Few and fortunate, indeed, are the business people who, having made an investment in plant and equipment, find themselves operating at full or over-full capacity. Barter permits a firm, and the economy at large, to capitalize unproductive assets and spare capacity, instead of allowing such assets to lie dormant. As a method of marketing one's product or service, or exchanging unwanted assets, barter has the advantage of recovering a significant amount of incremental revenue that might otherwise have been foregone. These firms are foregoing income from their unused capacity. If shown how to stimulate additional sales through barter, they have a strong incentive to make those sales as long as they can cover their costs.
Income taxes take away part of the extra profit from barter sales.
However, even at the highest bracket rate, a firm makes money after taxes on its additional sales. While reducing the extra profit, the income tax should not affect a firm's decision to make sales to reap that profit. This applies whether the additional sales are cash sales or barter sales. Since passage of the Tax Equity and Fiscal Responsibility Act of 1982, barter exchanges are required to report the barter income of their clients to IRS on Form 1099-B. As long as incremental revenue exceeds incremental cost, it will profit a firm to engage in barter exchange. The barter company's commission and other charges must be included in the cost calculation, but these charges are normally not a deterrent to barter.