For most of its history barter was a low tech untaxed business between people who knew each other, but
with the advent of the Internet, barter has gone high tech, taxable and global. Your challenge is to
combine the best aspects of both low and high tech barter and provide a service to your customers that
allows them to maximize their profits, minimize both taxes and losses to fraud, and thrive in a world with
For most of its history money was in essence a tool of barter. That is to say that money had value, it was
redeemable in gold or silver. Money was a commodity itself. In 1971, President Richard Nixon ended
trading of gold at the fixed price of $35/ounce. For the first time in history, there was no formal link
between the value of American money and the real value of commodities.
The lack of connection between money and value is likely to cause economic hardship to many as the
price of commodities escalates in response to large increases in the supply of money. In response to
rising global levels of government debt, many governments are creating money.
In America, the process of creating money is currently called quantitative easing and so far two rounds of
quantitative easing have added about 2 trillion dollars to the US money supply. Adding money without
increasing the supply of goods is inflationary and the results of quantitative easing can be found in higher
prices at the grocery store. A third round of quantitative easing is looming...
As more and more people are pushed into poverty by the unwise decisions of their government, your
business will depend on how effectively you help the poor solve their pressing problems. The pressing
problems of poor people are food, shelter and clothing.
Historically, barter has helped the poor solve all three problems. For example sharecropping is an
example of barter as shelter and food are exchanged for labor. Since food, shelter and clothing are
universal needs, you should concentrate your barter service in these areas.
The most basic human requirement is food and water, so start there. Start a farmer's market in your area
with low priced tables. To start, you need a major highway, land you own or rent with long term options,
some tables, portable highway signs and a pickup truck full of watermelons or a rack of strawberries or
peaches, or some other highly desirable produce at low prices to accustom people to stopping at your
site. Basically, create a small farm stand which is open on specific days and grow the business by giving
local farmers or retail food merchants a good deal on table rent.
Just to get this far, you need contacts and knowledge. While you are finding growers or wholesale food
markets to sell you watermelons or strawberries or peaches (growers will be cheaper), you should be
studying the sales tax in your state, how to keep records of business income and expenses, etc. You
need to be able to offer expert advice to those farmers and food vendors who join your farm market. Use
the Internet to find free mentors to help you, for example you could use www.score.org or search "free
In order to attract more food vendors, you should offer an Internet barter service to those who rent your
tables. This would allow your farmers and vendors to tell people what items and services they need and to
list items or services which they are willing to barter. You can advertise your website with big signs at
your farm market. For the benefit of your vendors, you should allow professionals (accountants,
veterinarians, etc) to advertise free on your website, if they are willing to barter services for food
vouchers from your vendors.
There are tax implications to selling food and bartering. While you are not responsible for other vendor's
taxes, you should probably advise your fellow vendors of their tax liabilities as they join you, in a written
handout or two. Information about the sales tax in your state can be found online, search "sales tax" with
your state's name.
The farmers or wholesalers you buy from will likely require a certificate from the state that attests that you
are purchasing food for resale and they do not need to collect sales tax from you. If your state taxes food
sales, you can learn what you need online, search "Sales Tax Exemption Certificate." A word of warning,
there are usually sales taxes on services like table rentals, be prepared to pay those.
The IRS considers the value of barter items to be taxable as income. ""According to the IRS, "The fair
market value of goods and services exchanged must be included in the income of both parties.""
(Wikipedia, "Barter"). This of course is unreasonable, since both parties also "pay" for the items they get
with the items they swap. But we live in a world where a hard working professional pays taxes at twice the
rate as a multimillionaire. And you can't afford an army of lobbyists to corrupt politicians on your behalf. So
the best you can do is minimize your taxes and the taxes of your vendors.
Therefore one of the services you can offer those who use your barter website and your roadside sales
area is a professional evaluation of the goods that are brought for barter on your premises. To this end,
you or a member of your family should start a notebook of prices of resale items.
Divide the notebook into sections, for example power tools, hand tools, small kitchen appliances, etc.
Within each section have subsections with pages for specific items, for example a power saw subsection
would have a page for circular saws, a page for table saws, a page for chain saws, etc. As you find each
type of saw at yard sales or auctions or even pawn shops, note down its description, its condition, where
you found it and its sales price and the date.
Since you are using your notebook to determine the taxable value of items rather than the purchase
price, where you found each item is important. Discount the prices of items found in pawn shops to
remove the markup of the pawn shop over the amount paid out to the person that pawned the item. As a
rule, you could cut the pawn shop price in half, cut the auction price by 10% to remove the auctioneer's
fee, but accept the yard sale price as is.
Consideration of condition is critical. Most of the items brought to barter will probably be in good
condition, so be sure you have prices for items in good condition in your notebook. Reduce the value by
at least half if the item needs repair. Guard your notebook and make a backup photocopy every few weeks
or keep an updated copy on line with thumb drive backup.
As your food vendors get larger, there is more chance that the IRS will take notice of them. Counsel them
to give produce that will not still be fresh on the next market day to charities that are willing to provide
receipts noting the cash value of the donation. These produce donations will allow your vendors to
reduce their tax liability (see below). As part of your service, you might be able to convince a
representative of a local food charity to come at the end of each market day to pick up unsold produce
and dispense donation receipts.
According to the Better Business Bureau website, "Individuals giving to 501(c)(3) organizations that are
either public charities, private operating foundations, and certain private foundations may deduct
contributions representing up to 50% of the donor's adjusted gross income if the individual itemizes on
his tax returns." (http://www.bbb.org/us/Charity-Tax-Deductions). Check the tax status of the organization
that is to receive donations to ensure that the donations will be tax deductible.
If your market becomes very large and the American dollar becomes very unstable, your market may wish
to issue its own coupons. I would recommend that you consider the design of your plan carefully and take
the advice of professionals. My gut feeling is that this formalization of barter could lead to a situation that
allows the government to persecute you using the currency laws. If they go after dairy farmers for selling
milk just as God invented milk, then they are capable of anything. (Search Justice Department dairy farmer
As a general rule, the better you serve your vendors, the more successful you will be. Keep your fees low.
Initially, support yourself with your own sales. Expect to work hard and not to get rich overnight.
I am 69 and I walk an average of over 5 miles a day (which means I walk everyday) and I have almost no
pain. That is the kind of vigor you need to set up your own business. Before you start, learn how to eat for
strength and energy. I recommend two articles on my website, No. 104, "Kitchen Medicine" and No. 105,
"Why Diets Don't Produce Long Term Results, And What To Do Instead."
Amo Paul Bishop Roden