![]() The value of each credit can be pegged to the official currency of the region or based upon time. Local Exchange Trading Systems (LETS) – means a community of individuals and/or very small businesses who are bartering with each other using credits. To be considered countertrade the transaction must be relatively large and generally cross at least one international border. My favorite example is from the early 1990s when Pepsi traded over 3 billion dollars worth of Pepsi-Cola for vodka and Soviet ocean freighters.Ĭountertrade – is itself a confusing term (and might be the subject of a future post) but a common definition is a large international transaction where barter (direct or via credits) is a component of the deal. One of the most common examples would be radio stations trading advertising spots in exchange for products and services that they give away on the air or used internally. This term applies to large transactions conducted by Trade Exchanges on a regular basis and the occasional deal amongst several companies with a broker who is earning a commission (profit or fee based) as goods and services change hands. ![]() The IRS requires that all participants in a barter network get a 1099-B and report their income on their tax returns.Įxamples include Trust Acadiana, BizX and The Wir Bank.Ĭorporate Barter – generally means barter conducted by large companies and can be either direct barter or bartering with credits. Since 1982’s TEFRA legislation these organizations and their business model has been blessed by the US government. They can be small networks with part-time staff or corporations with large offices in multiple countries. The Trade Exchange is considered a third-party record keeper and their job is to allocate and create credit, to recruit new members, and to manage the overall health of the network. Managed Barter or Retail Barter –conducted between small businesses via a locally organized Trade Exchange. (Both of these terms are very academic in nature, and even amongst hyper-active barter participants, I almost never encounter anyone who is familiar with either term.) These systems are sometimes classified as Mutual Credit Networks or Complementary Currencies. This allows for continuous bartering amongst an unlimited number of participants via the simple tracking of debits and credits inside of a closed loop. The remaining versions of barter generally use some type of a credit-based system to keep track of balances and transactions between the participants. The transaction is unlikely to be reported as income on either side’s tax return. These types of trades benefit both parties but are very difficult to manage at scale because they are challenging to keep track of, hard for both sides to quantify fairly, and because of the classic problem economists like to call “the double coincidence of wants”. These are often called direct trades, they happen all the time, and are nearly impossible to track. An example would include a dentist providing braces for a lawyer who then provides legal counsel to the dentist. Thousands of people continually buying and selling unlimited items via an organized network for decades.īelow is a quick overview and explanation of several different types of barter transactions.ĭirect Barter – two or more parties directly trading items or services. Two individuals simultaneously swapping a small item (OR) Indirectly trading items (products or services) using credits to keep track of the transactions ![]() In this article I’ll touch on some of the most common types of barter and related activities.ĭirectly trading items (products or services) where no money of any kind changes hands (OR) It can be found in every community on the planet and yet remains poorly defined and radically misunderstood. Barter is likely one of the largest and most fragmented industries in the world.
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