Washington Passes Legislation Exempting Restaurant Employee Meals from Sales and Business and Occupation Taxes

On April 13, 2011, Washington Governor Gregoire signed into law Senate Bill 5501, which creates exemptions from the state’s sales and use taxes, as well as the Business and Occupation tax for meals provided free of charge to restaurant employees.

Under current law, meals provided free of charge to restaurant employees are deemed provided in exchange for services and are subject to the deferred sales or use tax and the Business and Occupation tax. These taxes are currently imposed on the fair market value of such meals. The newly enacted exemptions will relieve restaurants from the imposition of these taxes on employee meals. The tax exemptions for employee meals will be effective commencing on July 1, 2011.