Engraving, gift wrapping, packaging and shipping are included in the price. However, cash (or cash equivalents, such as gift certificates) are viewed differently through the eyes of tax authorities. You should treat these gifts as additional compensation, regardless of the amount. These gifts are subject to withholding.
If you decide to give cash, gift cards, or similar items as a holiday gift to employees, the value would be considered an additional salary or salary and would be taxable. Distributing tangible gifts to promote goodwill among your employees during the holiday season may be considered a minimal additional benefit, where the gift is too small for your accounting to be reasonable or practical.
