Originally Posted by cakegirl123
Sorry, I should have included more details to my question. I was thinking of paying/tipping a caterer who sends me tons of business as a thank you and to keep the business coming my way.
There are two possibilities here:
1. The caterer is planning to stop sending business your way if they don't get a referral fee.
2. The caterer sends you referrals because she trusts you and the quality of your work.
In the first case, you don't want that caterer's referrals anyway. In the second case, giving the caterer referrals will make no difference and could potentially lead to a very expensive "gift", even after the tax deduction.
I would stick with a more traditional gift at the holidays as a thank you. Up to $25 of a business gift is usually tax-deductible.