How Do Trade Dollars Work?

What a trade dollar is worth

One trade dollar equals one US dollar of value. Members charge their normal prices inside the network, so a $400 catering job earns 400 trade dollars and a $150 brake repair costs 150 trade dollars.

Trade dollars are a closed-loop unit of account. They only work inside the network. They are not cryptocurrency, they are not a separate floating currency, and they do not change value against the US dollar. Think of them as a ledger entry that lets businesses buy from each other without writing a check.

How you earn and spend them

You earn trade dollars by selling to other members at your normal prices. The exchange credits your account when the sale clears. You spend trade dollars with any other member, the same way you would spend cash, and the exchange debits your account.

A simple loop: a printer prints 1,000 menus for a café and earns 800 trade dollars. The next month, the printer uses 600 of those trade dollars to get the company truck serviced by an auto shop in the network. The café and the auto shop never had to deal with each other. The exchange keeps the balances in order.

Are trade dollars and barter proceeds taxable?

Yes. The IRS treats the fair market value of goods and services received through barter as taxable income in the year the trade happens, the same as if you had been paid in cash.

The IRS addresses bartering in its Bartering Tax Center and in Topic No. 420, Bartering Income. Members of a barter exchange generally receive Form 1099-B from the exchange at year end, which reports the value of their trade activity for the year.

One planning point worth knowing: because trade income is taxable, you may owe tax in cash on income that was earned in trade dollars. That is not unique to bartering, but it is worth factoring into how much you choose to earn in trade in a given year.

This is general information, not tax advice. Confirm how barter income applies to your business with your CPA or tax professional.

How a good barter exchange handles taxes for you

Reputable exchanges do the bookkeeping that makes reporting straightforward. That means a clear ledger of every trade, regular statements you can hand to your bookkeeper, and a year-end Form 1099-B that summarizes your trade activity for the IRS.

Red Rock Trade keeps your ledger, sends statements, and provides your year-end 1099-B, so at tax time you and your CPA have one clean record to work from.

Red Rock Trade, in St. George

Red Rock Trade is a business barter network being built for St. George and Washington County. You can read how Red Rock Trade works or join the founding waitlist.

FAQ

Are barter exchange proceeds taxable?

Yes. The IRS treats the fair market value of goods and services received through barter as taxable income in the year the trade happens, the same as cash income. See IRS Topic No. 420, Bartering Income, and the IRS Bartering Tax Center for the general rules, and confirm specifics with your CPA.

Will I get a 1099-B from a barter exchange?

Generally yes. Barter exchanges report members' trade activity to the IRS and to the member on Form 1099-B at year end. Red Rock Trade keeps the ledger and provides your 1099-B so reporting is straightforward.

What is a trade dollar worth?

One trade dollar equals one US dollar of value, used only inside the network. Prices in the network match normal retail prices, so a $200 service costs 200 trade dollars.

Can I cash out trade dollars?

No. Trade dollars are not cash and cannot be withdrawn as cash. They are earned by selling to members and spent with other members inside the network.