respond out there. I’m not even in control of it either. It’s just some random guy. MATT: Just hoping that we convinced him to put the logo from the podcast up. NASIR: Exactly. MATT: It could be a fan, I guess. Maybe that’s what it is. NASIR: Super fan. MATT: Yeah. If you really want to tweet at us, go to @TheRealAskBizLaw on Twitter. NASIR: Verified account. MATT: Yeah, I think that’s kind of gone by the wayside. That was pretty big at the beginning because so many people were jumping on celebrity and athlete names but I think, at this point, it’s all kind of been sorted out, interestingly enough. NASIR: Yeah, you’re right. Now, it seems like it used to take a while to get a verified account but, apparently, now it’s pretty streamline and so forth. MATT: The only one I can still think of is Shaq but I don’t think he’s even @TheReal Shaq anymore. I think it’s just @Shaq. NASIR: That I don’t know. MATT: Well, we’ll get into the story because I know everyone wants to listen to people talk about tax issues. NASIR: That’s my favorite! MATT: I don’t want to deprive them of that. NASIR: Well, there’s no such thing as a free lunch. I had to say that. MATT: Aww, man. NASIR: Were you going to say that? MATT: That’s pretty good. I was going to say, “It’s two topics I like talking about – lunch and tax.” It’s a good story for me. NASIR: Wait, wait, you like talking about lunch? Who talks about lunch? Not dinner but lunch? MATT: Well, any meal, really. It doesn’t matter, yeah. NASIR: Oh, okay. I think you like food. I think it’s called food. MATT: Yeah, I would say that’s accurate. Free meals are always good, too. That’s what we’re getting into here. Google I think was the company that was really known for this. I didn’t realize that other companies too. I guess a lot of them and some of the bigger ones in Silicon Valley do this but they offer free meals to their employees. If you’ve seen the movie The Internship with Owen Wilson and Vince Vaughn, they talk about it in there and Vince Vaughn kind of abuses the system. But that’s not the issue here. It’s that the IRS is looking at this and saying, “You know what? I think we can actually tax this somehow and so we’re going to look into possibly saying these meals are actually income of the employees and we’re going to start taxing it as income.” Obviously, that’d be bad for the employees but, on the employer’s side, guess what, that means you have to pay half of that for payroll taxes. NASIR: Yeah. MATT: Basically, this boils down to this, and there are rules in place. To summarize it, employers are allowed to provide free meals for their employees but it has to be for the convenience of the employer. I think a very easy example would be if you had a business and there wasn’t any places to eat close to the business and you provided a free lunch for your employees. You know, you’d be fine with that. That’s a convenience of the employer because the employees would have to leave for a long period of time. Another classic example is bank tellers. If you need someone to be at the front,