FREQUENTLY ASKED QUESTIONS
What is bartering? Bartering is the oldest form of commerce. For centuries people and businesses have traded products or services back and forth as a way to conserve cash.
Is this legal? Yes. Modern barter exchanges are regulated by the IRS and recognized as a viable form of commerce under the TEFRA (Tax Equity and Fiscal Responsibility Act) of 1982 signed by President Reagan. We act as third party record keepers making sure every transaction done through our group is accounted for and recorded. Every member must fill out a W-9 or similar application that includes the basic company information and tax id numbers. At the end of the year we send 1099-B’s to each member. If the member is a corporation they get one aggregate 1099-B totaling all sales. Non-corporate members get a 1099-B for each transaction throughout the year as well as a statement total. We will report all transactions to the IRS meaning taxes will be owed on all sales just as if they were cash. This way all members are in compliance with the IRS and there is no risk of penalty. For further information go to USEFUL LINKS on the right of the page and click any of the links ending in IRS. They will send you to the IRS pages on bartering.
Why barter? It’s an easy way to increase your client base and conserve cash with minimal changes to how you operate. Plus, the more you trade the more you save!!!!
If we don’t use cash, what do we use? Every member will be able to use trade dollars instead of cash to purchase goods or services from other members. Interest free lines of credit are also available.
Do trade dollars have any value outside of the network? No, trade dollars have no actual cash value. They are simply a way to place a value on the goods and services being exchanged between members.
Are there any tax advantages to bartering? There are neither tax advantages nor tax disadvantages to bartering. Per the IRS, each trade dollar is equivalent to $1 US dollar and must be reported. You will pay the same amount in income tax for $500 in trade dollar as you would a $500 cash sale. Consult your tax advisor.
How can Midwest Barter Exchange help increase my sales? By being a member of Midwest Barter Exchange, it’s our mission to keep our members trading. That means doing everything we can to promote our members to each other. Being part of a barter network also helps drive sales because members look to other members first due to being able to save cash. With us continually signing up new members, we are constantly growing your number of potential new buyers. Add to that your potential for new cash sales due to referrals from network work members so don’t be shy to ask!!!
How do members save cash? Our members buy products and services at THEIR costs giving them an immediate discount on every purchase. Let’s use an accountant and marketing firm for an example. The accountant would like to increase business but doesn’t want to deplete his cash reserves. As a member, he uses a marketing firm within the network who will accept the trade dollars. The cost of the marketing is $500 trade dollars, not cash. The accountant gets the marketing without spending cash other than the network fees. Now he has a $500 deficit in his trade account. To break even he will offer $500 worth of his services to other members. $500 of his services only truly cost him $100. Add the $65 network fee; he then spent $165 cash to receive $500 in marketing saving him $325. The marketing firm now has $490 ($500 minus 2% trade dollar fee) in trade dollars they get to spend with other members which might have only cost them $150 in materials, time, and cash network fees.
I don’t see any current members that we could use, why join? It is our responsibility to our members to make sure we have the goods and services needed by our members. If there is a need let us know and we will do our best to fill it.
Why not just trade directly with other businesses? A couple major benefits of trading within the network is saving time and reducing risk. In order to trade directly, you must take the time to find a company that also needs your products or services. This takes lots of time that would be better used to increase business. There is also the risk of trading directly. If one company upholds their end there is always the risk of the other company not following through. Trading in the network means you don’t have to worry if the company taking your trade dollars needs your services. You are not waiting on anything in return for products or services already rendered.
What are the costs involved? See our Membership Agreement. All fees are tax deductible as a business expense provided you are purchasing products or services for your business and not personal needs. Consult your tax advisor.
Do I have control of trades? Yes. It is always up to the member if they want to accept trade dollars or not. If a member has accumulated a fair amount of trade dollars and doesn’t want anymore more until they use what they’ve got, that is perfectly fine. However, unless a member is saving up for something in particular, they should always try to use their trade dollars when possible to avoid not wanting to accept any more. It’s not until a member has a full sales cycle, accepts trade dollars and uses same amount of trade dollars, that the member enjoys the true savings.
Will this offset all cash transactions? No. Cash will always be needed in business. Using trade dollars is merely a way to help preserve cash increasing your bottom line.
Can I use my trade dollars for personal expenses? Absolutely. You are the owner of the trade dollars. If you need a furnace for your house and we have an HVAC member, it is your choice if you wish spend your trade dollars with them.