Frequently Asked Questions About Barter…
What is a Trade Exchange?
A trade exchange is a third-party record-keeper and a facilitator for a group of businesses that barter or trade their services and goods instead of spending cash. A network in which they earn and spend trade dollars with other members, these businesses are part of a small economy. The exchange maintains the proper records and assists with the barter transactions.
Why Not Trade Directly?
Many businesses are already bartering on a direct, one-on-one basis. It’s not always easy to arrange a direct trade. It depends on the good luck in finding another business who has what you need, wants what you have and is willing to trade. One a direct trade sometimes you are left with nothing after the goods are delivered.
Belonging to IMS Barter eliminates both problems. Barter in an exchange is not direct. We use a electronic barter accounting system to keep track of all trade dollars spent and earned. You don’t have to find a member who wants what you have before you can make a trade. When your business sells to another member your account is credited with trade dollars, which are immediately available to spend with any other member businesses. Your trade dollars are guaranteed when proper procedures are followed —even in the unlikely event that a member goes bankrupt.
What are the Advantages of Trading?
There are several. First of all, trade produces new business and allows you to expand your market beyond your cash-paying customers. Secondly, instead of spending your cash to purchases needed goods and services, you can trade your own goods and services; trade conserves cash. This means more cash stays in your business for other purposes. Finally, excess time, excess inventory, and excess capacity are converted into needed goods and services; trade puts idle resources to work.
Why Join IMS?
The best reason to join IMS Barter is to increase your sales. As a marketing opportunity, a membership in the exchange exposes your business to hundreds or thousands of potential customers. They have built-in incentives to buy from you because you accept IMS! If your business is not currently operating at capacity, you can convert excess time or inventory to new profits. By spending within the exchange you save precious cash for those items not available on trade, like your mortgage.
What Are the Tax Ramifications of Trading?
Contrary to some popular beliefs, barter is not a nifty way to cheat on your income tax returns. Barter sales, like cash sales, must be included in income reported to the Internal Revenue Service. This is true for individuals, partnerships and corporations. On the other hand, barter expenditures which qualify as business expenses are deductible from income in arriving at taxable net income. In other words, barter income and expenses are no different than cash income and expenses.
As the barter industry has matured, it has achieved official recognition in the laws of the U.S. Barter exchanges are legally third-party record keepers, on a par with banks and credit card companies and other custodians of financial records.
Barter exchanges also have a responsibility imposed by law to provide the IRS with information on the barter income of each client. This is accomplished with form 1099B, Proceeds from Barter Exchange Transactions. You, the taxpayer, are required by law to provide the exchange with the proper taxpayer identification number.
How do I get started?
When you are ready to trade, contact the IMS office near you. A member of our sales staff will meet with you, have you sign a contract, pick up your check and discuss what you want to trade what you can spend your trade dollars on. Our staff will help to arrange, take you through your first sale and continue to suggest ways for you to spend your trade dollars.