May 28, 2017

Top Myths About Barter

MYTH: Barter is a new concept.

FACT: Barter, the exchange of goods and services without using cash, is one of the oldest forms of commercial transactions dating back thousands of years when primitive societies used corn, shells and beads as currency. Throughout the centuries barter has played a significant role in commerce, and today, barter is used by over 450,000 businesses including 65% of NYSE companies.

Companies that have employed barter include General Foods, Heinz, Philip Morris, McGregor, Bloomingdales, Perry Ellis, Apple Vacations, Casio, Hanes, General Motors, Pennzoil, Gallo Wines, Six Flags, Air Tran, Chrylser, Caterpillar, 3M, American Airlines, Tyson, 7 Eleven, Frito Lay, GNC, BMW, Kraft, and Avon…to mention a few.

MYTH:  Bartering is a questionable business practice.

FACT: Barter has always been legal.  In 1982 the U.S. Congress enacted the Tax Equity and Fiscal Responsibility Act imposing tax payments on barter transactions. The Act is considered one of the most significant factors in the development of the barter industry. By regulating and treating barter income as the equivalent to cash income, the 1982 Act “officially” legalized the barter industry. Since the 1982 Act became law, corporate and commercial barter has continued to grow with more firms engaged in barter not for income tax evasion but rather as a financial and marketing tool.

MYTH: Barter only works with a few products.

FACT: The list of products that can be bartered is almost limitless. Examples include travel (hotels/resorts, airlines, cruise lines, rental cars), restaurants, premiums and incentives, computer equipment and related products, electronics, shipping and delivery, broadcast technical equipment, printing, consulting, office equipment/supplies, retail goods, food products, theater/entertainment/sporting events, packaging, and media advertising.

Virtually any company can take advantage of the benefits that barter offers, especially those with high fixed and low variable costs, highly perishable products or services, under-utilized capacity, excess inventories, or whose products or services can take advantage of a secondary market.