[pavlov]

> “reward business travelers personally based on how much their company spends”

Shouldn’t this be taxed as income?

A portion of the money paid by company A to company B goes directly to the employee of company A. It would be taxable if A paid its employee directly, so what difference does it make if there’s a benefit program operated by B in the middle?

[QuarterReptile]

It gets discussed from time to time.

As a government employee, I'm pretty jealous. All our spending has to go through a credit card with no perks, rewards, or identifiable appeal, presumably because it makes the data harvesting easier. And you have to identify on the front end whether each thing is a valid expense so you know which card to use, rather than just filing relevant line items in a claim on the back end. The only good thing about the government travel cards is that they're physical objects, so you can sometimes lose them and then get to fall back on a card that does something for you.

[matsur]

https://tax.thomsonreuters.com/blog/are-employees-taxed-on-t...

[pavlov]

Interesting, thanks.

The guidance is from 2002. The airline reward programs have changed in the meantime. As the original article notes:

”In short, SkyMiles is no longer a frequent-flier program; it’s a big-spender program.”

So I wonder if the IRS might come to feel that rewarding spend is different from rewarding miles flown. Unlike air miles, the benefit to the employee is in direct proportion to the money spent by their employer.

[lotsofpulp]

I doubt it. The IRS does not say cash back rewards from credit card spend is taxable income, which is as explicitly rewarding spending as you can get.

https://www.investopedia.com/ask/answers/110614/are-credit-c...

> So, where do cash-back reward programs fit in? It varies. If a cash-back reward is credited directly to your credit card account, then the income is generally considered a nice rebate that comes with the benefit of using the card. If you actually receive a cash-back check directly, though, it gets a little trickier: It probably also would be considered a type of rebate, but it could technically count as income.

[PopAlongKid]

> IRS does not say cash back rewards from credit card spend is taxable income

No, it's just a rebate/discount made directly to the purchaser. For tax purposes, if they buy something for $100 and get a $2 cash back, it just means they spent $98.

It's very different when there's a third party - employee - involved. The "reward" is going to someone who never spent any money, and so generally would be considered taxable compensation to them. OF course, regulatory exceptions in the tax code are nothing new, and it seems like this might need to be re-visited soon.

[lotsofpulp]

That is a good point. I guess it might be too complex to keep track of what entity paid for which points and so they let it slide.

[pavlov]

But is someone getting personal cash back rewards from corporate credit card spending?

That would be the equivalent of the airline situation.

[stefanlindbohm]

This is how it works in my country (Sweden). Everything that provides any sort of personal benefit to an employee is taxed as ”benefit tax” which simply increases the taxable income. Very few exceptions exist for small yearly gifts, health benefits and a few other things.

[gdprrrr]

It has to be taxed as income according to recent court rulings in Germany. Alternatively, any earned bonuses can be used for the benefit of the company, eg for The next travel.