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Include local sales tax when determining Fair Market Value for Taxable Fringe Benefit?

Hi all, searched the archives, and unless I missed it...I could use your expertise.

Employees received a tangible gift that we need to add the value of to their W-2 wages as a Taxable Fringe Benefit. Do we include local sales tax in determining FMV? I think not, and have always used just regular retail (arms length transaction). Would appreciate any input from the group.

[Deleted User]

Comments

  • Thank you David. There are so many variables to sales tax, which was my thinking.

    From IRS, Publication 15-B:
    General Valuation Rule.
    You must use the general valuation rule to determine the value of most fringe benefits. Under this rule, the value of a fringe benefit is its fair market value. The fair market value (FMV) of a fringe benefit is the amount an employee would have to pay a third party in an arm's-length transaction to buy or lease the benefit. Determine this amount on the basis of all the facts and circumstances. Neither the amount the employee considers to be the value of the fringe benefit nor the cost you incur to provide the benefit determines its FMV.

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