QUESTION: Our company is going to require some customer-facing employees to wear a uniform, which the company will provide without charge. Will we have to treat the value of that uniform as income for tax purposes? The clothes will carry our company logo, and there will be a strict rule prohibiting employees from wearing those clothes when they are not working or traveling to and from work.
ANSWER: Under general tax principles, the value of employer-provided clothing is a taxable benefit unless the clothing qualifies for an exclusion such as those for de minimis or working condition fringe benefits. The de minimis fringe benefit exclusion may apply to individual items of clothing, like T-shirts, but that exclusion is unlikely to apply when a uniform is provided to a readily identifiable group of employees. A more likely basis for exclusion in your situation is the working condition fringe benefit exclusion under Code § 132(a)(3), which allows an employer to provide property or services to employees on a nontaxable basis if the expenses would qualify for a business expense deduction (under Code § 162) if the employees paid for them. Whether your company’s uniforms will qualify for that exclusion is uncertain based on the facts you’ve provided.
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