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Barter transactions can provide your company with important financial, sales and marketing benefits. Like other transactions, however, barter sales are taxable, and your company must report them to the IRS. This is also true of credits you receive or spend through a barter exchange; regardless of how you use barter credits, they are taxable as though they were cash.

Barter Income and the IRS
The U.S. government considers barter exchanges to be legal third-party record keepers, similar to banks, brokerages and other firms that deal with taxpayer records. Barter exchanges are required to complete and submit Form 1099-B, "Proceeds from Broker and Barter Exchange Transactions," for each of their members and the IRS. In order for the exchange to complete this form, you`ll need to give the broker your taxpayer identification number.

As far as the IRS is concerned, barter dollars are identical to real dollars. As a result, you won`t get any special tax benefits (or penalties, for that matter) from using a barter exchange. If you conduct any direct barter — that is, barter for another company`s products or services — you`ll have to declare the fair market value of the items you sold as taxable income.

This same-as-cash standard also applies to barter purchases: If a barter purchase is business-related, you can deduct it from your taxes, but if it`s for personal use you can`t deduct it.