Top 10 FAQs About Barter
Top 10 Frequently Asked Questions (FAQs) About Barter
1. WHAT IS BARTER?
Barter, also referred to simply as trade, is the oldest form of commerce or business in the world. Barter is simply the exchange of one product or service for another without the exchange of cash. Described another way — barter is using what you have to get what you want or need.
2. WHO CAN BARTER?
Any business owner or professional who has a product or service to offer on trade for which there exists some demand. Obviously, the higher the demand for a product or service and the more limited the supply, the more opportunities you will have to trade for the products and services you want and need. Traders range in size from small sole proprietorships to large international corporations.
3. HOW CAN BARTER INCREASE MY CASH FLOW?
There are several ways in which barter can increase your cash flow. Firstly, normal expenses can be converted from cash to trade transactions, thereby freeing up your cash. Secondly, new customers with whom you do trade business and whom are satisfied with your product or service become great sources of word of mouth advertising – the best kind. Thirdly, you can trade your product or service for all forms of media advertising for more cash business without the out-of-pocket cash costs.
4. HOW DO I KNOW THAT THIS IS LEGITIMATE? / THIS MUST BE ILLEGAL?
The Barter Industry is now officially recognized by the federal government through the “Tax Equity and Financial Responsibility Act (TEFRA) of 1982” as third-party record keepers. Trade/Barter Exchanges now rank on an equal footing with banks, credit card issuers, credit unions, security brokers and others as legitimate custodians in the eyes of the law.
5. WHAT IS A BARTER EXCHANGE?
A Barter (or Trade) Exchange is a business organization engaged in the exchange of products and services without the use of cash. A Trade/Barter Exchange acts in a fiduciary role, facilitating trading between the exchange’s clients via a form of currency, e.g. Trade Dollars (T$), that clients can spend on any of the products and services available on trade from the other clients.
6. WHAT ABOUT TAXES?
There are no tax advantages or disadvantages to barter. The IRS and tax law treats barter identically to cash. Barter sales are treated as taxable income in the year they are credited, just like cash sales. Barter purchases for products and services for your business, including salaries, are tax deductible just like if they were cash purchases. Barter Exchanges report the barter transactions for their clients to the IRS and to the client on a Form 1099-B at the end of the year. You would be responsible for issuing the appropriate Form 1099-B’s for any direct trades in which you participate.
7. WHO ARE THE BEST TRADERS?
Aggressive, intelligent and inventive traders are some of the best. Everyone can learn to be a “mega-trader” by dealing with other traders, watching how they make barter work for them and through creative thinking – “Think Trade First!”, before you spend cash.
8. CAN I GET EVERYTHING I NEED THROUGH BARTER?
No. There are some things that you probably won’t be able to find on trade, including: utilities, parking meters, tips, mortgage payments and money payable to local, state and federal governments( taxes, business licenses, traffic fines). Most everything else can be traded.
9. CAN I AFFORD TO BARTER?
All business owners and professionals can afford to barter. Some can afford to trade more than others, but it can benefit any business. Those who contend that they cannot afford to trade because of cash flow often need the benefits of barter more than anyone.
10. WHEN WOULD I SEE THE BENEFITS?
Each time that you participate in a trade you will realize some of the benefits of barter. When you participate as a seller in a trade you often receive new business from a customer who otherwise would not have purchased your product or service on a cash basis. When you participate as a purchaser in a trade you are acquiring a product or service at a discount equal to your gross profit margin and thereby saving cash. Therefore you will see the benefits whenever you utilize barter to grow your business! So what are you waiting for … ?
If you have any additional questions you would like to see answered, please forward them to me via the contact information below.
© Copyright 1997, 2022 Michael S. DeVries, All Rights Reserved.
This article was originally published on I-Barter.com in 1997 at http://www.i-barter.com/faqs.htm it has been reprinted here in 2022 with appropriate edits and updates with the express permission and approval of the author.
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