What Makes an Appropriate—and Legal—Client Gift?

Date: September 18, 2013

Client GiftShow your appreciation without violating policy

Every business owner appreciates a good client, but how do you show your appreciation without violating gift-giving etiquette? According to those who make business etiquette their profession, it’s all about being thoughtful and knowing your customers.

"Many givers of gifts tend to give a gift that they would like to receive rather than taking some time to learn what the receiver might truly appreciate receiving," says Gloria Starr, a consultant who has been coaching corporate executives on etiquette, image building, leadership and communications for more than 20 years. "Giving a gift to a client is a relationship-building strategy, so choose wisely. Take in to consideration the relationship you currently have with the client. Discover what their hobbies are and how they like to spend their social time. Sporting or theater tickets are great if you know their tastes," she says.

RELATED: Want More Loyal Customers? Show Them Some Love

Get Personal, But Not Too Personal

Starr advises that before showing up at the door with a gift, it’s important to find out the organization’s gifts policy, because companies in some fields, like medicine and insurance, prohibit receiving gifts from vendors.

"I do think it's important to add a touch of thoughtfulness to each gift. This is why I don't like the 'everybody gets a gift basket philosophy,'" says Jill Haney, an image consultant who has written a business-etiquette column for The Cincinnati Enquirer since 2007. "If you have a client who is a foodie and loves to dine out, then a gift certificate to that person’s favorite restaurant is in order. This is just a nice touch that says you know what the client appreciates."

Last year, Haney gave some of her clients holiday gifts of gourmet popcorn in sports-themed tins adorned with the logos of their favorite teams. "It added a nice personal touch, but not too personal. It is tricky business to navigate, as the gift shouldn't be too personal," she says, adding that she's seen some gifts cross the line of being inappropriate.

RELATED: 6 Creative Ways to Show Customers You Appreciate Them

Be Mindful of Tax Implications

Tax consultant and CPA Ron Evans notes that the maximum allowable deduction for business gifts is $25 per person, per year. The $25 limit applies to individuals and not an entire business.

"If one business gives a gift to another business, the $25 limit does not apply, but the business gift must be for the enjoyment of the entire business, not for one person in that business," says Evans. "For example, if a client is celebrating an anniversary and you give them a fruit basket for the company to enjoy, then the $25 limit does not apply. But if you gave it to the owner for his enjoyment, that would be subject to the $25 limit."

Evans suggests that one way to possibly avoid the $25 limit is with entertainment expenses, which are limited to a 50 percent deduction. If a ticket to a sporting event or theater exceeds $50, for example, he says it would be more advantageous to report the cost as an entertainment expense versus a business gift.

Evans adds that some companies mistakenly report gift items with their name or logo imprinted on them as advertising expenses, not as gifts. "This is only true (as an advertising expense) if the item is worth less than $4 and is given to many customers," he says. "If the item is worth more than $4 and the distribution is limited to select customers, then it is a gift."

Related: Employee Gifts: How to Give Tax Free



Subscribe For Free News And Tips

Enter your email to get FREE small business insights. Learn more

Get to know NFIB

NFIB is America's leading small business association, promoting and protecting the right of our members to own, operate and grow their business

Find out more about
NFIB Membership

Or call us today