Bad economy boosts bartering in St. Paul, Minneapolis

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Powderhorn Park resident Rhonda Kist swaps her skills at web design, photography and computer trouble shooting for help with plumbing and those other things “I don’t know how to do and don’t have an interest in doing.”

Kist is a member of the Hour Dollars service exchange. The Hour Dollars program values everyone’s time equally. It has a members-only website that list people’s skills and needs. Members agree to do certain tasks and bank the number of hours they take. They can later spend those hours on what they need. For instance, if Kist spends two hours helping someone with a website, she can contract with someone else for two hours of service, whether high-tech or low-tech. It could be a ride to the airport, help with a leaky faucet, upholstery, a massage or electrical work.

Someone called Kist the other week and asked if she would be willing to deliver freshly baked bread, she said. The woman wanted it delivered warm. “I said we would have to figure out a schedule,” Kist said. “It is about having everybody get a win-win.”

What about the taxes?

While the hour-for-hour exchange seems pretty straightforward, less clear is the tax implications of such swaps.

Consider that if someone did plumbing, electrical or computer work and billed a client, that bill would generate income, and therefore state and federal income tax. When the services are swapped there is no income generated and therefore no income tax. Do revenue agents go after small-time barterers? Or is it even an issue? (Hey, the government did a really crummy job of monitoring the big banks that took down the economy, are they really going to go after a small service swap club?)

News accounts on bartering make passing reference to barter-related taxes without elaboration. And it turns out it is a difficult to get details.

According to the IRS web site:

Bartering occurs when you exchange goods or services without exchanging money. An example of bartering is a plumber doing repair work for a dentist in exchange for dental services. The fair market value of goods and services received in exchange for goods or services you provide must be included in income in the year received.


The IRS web site goes on to define a bartering exchange as “any person or organization with members or clients that contract with each other (or with the barter exchange) to jointly trade or barter property or services.”

The Daily Planet sent a query to the IRS. Does it consider Hour Dollars to be a barter exchange? The IRS spokeswoman Carrie Resch said she couldn’t make an official determination on how to characterize a specific business.

Drower said Hour Dollars is not a barter exchange but a “service exchange.” She made a distinction between bartering where items or services are traded and assigned a fair market value. Hour Dollars is different. “We are not trading goods and services. We are trading hours,” she said.

Hour Dollars is now in its eleventh year, but seeing some growth because of the poor economy and recent publicity. It has approximately 125 members, mostly in St. Paul. Kist is interested in expanding the Minneapolis membership

Barter systems and service exchanges have caught recent media attention. Earlier this spring, KARE 11 ran a story on Hour Dollars. Minnesota Public Radio ran a piece on the growth in bartering, including increased ads on the Craigslist barter section.

Debora Drower, an Hour Dollars board member, said the organization is an all-volunteer effort. New members have to attend an orientation. Then they get access to the database and can contact people and start making trades. The Hour Dollars website said new members start with three hours in their account. (Kist said there is a $10 annual administration fee.)

The next Hour Dollars new member orientation is Saturday, May 16th, 10:30 a.m. at the Rondo Community Library, 461 N. Dale St. To schedule an orientation, email info@hourdollars.org.

Building community

Kist said Hour Dollars is a great way to meet like-minded people. And people don’t mind that one hour of photography equals one hour of walking a dog. “They are equal,” she said. “You are not going to put something in unless you feel good about the service being equal to whatever you are going to get out of it.”

She met one person through Hour Dollars who donates his banked hours to nonprofits who need volunteers, Kist said.

The Hour Dollars web site offers tips to both providers and receivers of service on how to negotiate a deal. The tips include:

• Ask for references, if you want them, or ask for examples of other jobs.

• Be clear about your expectations or requirements for the job. Discuss the amount of time you think the job might take; agree upon the estimated time. Talk about what should happen if the job takes more or less time than expected.

• If you must cancel, give as much notice as possible.

Scott Russell is a journalist. He wrote for the Southwest Journal and Skyway News (now the Downtown Journal) in Minneapolis from 1999-2005. He also wrote for The Capital Times, a Madison Wisconsin daily, from 1993-1999.

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