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IRS & Taxes

What are the tax advantages of bartering?

The Internal Revenue Service treats barter income just like cash income. The best tax advantage is to use the earned barter income to purchase the normal expenditures that are tax deductible. BBE recommends that you to seek professional accounting advice.

Is barter taxable income?

Clients are advised that transactions involving barter dollars are generally treated as taxable events for federal, state, and local tax purposes. The declaration and reporting of all applicable local, state, and federal taxes resulting from trades rest solely with the client.

How do I process sales tax?

Selling client shall charge the buying client the appropriate sales and excise taxes in cash and collect and record these on the BBE 3-part form at the time of sale. Under no circumstances will BBE be responsible to pay any sales, excise, use or other tax on behalf on any client.

What is the Tefra Act of 1982?

In the United States, barter exchanges are defined as third-party record keepers under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) and as such are subject to Internal Revenue Service (IRS) Form 1099-B reporting for the annual gross barter sales of the barter exchange’s members. As a result, barter exchanges are also subject to IRS imposed Civil Penalties for non-matching Tax Identification Numbers (TINS) and therefore must comply with Publication 1281 B-Notice solicitation requirements where non-matching Tax Identification Numbers (TINS) have occurred.

What is a Form 1099-B?

Barter exchanges, whether Internet based or with a physical location, are required to file Form 1099-B for all transactions (barter income). A Form 1099-B is a form issued by a barter exchange that summarizes the proceeds of all barter transactions (barter income). These sales must be reported to the IRS when you file your taxes.

Why does BBE need to know my federal identification number and/or social security number?

BBE is required by federal law to obtain the correct taxpayer identification number of client, who is required by law to provide such number, and to report all trade sales of client to IRS on Form 1099-B.

What do I do if I change my name, company name, and/or taxpayer identification number?

In the event that client changes his or her legal name, company name, and/or taxpayer identification number (TIN), applicant is required to inform BBE within ten (10) days. At that time, client must complete a new client Application and Agreement and Form W-9. BBE reserves the right at its sole discretion to suspend the trading privileges of any client who has had a name or number change until BBE receives the new signed client Application and Agreement and Form W-9. Once the paperwork is received, all barter and cash debts and/or credits will be transferred into the new account.


What happens if my federal identification name and/or taxpayer identification number is incorrectly reported to the IRS?

It is the client’s responsibility to provide BBE with the correct federal identification name and number. Failure to provide the correct taxpayer identification number may result in the imposition of backup withholding of twenty (20%) percent of the gross proceeds of each sale transaction, under federal law. Client agrees to hold BBE harmless for any actions BBE takes to comply with federal tax laws. Clients should seek professional tax advice. IRS audit of client's account is subject to a twenty-five ($25.00) dollar cash charge per hour with a one (1) hour minimum. A cash administrative fee of fifty ($50.00) dollars cash for each trade transaction will be charged to any business or individual who provides BBE with an incorrect taxpayer identification name and/or taxpayer identification number (TIN).

What are the important barter links on the IRS website?

Click the links below to view barter information listed on the IRS website:

Bartering Tax Center

Barter Exchanges

Four Things You Should Know if You Barter

Taxpayer Identification Number (TIN) On-Line Matching

Topic 420 - Bartering Income