Why Trading Goods for Services is Making a Comeback

Trading goods for services is a legitimate form of business enterprise recognized by the United States Internal Revenue Service and other international federal regulators. Barter has existed throughout the history of human civilization as a means of exchange in which material goods of value and service were exchanged.  For skilled crafts persons or those who have any skills that are sought by others, barter clubs and exchanges may be a way to live a cashless life or at least a way to minimize the use of cash in one's life. Additionally, goods obtained from providing services may be resold at a value greater than the market value of the service making it a worthwhile exchange indeed.  The process of trading goods for services is achieved through barter networks and exchanges. To begin bartering, searching for the different local, regional and international exchange groups can give one a taste of what the exchanges are looking for in terms of goods, and what they have to offer in terms of services.  • Commodity exchange for service and/or credit  With the advent of high energy prices and alternative energy sources, Federal governments such as Germany and the United States have legalized the exchange of energy between private energy producers in exchange for reduced energy supply service costs and/or credits to one's energy service costs. These programs have proven to be quite successful.  • Exchange credits  Some barter exchanges allow their users to redeem credit for which other barter items can be bought. These credits are generated by selling items to other users. So while this is a form of barter that also utilizes cash, the cash becomes converted into a new type of credit currency within a contained marketplace of goods and services. If one can sell one's goods and services for a price that allows one to purchase new goods and services for a lower than external market value, this type of exchange can be worthwhile.  • Physical barter  Physical barter can involve direct exchange of goods and services according to a specified agreement. If the agreement of exchange is for a future point of time it is becomes a forward contract. For example, person A may be a skilled electrician and person B may be a knowledgeable tax accountant. The two may agree to exchange services at a given point of time. If the services are of equal value to the market value, neither one gains financially, but the use of money is eliminated.  • Advantages and disadvantages of barter  Barter is becoming popular because it allows people to maximize the value of their skills through trade rather than employment. In effect, exchanging goods and services creates a new market outside of the conventional market that affords people new opportunities to generate wealth via credit, receipt of good and/or services. The exchange of goods and services is taxable based on estimated fair market value of the services or goods provided.  So if person A installs a set of inset lights in person B's living room in exchange for tax preparation, each person must report the service offered on their tax returns in terms of the value of the service provided. When the value of goods and services exchanged can be traded and one still has a cash income, one in effect does not lose money but rather time. Thus, provided one holds one cash income constant, engaging in barter of services and goods no only reduces expenses but allows one to have a higher standard of living.  • Useful resources for bartering  The following resources can be helpful in understanding tax regulation of barter exchange in addition to locating new ways and places to trade and exchange goods for services.  1. National Association of Trade Exchanges 2. The Internet Barter Exchange 3. U-exchange.com 4. U.S. Internal Revenue Service Researching the various types and kinds of barter exchanges in addition to the regulations regarding barter exchange, can allow one to become familiar with the process and if one can benefit from such exchange.  The trading and goods and services is a market within a market. Theoretically, one could live a life through barter alone, but the need for cash is still very present in modern society. Barter affords skilled people, people with unwanted goods and people with extra time to find additional ways to increase their standard of living outside the conventional marketplace.  As the traditional marketplace may be restrictive for some people, barter exchange offers an alternative from which skills and goods can be traded independently and entrepreneurially. The evidence that such trade is on the rise is clear with the advent of energy exchanges between energy companies and individual energy producers in addition to an increasing amount of volume of barter exchange via the Internet and barter clubs and organizations.