Financial Services Manual (FIN)

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Effective: 7/1/1996

Revised: 11/1/2013

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FIN 123: Taxability of Employee Discounts

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Purpose

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To provide policy relating to the taxability of employee discounts

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Sources

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Internal Revenue Service regulations
University policy

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Applicability

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Discounts provided to the employees of Arizona State University by ASU and other financially related organizations

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Policy

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ASU and other financially related organizations may offer employee discounts. If employee discounts exceed 20 percent of the price of the services offered to the general public, the discount is generally a taxable benefit to the employee.

Discounts up to 20 percent are generally not a taxable benefit. Additionally, discounts greater than 20 percent are not taxable if admittance or participation in the event does not make the organization incur any additional costs (including foregone revenues). Accordingly, discounts greater than 20 percent can be made only on an “as available” basis and cannot preempt a patron willing to pay full price.

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Exception

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This policy does not apply to employee benefits administered by Human Resources.

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Procedure

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If a taxable benefit is provided to an ASU employee, the department submits a Payroll Action Request (PAR) to Payroll Services requesting that the value of the discount be recorded as a taxable fringe benefit to the employee(s) involved. Any questions regarding the application of IRS regulations governing ASU employee discounts should be directed to the ASU tax compliance liaison of Financial Services at 480/965–8479.

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