In the US, if I were to trade commodities for labor would I pay tax? For example I pay John in beef to remodel my kitchen

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In the US, if I were to trade commodities for labor would I pay tax? For example I pay John in beef to remodel my kitchen

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Anonymous 0 Comments

Yes you would! You’re not the first person to think about getting around taxes like this, the IRS accounts for it, called “bartering”. You pay taxes on the fair market value of the goods. You treat it (basically) the same as if it was cash. If you did plumbing for someone and they decided to pay you in a car instead of cash, you have to report the fair market value of that car on your taxes, and be taxed on it as if it was cash.

You can imagine though, that plenty of people exchange goods instead of cash and of course, may never report such a transaction even though you are supposed to.

Anonymous 0 Comments

FWIW it’s a similar logic to buying goods in a state you don’t live in.

Let’s say my state sales tax is 8% and travel to a different on vacation. While there I shop at the state-run liquor store that has 0% sales tax and on the way home I stop in a different state to buy a necklace for my partner and that state has a 4% sales tax.

In theory I should write all this down and remit to my state the 8% sales tax I avoided paying on the liquor and the (8-4)=4% in sales tax I saved on the necklace.

Of course, very few people actually do this, but states and the IRS are starting to crack down much harder due to things like Remote Work and Online Shopping changing the way we live and purchase goods.

Anonymous 0 Comments

John would have to pay taxes on the value of the beef is if it were money. If he has a business, he’d be able to deduct his expenses of doing your job. So if you gave him $500 worth of beef to paint a room, and he spent $100 on paint, tarps, etc. he’d report $400 in income.