I believe gifts to customers of your business would probably be advertising. I see this question is also claimed by another expert and they may have more details.
Gifts to employees of your business must be included in their taxable income, reported on their W-2, and are subject to income tax and employment tax withholding. Generally, anything of value (whether money or items) that you provide to an employee as a reward for their service is taxable income on their W-2. The only exception are certain listed employee benefits. Gifts are taxable income unless they are of minimal value (like t-shirts and coffee mugs with the company logo); or you can establish an award program for long time service (10 years, 15 years etc.) where you give out a service award, and that can be tax free as long as the program is in writing and the qualifications and rewards apply equally to all employees.
Since those gifts are includable as taxable income to the employee, you would record them as part of employee compensation on your business tax return.
