S. S. Kresge Co. v. United States

This is appellant Kresge's second attempt to recoup taxes paid the United States on the value of lunches which it furnishes free to its lunch stand employees during their half-hour lunch periods. The statutes involved are the Federal Insurance Contributions Act (26 U.S.C. §§ 3101-3125 (1964)), and the Federal Unemployment Tax Act (26 U.S.C. §§ 3301-3308 (1964)) which provide funds for social security and unemployment benefits, respectively. The first such effort on the part of appellant pertaining to taxes paid in 1958 and 1959 resulted in a judgment for the defendant in a careful opinion by Judge Ralph M. Freeman of the United States District Court for the Eastern District of Michigan, S.S. Kresge Co. v. United States, 218 F. Supp. 240 (E.D. Mich. 1963). Judge Freeman held that the value of the meals furnished was taxable because the meals were furnished by Kresge for the purpose of having the employees available in order to help out in case of a rush of customers, in which instance it was conceded they were called upon. He also held that the ""convenience of the employer rule"" employed to determine whether or not free meals are taxable to an employee as ""wages"" under the federal income tax statutes (see 26 U.S.C. § 119 (1964)) was inapplicable. Judge Freeman cited and relied upon a Ninth Circuit case, Pacific American Fisheries, Inc. v. United States, 138 F.2d 464 (C.A. 9, 1943).