Economic slowdown gives boost to bartering

NEW YORK — As the economy slows, a growing number of consumers are trying to find a wider market for their goods and services by offering to barter them.

Newspapers and Internet sites such as Craigslist are seeing a sharp rise in postings by people willing to swap their used cameras or baby-sitting services for other people’s electric drills or guitar lessons, rather than taking cash.

Some ads reflect financial distress, such as one from a suburban San Francisco man who “will paint for groceries.” Many others are from people trying to get rid of things they no longer want or need, or offering services such as lawn care, massages or riding lessons in their own neighborhoods.

Jim Buckmaster, chief executive officer of Craigslist, which is headquartered in San Francisco, said there were more than 120,000 barter posts on the site in April — double the total from a year earlier. He estimated the number increased in May to more than 140,000.

“In the last down economy, we saw the barter category rise,” Buckmaster said. “It’s especially good for people out of work or having trouble making ends meet because barter is a way to get services or meet a need.”

In addition, he said, small-business owners are showing more interest in barter because they can attract new customers and get goods and services they need for themselves. Bigger businesses already have such capability, often exchanging goods and services through established barter exchanges.

Buckmaster says he thinks of bartering as “an inherent friendly and sociable activity” compared with cash sales.

“Sometimes people enjoy getting to know somebody else,” he said. “And maybe more ends up flowing out of that relationship than the initial barter would have led you to expect.”

The main downside of bartering — and one that many consumers are unaware of — is that some transactions are taxable, according to the Internal Revenue Service.

The IRS describes as an example of barter a situation in which a plumber does repair work for a dentist in exchange for dental services.

“The fair market value of goods and services exchanged must be included in the income of both parties,” the IRS says. That figure gets entered on Form 1040’s Schedule C, which is titled Profit or Loss From Business, it adds.

Despite possible tax consequences, barter can be a useful tool when economic conditions limit cash sales.

Robert Josefs, who owns a Web design firm in Hillsboro, N.J., said many small businesses hurt by the credit crunch and rising oil prices are looking to barter.

“The attitude out there seems to be, ‘I’ll barter anything for gas,’ ” he joked.

While Josefs typically charges cash for his services, he said he’s looking at doing some barter transactions. He sees possibility, for example, in designing Web sites for restaurants that want to pay in dinners or for dentists in exchange for dental work or for contractors in exchange for electrical work.

“I’m looking to expand my horizons,” he said. “This way I can maybe get my foot in the door … in new industries.” On the other hand, the new clients “won’t have to spend a lot of money” determining if the two sides have a lot to share, Josefs said.

Some communities — including Ithaca, N.Y. — have tried to set up community service exchanges, while many businesses do barter deals through formal exchanges.

But even companies with products or services in high demand shouldn’t put all their eggs in the barter basket, he said.

“We normally tell business clients that they should not exceed 5 percent of their sales in barter transactions,” McDowell said. “That’s because they need cash to pay for supplies, for employees, for taxes.”

And tax reporting isn’t optional, he added. The exchanges are record keepers, so every deal that passes through is reported on an IRS Form 1099.

Local barter posts

Here are some of the recent bartering offers from the Spokane-area Craigslist:

•Retro kitchen table to trade for a lawnmower

•4x4 Toyota pickup to trade for boat or camp trailer

•Trade a Yamaha 12-string guitar to someone who will remove two captain chairs from a van

•Trade horses for anything that doesn’t eat