As far as income tax goes, the answer in the United States is no. Treasury Regulation 1.132-2 excludes the value of "no additional cost" services from income. A key point here is that the employees are flying standby and if the airlines were to allow employees to book "no additional cost" seats in advance, it WOULD be taxable income. Free hotel rooms for employees work the same way.

The benefit must be provided on a non-discriminatory basis, like a 401k. The employer must not incur significant additional cost in providing the service and it must be a service that is offered for sale to customers in the ordinary course of business (therefore cannot be customized or provided solely for employees). Also, if the company for example owns both hotels and airlines, the airlines employees can't stay in the hotels for free and the hotel employees can't fly for free. Of course, the CEO and other corporate officers work in all lines of business and therefore can fly for free and stay in the hotels for free and can get free phone service if the company happens to own a phone company as well. How convenient.

These are the major elements of this tax law. Personally I do not think this exclusion makes any sense on any kind of theoretical or economic basis.

Doakes

[edited for my unconscious yet unconscionable ethnocentrism]

[This message has been edited by JoeDoakes (edited 06-19-2002).]