In the Taxpayer Certainty and Disaster Relieve Act 2020, Congress provided for the temporary allowance of 100% deduction for business meal food and beverage expenses provided by a restaurant which continues in 2022.

Business Meals – 100% Deductible

Business meals that are purchased from a restaurant are 100% deductible.  The IRS Guidance means a business that prepares and sells food or beverages to retail customers for immediate consumption. The food does not have to be consumed on the business’s premises.  A “restaurant” does not include businesses that primarily sell prepackaged food or beverages such as grocery stores, liquor stores, drug stores, convenience stores or vending machines.

Companies can deduct 100% of the cost of meals as a business expense for:

Client Business Meals

• Meals During Travel
• Meals Provided Primarily to Employees on the Business Premises
• Employee Shift Meals
• Meals at Internal Business Meetings
• Meals of Business Leagues

For the expense to be 100% deductible, the following requirements must be met:

• the expense must be ordinary and necessary and paid in carrying on a trade or business
• the expense may not be lavish or extravagant
• the taxpayer or an employee must be present when the food or beverages are furnished
• food and beverages must be provided to the taxpayer or a business associate
• if the food and beverages are provided during or at an entertainment activity, separate invoicing is required.

Invoicing

Food and beverage expenses deductibility and treatment depends on how invoiced.  Food and beverage expenses include delivery fees, tips, and sale tax. For food or beverages provided at or during an entertainment activity, the amount charged for food or beverages on a bill, invoice, or receipt must reflect the venue’s usual selling cost for those items if they were to be purchased separately from the entertainment, or must approximate the reasonable value of those items.  If the invoices are not stated separately and no allocation can be made, the entire amount is not deductible.  Entertainment expenses are a separate matter and are no longer deductible.