Barter—Part 1: What Is It?
August 21, 2008 by Lillie
Table of contents for Barter
A few months ago, I received an e-mail from someone who had read my post Connecting – Part III: Trade Exchanges. He asked several questions that I thought others might find interesting. In this post, I’ll discuss what barter/trade exchanges are, then in subsequent posts, I’ll answer the questions.
Just about everyone has heard about the ancient practice of bartering. The farmer would pay the doctor with a chicken or the carpenter would repair the lawyer’s house in exchange for legal work. However, it’s not often that two businesses need each other’s goods or services in the same amount. Trade exchanges, also known as barter clubs, make bartering possible for almost everyone. The trade exchange acts both as a matchmaker and a banker—finding goods and services for members and maintaining records of the “trade dollars” or “barter units” members spend and receive. The exchange charges a transaction fee (in cash) for providing the service; most exchanges charge a one-time, annual, or monthly membership fee as well.
Often businesspeople find bartering attractive because they think they don’t have to pay taxes on trade income. Unfortunately, that is a misconception. Trade income is taxable exactly the same way cash income is. However, if you spend trade dollars for business expenses, the expenses are deductible just as if you had paid cash.
In the next installment, we’ll talk about the value of being a member of a trade exchange.
Hi Lillie – I’m looking forward to the next part in the series. You mentioned taxes. I know businesses are supposed to pay taxes when they exchange services but many don’t and often they get away with it if it’s a one off job, as no money has exchanged hands.
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Hi Lillie,
Thanks for this barter’s post, as I’m now having an argument about whether we need to pay taxes when we’re using the barter system…
Hehe, I will forward this post and let him read it now, so we can stop the argument immediately lol
Thanks again for such an informative post
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Barter is an amazing tool especially in business. In my business we do a lot of barter and we report it as earnings in our taxes, so I guess we are a pretty ethical company.
Hi Lillie,
For a year when I lived in Manhattan, I belonged to a co-op where EVERY member bartered goods or services. It was the only way to live there. We even had an MD who was desperately trying to open a family practice, and had little money – or time – for anything else. It was, without a doubt, the best little group I ever joined. We DID pay taxes on our bartered goods, but we also had a CPA in the group to help with taxes and financial planning. Other than rent, I spent less than $2,000 in cash that year.
I am anxiously awaiting the rest of your series. And by the way – the only reason that I left the barter group was that I moved out of the city. I’d still be there today – if it still exists – had I not moved! (I guess it was a “barter group,” as you call it. We called it “the exchange” or “the co-op.”)
Rita
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I can tell this is going to be an interesting discussion. Thanks Lillie.
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Trade exchanges sound like a cool idea. I love bartering, but I”ve never tried to do it with profesional services (or if I have, it didn’t seem like such to me at the time. I’m going over to read the next instalment right now.
I did reply to all these comments but my responses were lost when I moved the blog.
After reading all 4 parts, I really gain something and learn it well. I have a very good reason to follow this blog mainly because you provide us with good article to read. Thank you!
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Val,
I’m glad you found the series helpful.
Thank you for this. I have never fully understood the barter method.
Your explanation is most informative. I shall now seek further information. Your blog answered a puzzle for me about the comment I once read, ‘Buy high, sell low, but make a profit’. Seemed then, to be a contradiction.
I have bookmarked your blog for future reference.
Ray,
People often tell me “I’d rather have cash,” but they don’t understand barter and don’t want to learn, either.
I’m glad you did want to learn and found this helpful.
Lillie,
Thank you for these interesting and informative postings on barter.
I am learning much here and becoming quite excited at the prospects unfurling before me. Never realised just how easy bartering is…or could it have something to do with your easy to understand teaching methods?
As a pensioner experiencing hard times I shall have to first earn some barter seed money, but can see the incredible potential of bartering. Thanks, in no small part to you, Lillie.
Found an interesting course by another contributer here and have just created a rather primitive blog on her product.
Hope this post is acceptable to you(if not please delete), as it is only possible for me to barter if I can first create a disposable income. What better way than by promoting Sylvia’s solid barter course, which I intend purchasing at a later stage, anyway.
Thank you,
Ray.
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Ray,
I don’t know anything about the course or barter arbitrage, but I wish you luck. Checking out your Blogger profile, it looks like you have your fingers in a lot of pies.
thanks for the posting. Since I don’t have much idea on trade exchange but read out your all barter part stating from the 1st to last part. I am also looking foreword for your next post about the advantages to be part of a trade exchange.
kitty,
I hope you’ll give barter a try.
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