Tuesday Report - March 27, 2001

March 27, 2001

BarterNet Affiliates Put Up Big Numbers In 2000

Eric Jeck, CEO of BarterNet Corporation, announced that the 26 trade exchanges around the world that they consolidating generated some $231million in transactions last year.

According to Jeck, the revenue represented one side of the trade transaction. BarterNet calculated the "selling side" to arrive at the figure. (Some barter companies double the gross revenue -- both buys and sells -- when reporting revenue.)

BarterNet, www.barternet.com, has affiliate offices in the U.S., Canada, Europe, and Australia. Some 48,500 active members traded across the network last year, with the average member bartering $4,760 worth of goods and services.

3-Year Economic Downturn In Argentina Sees Many Using Barter To Survive

Since 1991, Argentina's peso has been wrestling with economic problems--one of which is an incredible 21% sales tax! Many have found that barter is the way around such taxes and the economic slowdown. Since 1995 that has been an enormous increase in the use of barter, both through organized barter clubs as well as direct trading activity.

Analysts estimate the goods/services traded each month is in the millions and growing. And well it should with unemployment pointing to 15% and one-third of Argentina's 36 million people mired in poverty.

An estimated 320,000 people have joined some 400 barter clubs. Done a bit differently than other countries, Argentina's traders meet in vacant lots about the size of 4 football fields and set up row after row of wooden tables.

It's much like U.S. garage sales...only no money changes hands. Everyone comes to barter just about anything they can like canned food for electrical repairs, a bicycle for the services of a plumber, or garden tomatoes for children's clothing.

Lawyers, carpenters and laid-off bricklayers show up for these weekly barter sessions. And a commuter bus line offers transportation in exchange for having vehicles painted. Even hoteliers are getting in on the action--obtaining sheets and cleaning supplies in exchange for lodging.

For readers of Spanish, take a look at their online efforts, www.truequeclub.com.

Separating Company BarterFrom Personal Barter

Many business owners join a trade exchange to enhance their lifestyle. When doing so, however, there is a way which eliminates any possible tax questions.

A personal sub-account with a separate ID in the name of one or more business owners, partners, stock holders, or employees will receive monthly statements. Sub-accounts are commission free, as commissions are paid by the "parent" account holder.

A Sub-Account Establishes Your Personal Account

By using your company's main account for corporate expenses and establishing a personal sub-account, you will automatically keep the two types of purchases on separate statements--thereby simplifying record keeping.

You can set up a sub-account by calling your trade broker. The IRS has made one thing perfectly clear: trade dollar income, whether personal or corporate, is the same as cash taxable income. It should be reported dollar-for-dollar in the year it is credited to a barter account.

Personal barter income can fall into any of the following categories:

Bonus, commission, incentive awards

Expense reimbursement

Draw against future income or personal loan

Keep in mind that when trade dollars are labeled wages, anyone paid as an employee (including yourself) needs to have normal withholding taken out of trade dollar income, and the dollar amount should be added to the W-2.

It is illegal to compensate individuals as independent contractors (and report income on a 1099 Form) unless the increasingly strict criteria is met.

Since one person cannot receive both a W-2 and a 1099 from your company, even bonuses, commissions, or prize money paid to anyone who also receives a salary are subject to withholding and get reported on the W-2.

Here And There. . .

The National Association of Trade Exchanges (NATE) has scheduled its annual convention, titled Barter at the Beach, for April 19-21 at the Wyndham Hotel in Miami Beach. For further information see their web site at 222.nate.org.

BigVine, a service of AllBusiness is about to become AllBusiness Barter.

European barter company Efficio, established in 1995, has announced the first Pan-American bartering platform, CoBarter.com.

Ever wonder how many small businesses there are in the United States? According to an IRS press release the figure is 45 million. To obtain more tax information go to www.irs.gov and then look for "Small Business and Self Employed Community."

Argent Atwood, a corporate barter company based in NYC, has agreed to invest in a Mexico City engineering and construction company, to help construct a 10-plant petrochemical complex in that country.

In exchange Atwood will receive, no doubt, the output from the plant—products like styrene and polyethylene for making packaging and fibers. Both are commodities which the corporate barter company can use to acquire boxing materials, for use in their fulfillment efforts.

Despite all the doom and gloom about the stock market, the fact is that if you put $2,000 in the market in 1950 (S&P index fund) and let it sit, today you would have $1.2 million. (If you put the same $2,000 in bonds in 1950 you would have $25,000 today!)