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When money’s tight, everyone looks for ways to trim costs. And that’s bringing an old biz practice back in vogue. More companies, mostly smaller ones, are willing to barter their goods or services with vendors.
From a commerce standpoint, it’s a win-win: If your company can get some free goods or services by supplying your own excess inventory to another company, who could complain?
But to get the most benefit, there are a few things to consider before you start a bartering initiative:
- Pick and choose your targets. It’s tough to go wrong bartering for something your company needs: You get what you need for no money. However, bartering for something your company could use isn’t such a clear-cut benefit.
If the product or service the vendor wants to exchange isn’t something you normally buy, weigh whether the benefits are really worth whatever you’ll have to hand over. For example, it might be worth it if it allows you to test out a new supplier or product for free.
- Know the tax rules. Don’t forget IRS always wants a piece of the pie. Trades and barters are treated just like any other sale, so make sure you’ve confirmed whether or not the barter you’re considering would be taxable/reportable. For example, let’s say you arrange to have an independent contractor do some work for you and get paid with products instead of cash. If the value of the goods is over $600, IRS expects that to be reported on a 1099, just like a cash payment would be.