no cash on the barrelhead
In order to establish a workable barter arrangement, both parties must be fair and honest in the valuation of all property being exchanged. Direct barter is generally conducted on a one-to-one basis, with no middleman or transaction fee. If you are a painter who needs shoes, you might be able to find a shoe retailer who needs painting without expending a lot of time and energy. If you are chimney sweep who needs a custom engagement ring, the effort of finding a jeweler willing to barter could be overwhelming. Perhaps the best place to start is with the services you already use. Ask your print media ad rep if his publication would consider trade in partial payment of your bill. Your printer, dry cleaner and pest control company might consider it, too.
gilt by association
Another possible venue for swapping inventory for the goods and services you need is through an organized trade exchange. Although there will probably be a cash transaction fee paid to the broker, this rarely exceeds ten percent of the trade value. The benefit is that you don’t have to locate someone who needs your services now and has what you want. The third party broker acts more like a bank, adding credits for the services or goods you exchange and debiting your account when you spend them. Except the coins stay in your pocket. A golden opportunity indeed.
look before you leap
Although barter can stretch your budget, decrease your cash outflow, attract new customers and help you liquidate inventory, it is not the answer for every business. If you’re already inundated with customer demands and severely understaffed, barter is probably not going to help. Carefully evaluate your workload, look at the status of your inventory, and see if it makes sense for you. Check out websites like Craigslist.org, talk to local businesses that use a trade exchange, ask yourself what you might want to trade for and carefully consider the pros and cons. If it seems like a good idea, go ahead and test the waters. Geronimo!
truth or consequences
According to the IRS Tax Equity & Fair Responsibility Act of 1982, "the fair market value of goods and services exchanged must be included in the income of both parties." However, if you barter for goods and/or services, you are taxed neither more nor less than if it were a cash transaction. In other words, it is handled the same way as a cash transaction regarding taxation. If you bartered for a profit, you pay the appropriate tax, If you generated a loss in the transaction, you have a loss. If you’re using a barter exchange, they will generally provide a Form 1099-B for your tax records. Informal one-on-one bartering is dependant upon the honesty of the individuals or businesses involved. Get the deal in writing so you’re both on the same page [instead of ending up in the same cell.] Your accountant can go over the finer details, but that’s the basic implication. Truthfully.
