Bartering is the exchange of goods or services. An exchange may involve products, services, real property, or intangibles. Barters are sales and sales and use tax may apply to such transactions.

If you barter taxable products or taxable services for a service, real property, or intangible, the amount subject to tax (sales price) is measured by the amount of the consideration received, in money or otherwise, for the service, real property or intangible.

If the products or services you barter are not taxable, you should report the sales price from the transaction on line 1 of your sales tax return and then deduct the nontaxable sales price on line 3 of your sales tax return.

If you barter tangible personal property for tangible personal property in the same transaction, your taxable sales price may be reduced for a trade-in.

Example 1 - Tangible personal property traded for other tangible personal property
Example 2 - Tangible personal property bartered for nontaxable service and payment
Example 3 - Tangible personal property bartered for taxable service
Example 4 - Tangible personal property bartered for real property
Example 5 - Taxable service bartered for nontaxable service
Example 6 - Taxable service bartered for real property
Example 7 - Nontaxable service bartered for taxable service and payment

Example 1 - Tangible personal property traded for other tangible personal property: A bicycle shop sells a bike retailing at $400 to a cyclist. In the same transaction, the bike shop allows the cyclist to trade-in a bike trailer. The bike shop allows the cyclist a credit of $150 for the bike trailer. The bicycle shop reports taxable sales of $250 on its sale tax return.

Example 2 - Tangible personal property bartered for nontaxable service and payment: An interior designer exchanges $500 of products (mirrors and artwork) for nontaxable dance lessons with an established price of $400 and a payment of $100. The interior designer reports the $500 sale on its sales tax return. If the dance school holds a seller's permit, it would also report the $500 sale and then deduct $500 for its nontaxable sale on its sales tax return.

Example 3 - Tangible personal property bartered for taxable services: A building material supplier exchanges lumber for taxable landscaping services with an established price of $750. Both the building material supplier and landscaping company report taxable sales of $750 on their sales tax return.

Example 4 - Tangible personal property bartered for real property: A building material supplier provides building materials to an individual in exchange for a one-acre lot and building. The building materials supplier reports the taxable sale of building materials on its sales tax return equal to the value of the lot and building received. The sale of land and house by the individual is a nontaxable sale of real property.

Example 5 - Taxable service bartered for nontaxable service: A lodging provider exchanges taxable lodging services for radio advertising with an established price of $200. Both the lodging provider and advertising company report sales of $200 on their sales and use tax returns. The advertising company may deduct $200 for its nontaxable sale of radio advertising on its sales and use tax return.

Example 6 - Taxable service bartered for real property: A landscaping company provides taxable landscaping services to a concrete paving company in exchange for the installation of a concrete patio with an established price of $700. The landscaping company reports taxable sales of $700 on its sales tax return. If the concrete paving company holds a seller's permit, it would also report the $700 sale and then deduct $700 for its nontaxable sale on its sales tax return.

Example 7 - Nontaxable service bartered for taxable service and payment: A bookkeeper provides its client $150 of nontaxable bookkeeping services in exchange for $80 of taxable clothing alteration services and a payment of $70. The client reports sales of $80 for clothing alteration services on its sales tax return. If the bookkeeper holds a seller's permit, the bookkeeper would report the $150 sale and then deduct $150 for its nontaxable bookkeeping services on its sales tax return.

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May 10, 2016