The weekly newsletter for everyone interested in barter--the world's most versatile business tool!
December 21, 1999
In this week's report. . .
Barter Plays Role Moving Catalog Houses' Excesses
The president of Children's Wear Digest, Philip Klaus, Jr., when interviewed in Catalog Age, divulged that one of the major problems faced when selling merchandise via catalog is overstocking.
"One of the toughest parts of the business is managing the inventory. We are always weighing the increase in inventory with its potentially higher sales, versus the risks of overstocks and mark-downs."
He went on to explain that less than 15% of the items are repeated in each successive catalog. And after 18 months only four items remained from the first 148 items in the original edition.
With $65 billion worth of products sold each year through the nation's 9,000 mail order catalogs, barter is one of the intelligent ways that visionary major catalogers move their excess merchandise.
Special Report From BarterNews
All Barter Deposits Are Not Taxable Income
Every January, as required by law under TEFRA, all of the approximately 500 organized trade exchanges in the U.S. provide the IRS with statements showing the total amount of barter credits deposited into each and every member's account during the previous calendar year. However, some of these barter deposits may not be taxable income.
(Your trade exchange also provides this information to you in the form of 1099Bs, "Proceeds from Broker and Barter Transactions.")
Here is a look at another one of the five kinds of barter deposits which are sometimes improperly taxed. You may want to file this important information and show it to your own tax advisor to determine how to report your trade dollar income.
As a trade exchange member you may have two or more accounts, or sub-accounts, and thus move credits back and forth between these accounts. In this scenario you'd be taxed twice on the same barter dollars-once when depositing them into your primary account, and again when moving them to a second account.
Although account transfers are not taxable, the IRS will expect you to pay a tax on (what appears as) all deposits...because they don't realize certain credits fall into the non-taxable category.
In order to avoid paying taxes on non-taxable income you will want to discuss this with your tax preparer. When we publish the fifth article in this series we will give you more specific information on how you may report these items.
Follow-up On Previous Question:
Would American Express' entry into the commercial barter business be beneficial to the industry?
Frank Crombie, CEO of Barter Express Corporation: "I note with great interest your most recent commentary on the possibility of American Express entering the barter space.
"As an exchange owner, my focus is not on who may be a potential competitor. Moreover, my concern is with what the market landscape will look like. We can all address the issue of aggregation and consolidation, but does this mean that just because we have grouped together that collectively we have any better idea of what the future of the industry will bring? Or do we simply confront it as a bigger entity?
"I encourage the American Expresses of this world to enter our domain to drive innovation. We seem to have missed that ultimately what will drive the success of the barter marketplace is a business model that adapts to current business philosophy.
"The industry must become mainstream in its reach and positioning. When this occurs we will truly have a parallel economy that complements cash. Only then will the credibility and funding have real relevance."
(What's your opinion? Send along to: firstname.lastname@example.org )
Major Oil Refiner Acquires 37% of Products Through Barter
Showa Shell, Japan's fourth largest oil refiner and the Japanese arm of Royal Dutch/Shell Group, is expanding its barter efforts. The company reports that some 37% of the gasoline, and other oil products, it sells are acquired from rivals' refineries and storage sites closer to its retail outlets. Last year barter agreements totaled 25% of sales.
"The internet is not just a new way of doing business...it is a completely new paradigm of economic activity."
S. Wesbury, economist
Wesbury says the U.S. has entered a new era of wealth that is still in its infancy. No longer is it just a world of diminishing returns, where a piece of machinery is a depreciating asset of limited useful life.
In the new age of increasing returns, Wesbury contends, a computer, while a piece of machinery, is really an appreciating asset. Because every day another software or online application is invented, and more information is constantly added onto the World Wide Web.
The building blocks of our current environment are technology, globalization, fiscal policy, and low inflation. Wesbury believes that as long as we do not repeat the mistakes of the past, the boom will continue. "The new era," he claims, "is for real."
Here And There...
Coming soon. . .
We welcome your comments, questions, and observations.
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